How much money can you make before taxes become an issue?


Denette
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On 12/29/2015 at 0:37 PM, Llama said:

It was "free" with the purchase of the HP-10 ;) 

Nothing is free.... EVER! The founder's circle fee you saved in getting 10%off the HP-10 was factored into that price, and them some. It's like having a bonus card for a grocery store, that 99 cents you're saving per gallon of milk you're buying is just increased price so you sign up for the card to save it.... It is just a way to keep you going back for more and getting a false savings, thus generating more revenue for the store....

The first hit is free!

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41 minutes ago, Tom Cancelleri said:

Nothing is free.... EVER! The founder's circle fee you saved in getting 10%off the HP-10 was factored into that price, and them some. It's like having a bonus card for a grocery store, that 99 cents you're saving per gallon of milk you're buying is just increased price so you sign up for the card to save it.... It is just a way to keep you going back for more and getting a false savings, thus generating more revenue for the store....

The first hit is free!

Yeah yeah yeah.. Go rain on someone else parade logic man! :) 

 

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There's always a mark up, they're not in business to give stuff away.  However, it was still 10% less that Mel had to pay.

Also, there are times when things get marked below cost in an effort to get you in and spend your money on other stuff where the profit margins are insanely high.

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  • 5 months later...

Claim it, Even if you don't make a profit, You can claim a loss. You can write off the tools you buy, shop supplies any schooling you might want to attend.

A Good tax guy can help you with the limits of the write offs and losses so you won't stand out and be audited. Im not advocating doing  anything illegal either just taking advantage of the tax code. with in the legal limits.

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5 minutes ago, Mike. said:

No, a good tax guy will advise you on what is legal.  Whether you will attract an audit should not be a concern.  If what you are doing is legal you will win your audit defense.   If your returns stands out but you are on solid ground, you should absolutely stand that ground.  

If you use your tools, machines, etc for both hobby and business use you can not "write-off" the full cost of your tools (as an aside, the CPA in me cringes every time I hear the term "write-off").  You need to have some way of accounting for what is business (i.e. revenue generating) and what is hobby use. 

 

Eggsaactly the main jist of my post was to keep him out of trouble and use the tax code to his advantage. My tax guy takes care of me as far as what I can claim or can't claim. BTW  I didn't say "full cost of the tools"

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  • 3 weeks later...
2 hours ago, K Cooper said:

First sell. Actually, it was a request from dil for a cutting board for her brother for Father's Day. No charge to her of course. She picked it up yesterday and returned about 4 hours later with a case of Miller Lite and a gift card from Whataburger from her brother. Almost covered the cost of the wood, but it's the thought that counts. I think I'll keep my day job and hope for less commissions?

Well after I take my cut,  it's only really half a case of beer, preferably, the half that you didn't drink yet. 

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  • 10 months later...
On 12/27/2015 at 0:07 PM, Cliff said:

Isn't that really just a question of ethics? I mean, potentially breaking the law, potentially keeping money out of the hands of the government (which one could consider to be stealing.) How come people have no ethics when it comes to taxes but taking leftover concrete from a contractor because you know an employee there is stealing? I mean, just curious how everyone arrives at this. I was gifted with a complete lack of ethics and theorize that a sucker is born every minute, and if you aren't taking advantage of a situation when it's presented, then you are the sucker. The rate I get taxed at is retarded-high so I feel no obligation to report side income - which, I absolutely make none in woodworking - but I do in programming activities.

I know draging up an old thread for a first post not so great and maybe I missed if there was a good answer I was just skimming but taxes can be a sore subject and just have my own thoughts. As far as ethics go I think the only area of concern imo is lying on the form. Only think its stealing if you are lying and getting back more than you pay in. Still an ethics question but just not about stealing imo or at least very different from the the taking concrete from a contractor analogy. Is it stealing to keep my money? Who's stealing me or the IRS? Just cause they take it legaly doesnt mean they are in the right. Lot of legal crooks in this world. i know we got to pay for roads and police ect blah blah. They do a lot more than that with my taxes and some of it I strongly disapprove of so it like I said can be a sore subject and not one that could be settled in this type forum just pointing out what I thought was a flaw in the posted example.

