Taxes and woodworking

You are half right.
Seek advice from a tax professional.

-- 温故知新

I am a CPA and I would recommend seeking advice from your tax preparer. I would be happy to answer PM’s on this topic if it would help anyone.

Regarding 1099-misc forms, they are filed by the payer, not the person receiving the money. They are then sent to the recipients (you). This lets you know that the IRS has been notified of this income, and they will expect to see it somewhere on your return!

-- Jesse, Hopewell Jct., NY

Cash is King. So why pay the Joker?

-- So Many tools, So little time

This is what I do with my current WW business. I don’t make much gross income on it per year, but what I do make I get to offset with tool deductions. It’s a business (albeit a low-profit one), but I can legitimately deduct tools, which ultimately makes them cheaper…. and easier to justify. :)

Jesse is correct. You will never file any 1099. You declare income from 1099(s) that you receive from other companies such as interest income, or in the case of some of us, payments from companies for work done. Technically, all income, regardless of the source, is subject to federal tax. Many of us who are self-employed make quarterly tax payments using an IRS form. Now, why anyone would be hell-bent on claiming income from something they make in their garage on the weekend and sell to their neighbor is beyond me. I agree with woodsparky.

That being said, if you want to deduct your tools and materials, then you need to establish yourself as a business with all the local licenses and sales tax ID. Even with all this, if you don’t show a profit within three years, the IRS will declare your business a hobby and disallow deduction claims. However, they still want you to claim your hobby income and pay tax on it, but without the benefit of deductions. In this case…..cash is king.

-- I don't make mistakes, only design changes....www.dgmwoodworks.com

I avoid the entire IRS Income tax issue relative to my woodworking. I don’t sell anything. I give it away and I do not claim any deductions…. No income, no write off’s and the recipents of my gifts don’t have to file 1099s.

-- I love the smell of sawdust in the morning....

I write off all of my tools, work miles on the truck, any of the sales tax for material that becomes a permanent fixture in the house…etc, etc…..

but it also says right there on my W2: occupation: carpenter, employer: _ Construction Company.

And if I were to sell something…...I’m just not set up to take credit cards.

-- measure once, keep cuttin' til it fits

Be careful with your deductions. Make sure you have reciepts. My CPA does a great job getting everything in order. I was audited last year because of deductions I claimed related to schedule C income ( I do contracted sales for a fishing lure company.) My instructions to CPA is if the deduction creates a red flag leave it out, I had rather eat a few deductions than get another audit. Not to bad for a one year audit but they can go back like 7 years if they want.

-- Jerry Earley ( Perserving the American Wood Heritage One Barn at a Time)

I married an accountant so I would never have to worry about things like this or do my own taxes.

-- You can get more with a kind word and a 2 by 4, than you can with just a kind word.