At what point is it a business?

[ChoppyChoppy]

Last time I looked, in Australia you could make a few bucks doing something that was classed as a hobby rather than a business. There wasn't a formal dollar value limit. Short answer was that the Tax Office couldn't be bothered with the small stuff, so Aunt Mabel is able to sell her apricot preserves at the local market without getting taxed. Now if you're pulling in $50G a year doing it they'd probably be interested. To answer the original question, I think it's a bit of a gray area. My personal impression is that if you have a full-time job and cut wood on the weekends to sell, it's not a business. If you're working for a wage part-time and cutting wood to sell the rest of the time, then it is. Whether the IRS agrees is another matter, of course.

That's probably not much help to you .

I work a full time 50hr job plus do logging/firewood full time as well. Ends up being 80-100hrs a week or so.

 

[gary courtney]

IRS you tell them you have a gambling and drinking problem.

until they pull the casino's surveillance tapes for the past year

 

[Corncob]

God, family, Church,and country...

You just named the priorities and then in the next breath you said

If one interferes with one ahead of it such as a country that will bankrupt your family if you tell them the truth... Then God isn't going to punish you for putting your most important priorities first.

When you put anything ahead of God you have tilted the apple cart. His word says "Seek ye first the kingdom of God and his righteousness and all other things will be added unto you" Either God is Truth or a liar. God does not "punish" one when they put themselves in those predicaments.
Bottom line is when someone gives their opinion ,if it does not fit what they want then they get your kind of post like this.

 

[Slick50]

It is simple! Start your business with honesty to all involved or hide,cover-up,lie and manipulate and try to remember what you said at the end of the day. Nothing hear about God is said.This is the advice you have received.

 

[macattack_ga]

it depends....
https://www.irs.gov/newsroom/hobby-or-business-irs-offers-tips-to-decide

 

[rarefish383]

Good point about the sales side. A lot of my clients require my Federal Tax ID number upfront, for a 1099 for their records, if it's going to be more than $600 for the year.

Philbert

My tax man told me that if my lawns went over $600 per customer on the year I had to claim them. So, the most firewood I sell is two cords to two customers, that's only $400 each. The rest are 1 cord sales. So, I should be ok on the $600 thing. I should have asked him more questions, but, I didn't want him knowing too much. It might put him in an integrity issue. Being a CPA there are laws he has to abide by too. Back in 1999 I took the MD Tree Experts Exam just so I could do a little side work legally. When I checked into insurance on just me, it was so expensive I would have to quit my $90,000 a year job, and go back into tree work full time. Tree work full time I would have made a lot more money, But, I got out of tree work because I was tired of the 24-7. I'll be 64 in two months so full time jobs are for the young bucks. I lost my 3 best lawns for next year, one passed, one got his own tractor and one moved. So, I think I'm going to sell all of my commercial equipment and just buy and sell stuff I find at auction. I enjoy auctions way more than work. I haven't asked my tax man about claiming auction sales, they are really hard to trace.

 

[cantoo]

rarefish383, we do the auction thing as an add on to our lawn business. I used to work more hours on the lawns but working on the road put a stop to that so to keep our income close to the same I do the online thing. Still do on site auctions but usually only big ones. We got audited several years ago due to a mistake on a GST over payment. My wife made a mistake and paid $3000 instead of $300 so our "accountant" tried to get the money back. They didn't want to give it back and spent 2 years trying to prove that we were dealing in cash. After spending hours at my kitchen table explaining every purchase and job we had done for 5 years I finally said just give me a number. After 3 months they said $15,000. We paid the money and didn't look back, they closed out our file. We never did anything wrong but we were just tired of it. We changed Accountants and keep much better track of everything now. I know lots of guys who are creative but there is always a paper trail. You sell wood for cash to a guy who runs a business, he doesn't tell you but he claims the cash as a business expense to heat his shop. He even writes your name on the note he gives his Accountant as an Expense. He ever gets audited they are going to want to talk to you. We have a couple of farmers that we cut grass for, they pay cash because they want to save money. We just charge them a couple more dollars, claim the cash as Income and pay the taxes ourselves. No use arguing with them. Trust me there is a paper trail. I couldn't believe the info they had on us just from our bank accounts.