 

Aside from that hoping to learn a lot here. In construction a long time but new to wood working.

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6 hours ago, Mike. said:

There are very few refundable credits and a refundable credit (like the earned income credit) is the only way to get more back than you put in.

You can make up your own set of rules all you like, but tax evasion can absolutely put you in jail and the IRS has broad power to garnish your wages or seize your personal property.  Have fun with that. 

 

And you totally missed what I said. Didn't say what I did or didn't do. I don't believe in seat belt laws but I wear my seat belt. The question wasn't weather it was legal but if it was ethical. Many legal things not ethical and many illegal things that are ethical. The law is not the end all of ethics.

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7 hours ago, Mike. said:

You can make up your own set of rules all you like, but tax evasion can absolutely put you in jail and the IRS has broad power to garnish your wages or seize your personal property.  Have fun with that. 

 

This is a warning. Believe what you want. The reality is brutal. If your expression of belief leads one down that path, ouch. Kind of a silly first statement if it was purely philosophical. Also, beware the unwelcome topics. I am not sure from your posts that you have taken a spin through the forum rules. @justforfun

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Point taken on unwelcome topics. Will be my last post in this thread and will refrain from anything un wood related in the future. All I will say is anyone that has a problem with what I said, reread and don't add any meaning. I stand behind everything I said and never said I think someone should skimp on their taxes. I hope the OP was successful in their endeavor.

 

Government intrusion can be a sore thing for me but its the wrong time and place. Have a nice day all.

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1 hour ago, justforfun said:

Point taken on unwelcome topics. Will be my last post in this thread and will refrain from anything un wood related in the future. All I will say is anyone that has a problem with what I said, reread and don't add any meaning. I stand behind everything I said and never said I think someone should skimp on their taxes. I hope the OP was successful in their endeavor.

As you are a new member, I did not give wiggle room. Show an investment in the forum that respects the rules and that kind of opinion will be taken at face value. I am not a mod here. I just don't want error to be made out of ignorance. I have not said I agree or disagree, only cautioned practicality and respect for the forum rules. I certainly don't like taxes. :-)

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I built custom fishing rods for 8 years and quit this past December 31st.  Didn't need a full time job.  Had one for over 40 years.  My wife went to one of the walkin tax places and they screwed me....royally.  They didn't deduct my expenses.  Now I have used a CPA for the last two years and came out great.  He even gave me sheets that outlined what was considered a home business and what I could deduct.  Wouldn't do without a CPA.

Mike, I have a friend who is a CPA.  He said the letters are "Can't Pass Again!"

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  • 2 weeks later...
On 12/27/2015 at 11:18 AM, Denette said:

This is all hypothetical, but...

Let's say that I've been making and selling projects.  It's all informal, all done in my garage, but people have been paying me.  How much money could I make and still have it count as "hobby income" on my taxes?  I'm a nincompoop when it comes to taxes, so I'm just trying to make sure I choose a sustainable business model.

Some principles to consider

1. Even if it is a "hobby" your receipt of funds is called "income" by the IRS. But, yes, expenses are still deductible even for "hobby" income.

1.1 Keep track of expenses, including mileage. If you lose money then report it and gain the benefit if lower taxes.

1.2 If you make a few bucks then pay a few bucks in taxes. It's cheaper than the alternatives. And less time-consuming.

2. The IRS always cares. It's what some government officials have termed the "underground economy." But all that means is that they don't have control of it. (Why do you think they *want* a digital economy?)

3. In *practice* they don't worry about garage sales and onesies among neighbors, friends, and family. It's when you get proficient and highly productive that they take notice.

3.1 They generally set their own rules aside (like not getting a speeding ticket when doing 8 mph over) because they do not yet employ 1/2 of the population to monitor the other half (see "1984").

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