Hobby Vs. Business (Where's the Line?)

[ItsAllNew2Me!]

Just answer the questions TurboTax asks you and you'll be fine.

You should save your receipts so you have a record and in the unlikely event that you get audited and someone asks to see them, but you don't include them with your tax return or anything.

Having a website or a cute DBA name or stickers or certificates or advertisements or booths at shows or shipping tape with your name on it or whatever is totally irrelevant. The costs of those things would be considered business expenses, but having them or not having them makes no difference at all to whether you're a business or not for tax purposes.

Thanks. I am a computer Geek so a website not only seems smart but fun just the same .

You pay taxes on net income not gross sales.

So, if you sold $14k in babies that's great, but you deduct the cost of your breeder snakes, feeders, the incubator, the snake racks, thermostats, heat tape, substrate, hides, water dishes, vet bills, web hosting fees if you have a web site, advertising fees, travel expenses to/from expos, shipping fees, shipping boxes/insulation/heat packs, etc. etc. etc.

If your expenses are more than your income and you've put business losses on your schedule C for three years running, you're at risk of the IRS going back and saying your business is really a hobby, and then you get hit with back taxes, penalties, and interest. This is why I keep my snake-breeding strictly a hobby and every December I figure out income versus expenses, and if I had a good year I go shopping.

Thank you for your break down it was very helpful. So basically you always claim Schedule C but make sure it always under a hobby and show that you break even?