"Haywire's Hey! Wood!" is born...

[Haywire Haywood]

or maybe 'hatched' would be a better word. I'm doing the paperwork next week to officially open "Haywire's Hey! Wood!". I'll never turn a profit, but I do have visions of having the woodshed I want to build as well as my overload springs, spray in bed liner, and other "business expenses" being tax write offs. My wife tells me that after a couple of years of losses that I will have to show a genuine effort to make a profit or they'll cut me off, but by then I'll already have all my tax free toys. WooHoo! ---evil grin---

Ian

 

[Husky137]

Not only will they cut you off but then they will audit you and go after you under the hobby loss rule and recoup the write-offs with penalties and interest. Talk to a good accountant before you make a mistake.

 

[Haywire Haywood]

Hmmm... Did you hear that 'pop'? That was my bubble. I'll have to go talk to my tax guy and see what criteria they use to go after folk. Maybe I can skirt the edges. He's good at defining the edges and then skirting them.

Ian

 

[CaseyForrest]

I was going to do the same thing, a little more legit though. I did actually start a business and made some money, but I was way in the red it being my first year. I may go to a tax guy next year and see if anything I have can be written off. There are also limits on what you can claim for start-up costs, I believe its $5000 a year. I got around to doing my taxes this year and threw up a couple audit flags.

According to the IRS if you have a full time job, and also run a company on the side you need to devote enough time to your own company to consider it a business and not a hobby. Husky is right....You need to do more than just make money..you need to not be in the red consistantly.

 

[Haywire Haywood]

According to the IRS if you have a full time job, and also run a company on the side you need to devote enough time to your own company to consider it a business and not a hobby.

That's what I have to find out, How much time is enough for the IRS to leave me alone. You really don't need to invest a pile of time in a small firewood business. Cut and split a shed full of wood in the spring, and you're done time-wise till fall deliveries.

Ian

 

[CaseyForrest]

That's what I have to find out, How much time is enough for the IRS to leave me alone. You really don't need to invest a pile of time in a small firewood business. Cut and split a shed full of wood in the spring, and you're done time-wise till fall deliveries.

Ian

You are right, but if your business is seasonal...where are you getting the money the rest of the year?

If your answer is your full time job, then the definitions of "business" and "hobby" comes into the IRS playbook. You can write off a percentage of your expenses if its a "hobby." If its a business you can write off just about everything.

 

[Husky137]

I didn't want to pop your bubble to be mean. I just didn't want you to feel the IRS man's hands on your shoulders and wonder why your a$$ hurt.

 

[Haywire Haywood]

Sometimes a bubble needs to be popped, especially when it gets too big and is likely to engulf the owner.

more research is in order here,
Ian

 

[Haywire Haywood]

This is from the IRS site:

Is it a Business or a Hobby?

It is generally accepted that people prefer to make a living doing something they like. A hobby is an activity for which you do not expect to make a profit. If you do not carry on your business or investment activity to make a profit, you cannot use a loss from the activity to offset other income. Activities you do as a hobby, or mainly for sport or recreation, are often not entered into for profit.

The limit on not-for-profit losses applies to individuals, partnerships, estates trusts, and S corporations. For additional information on these entities, refer to business structures. It does not apply to corporations other than S corporations.

In determining whether you are carrying on an activity for profit, all the facts are taken into account. No one factor alone is decisive. Among the factors to consider are whether:

1. You carry on the activity in a business-like manner,
2. The time and effort you put into the activity indicate you intend to make it profitable,
3. You depend on income from the activity for your livelihood,
4. Your losses are due to circumstances beyond your control (or are normal in the start-up phase of your type of business),
5. You change your methods of operation in an attempt to improve profitability,
6. You, or your advisors, have the knowledge needed to carry on the activity as a successful business,
7. You were successful in making a profit in similar activities in the past,
8. The activity makes a profit in some years, and the amount of profit it makes, and
9. You can expect to make a future profit from the appreciation of the assets used in the activity.