Breeding and the IRS

[Slashmaster]

Hey, for those of you who are more experienced breeders, how do you handle your taxes? I'm just now starting to get into investment-quality BPs; they are still babies and I have maybe three years to prepare for the business side of things.

How are animals (specifically BPs you plan on breeding) reviewed with respect to US federal tax laws? What about the hatchlings you sell? What are some expenses you have for breeding that are legitimate?

Someone told me that a dog breeder they knew got audited every year because breeding isn't "a legitimate business" according to the IRS. Is that still true? Do you guys get audited often?

Do you run your breeding as a business, or as a hobby in your tax filing?

Any help is greatly appreciated. I want to do this by the books.

[RichsBallPythons]

Keep all receipts if you expect to make enough money.

Anything you buy or sell can be reported. And 9 times out of 10 you will be in the red and wont owe anything for breeding and selling due to supplies add up fast. Just hand over all your reciepts to the Tax agent and they will figure it all out for you to see if you made a profit or lost and if you owe.

I havent had to owe anything as i dont make but maybe $5-7k a year selling snakes and other online items. But when you add in the cost of buying food,electricity, water,equipment,new snakes and so on like i said adds up fast to where you can never get out of the hole.

And if you cant provide a profit 3 years out of 5 your put into a different tax bracket as a hobbyist which is where i am.

[Slashmaster]

Thanks for the information, Rich!

When I go to expos, the sellers typically don't give me a receipt for the snake. For example, at an expo about two weeks ago, I purchased $1000 in snakes and the seller didn't give me a receipt, so I wouldn't have a record of that buy. Is it normal to ask for a receipt at expos? If so, will sellers typically provide them? What if they don't provide one?

[RichsBallPythons]

Usually at expos when cash is involved dont expect a receipt. Theres a lot of vendors that do this just to have no record or it so they dont have to claim it.

Now if you pay with credit card,paypal you can just use the receipt/invoice as youre proof.

If you pay with money order/ cashiers check use the receipt/stub you have as your proof.

But you can still ask the vendor to hand write out a receipt for your proof but not always accepted by tax agents.

[Gto_402]

I have wondered this recently. Do you need to have a business license to be able to claim the cost of animals and supplies?

[JulieInNJ]

Wow, thanks for all the great info!

[rabernet]

Good discussion! Moved to Business talk, since it technically isn't about breeding, ovulations, outcomes, etc.

[kitedemon]

I can't speak for the states but here in Canada tax audits try to at least break even. The cost of an audit is about 2000-5000$ so if it looks like you owe less back taxes than this it is just as unlikely auditors will show up. It is when things look fishy that they arrive like the pizza place that orders 1500 boxes a month but only sells 500 pizzas....

[RichsBallPythons]

You only need a business licenses if your planning on being a business and having a store front.

When doign it out of your house all thats needed is a State Tax ID number for charging local taxes on sales and paying taxes.

But even thats not needed is most states when it comes to live animals. As long as you claim all your sales and supplies your fine.

[Slashmaster]

I know the breeder I bought my fennec fox from needed a USDA license to breed her animals (granted they were mammals). Do you have to be USDA licensed to breed snakes?