 

[Philbert]

You need Ben Affleck as your Accountant.



Philbert

 

[Ted Jenkins]

There was a time when I had several employees with two kinds of businesses. One involved firewood, but kept me going in the winter. I also did work with my father. On paper my income looked over whelming with taxes that nearly made me broke. By accident I called the local IRS office wanting some clarification on some past and present returns. The lady I talked to was very very nice and suggested an appointment which I kept. After about fifteen minutes the reason I was there was cleared up and then she said I will suggest some strategy on how to manage my finances. After tax season was over I called her and was surprised she remembered me, but asked if now was a good time for her to meet with me. She set up an appointment and spent a generous amount of the afternoon with me. I had several properties that were not bringing much money in. but were necessary for my business. I took notes and wrote out pretty much every thing she said. It lowered my tax bill by 90% and never got audited again. In California most wood sales were cauterized as a service which is very different from retailing. The whole process made me rest more easy. It felt like I was cheating some one. Thanks

 

[Justsaws]

At what point in the firewood market to you take the plunge and become a small business or llc.. I have a young family and take days off my 40+ hour a week job to do wood.. have upgraded splitters saws equipment in general and it’s all been cash which is great but at which point do I make the “business” pay for that? Do you hit a dollar amount?

The fed and state will have their own definitions. The ones to watch out for are local taxes, city, township, property, school district, personal property, etc., etc., etc.,.

Any venture that is not a trivial one off, such as a yard sale one weekend a year can/will be considered a business. Folks that hide behind expressions such as “hobby” or “part time” are still conducting business, generating reportable income for many areas. Delivering firewood, that can be a mess in a large urban area.

Buying anything tangible with the intent to resell is a business venture.

Advice on taxes over the internet is always bad. So, yeah.

 

[Justsaws]

Business advice over the internet is dodgy. So, again, yeah.

 

[Mike Van]

[QUOTE="sb47, post: 7133400, member: Logs or unsplit rounds are just logs. Once you split it and stack it, it becomes a product and you can be taxed. They can't tax your logs, only after it's been split wood ready for sales. . [/QUOTE]
I would not bet the farm on that statement -

 

[macattack_ga]

You need Ben Affleck as your Accountant.

View attachment 786571

Philbert

Let me tell you something. You're suspect. Yeah, you. I don't know what your reputation is in this town, but after the **** you tried to pull today, you can bet I'll be looking into you. Now the business we have heretofore you can speak with my aforementioned attorney. Good day gentlemen, and until that day comes, keep your ear to the grindstone.

 

[Ted Jenkins]

[QUOTE="sb47, post: 7133400, member: Logs or unsplit rounds are just logs. Once you split it and stack it, it becomes a product and you can be taxed. They can't tax your logs, only after it's been split wood ready for sales. .

I would not bet the farm on that statement -[/QUOTE]

I have been through this process with State and Federal several times so I think I have a hint. There was a time when I was charged a harvest tax which was very small. Retail tax is different for sure If I harvest and sell my tax liability is very small since most of what I do is a service. If I buy logs then resale such my tax liability is very much larger. At the present time my operation is quite small so at the moment not a real big issue. If and when I have several employees a whole other matter which will cause audits and scrutiny. Laws in other states will vary quite a bit and definition of what constitutes business and service can also vary too. Thanks

 

[Philbert]

The different rules, and nuances, are what make people nuts. To me, even more than the amount I pay.

Why a good accountant is so important.

Philbert

 

[cantoo]

Our problem was that we had used an Accountant for about 4 or 5 years, she sold the business to another person, she stayed for a few months to bring new owner up to speed and things just kept going the same for 3 years until the over payment. That's when we found out that the new owner was a "bookkeeper" and not a licenced Accountant. Auditor said we should have checked for her licence. New owner ended up loosing her business after a bunch of her clients were audited, we all just assumed that she was licenced. Never again. The company we use now does only small businesses and some farmers. If you are working under the radar all it takes is one bad customers to drop a dime on you and you have some explaining to do. And like the Auditor said these types of small business are known for tax evasion.