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Old 02-23-2018, 12:43 PM
 
5,433 posts, read 3,484,357 times
Reputation: 13715

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Quote:
Originally Posted by ss20ts View Post

The thing is a business has to make an income in order to be considered a business by the IRS. After a couple of years, it's considered a hobby and no longer tax deductible....at all.
Quote:
Originally Posted by EmilyFoxSeaton View Post

This has nothing to do with anything. Seems you just want to post what you want to talk about. I won't need a tax deduction.

Amazed? I find that hard to believe. It is basic that a message board should keep people on topic. If people want to blather about irrelevant information designed to make them feel superior.. gonna call it out.
Quote:
Originally Posted by runswithscissors View Post

You will have to file and pay income tax even as a sole proprietor.

You will be required to pay Self Employment taxes for Social Security and Medicare taxes. You'll pay both the employer's share and the employee's share.

Whether you take business deductions on your filing is up to you.
Quote:
Originally Posted by aslowdodge View Post

The posts have all been very much on topic and very relevant to owning and running a business.

If you can't see that then I think you are not going to have successful in business.
Having owned my own business I can say everyone has been pretty accurate.
You on the other hand have no experience and never owned a business, so much you came to a board asking a bunch of strangers for advice .
You claim to be a lawyer which involves reasonable intelligence. Why do you need to ask people here for their advice, can't you figure it out on your own?
It seems you might do well to try a business that doesn't involve dealing with others because you seem to be easily offended and are quick to chastise others.
Quote:
Originally Posted by ss20ts View Post

It doesn't matter if you need a tax deduction. The IRS has all kinds of crazy requirements for hobbies and businesses. If you're running a business, you're required to file income, sales, and employment taxes. The state has their own requirements as well.
It can be quite a pain and spendy to have an accountant do all that work.
Quote:
Originally Posted by johngolf View Post

I believe the OP has a law degree, but has never taken/passed the BAR Exam, so she is not a lawyer. She is just one that dabbled in the law.
The fact that the OP thinks tax information about running a business is completely off-topic illustrates some facets at work here and illustrates what is lacking.

Last edited by matisse12; 02-23-2018 at 12:52 PM..
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Old 02-23-2018, 12:58 PM
 
Location: Southern California
24,222 posts, read 8,474,619 times
Reputation: 15762
If I could walk much better and wanted to work again, only worked 40 yrs, I'd engage in pet services..dog walking and more as many need services for their animals when they travel. My daughter spends $$$ on the woman she has for their doggie.
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Old 02-23-2018, 01:00 PM
 
15,749 posts, read 9,303,112 times
Reputation: 14249
Quote:
Originally Posted by aslowdodge View Post
I have no dog in this fight, but I am amazed the op came here for advice and is snarky to some of the respondents who took the time to write a response.

If anyone follows the real estate forum, this reminds me of the Abby schmitters thread.
Yea, not a great trait to have for any business that involves dealing with people.
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Old 02-23-2018, 01:05 PM
 
Location: Virginia
4,020 posts, read 2,078,141 times
Reputation: 11102
Quote:
Originally Posted by bbtm100912 View Post
It sounds like something I would enjoy because I love restoring wood and furniture but I can see the scenario you are talking about. I remember when I was moving years ago I had a sale and people were coming thru my house and cellar. I had priced the stuff low because I just wanted to move but then people would come in and waste my time haggling over the stupidest of things.

Once I got so fed up about these two older gents arguing over an old picture frame in my cellar that when they left I flung it against the wall (I know, bad - maybe an anger management issue ) But about $130 came flying out that someone (probably my grandfather) had hidden.

Then when I no longer wanted anything to do with my 'sale' I put the rest of the stuff outside with a 'free' sign. You wouldn't believe how many people came pounding on my door asking the price. One family came back so many times I finally said, "Ten dollars" and they were finally happy and left with their stash.

Bungalove - this was in my old 1920's bungalow that I wish I still had

But it WAS something I was considering doing on the side when I get a little bit older but now I'm not sure.
Oh please, don't let me discourage you. TBH though, the people who make out the best at antique malls are the mall owners. Sure they have to pay rent/mortgage for the building and utilities/insurance/etc., as well as hire staff with the associated tax requirements for that, but the accumulated booth rent more than repays them for those expenses. Individual booth "owners" have to make at least their both rent each monthly just to break even, and expenses add up quickly. Granted, I always liked finding the antiques the best despite the time it took to go to the auctions, estate sales, yard sales, salvaging (I'll salvage an abandoned building in a heartbeat - I'm not afraid of snakes or dirt). But then you have to get your "finds" home and have a place to clean and fix them up, store them, etc. At one point my 1927 garage and both Amish sheds were crammed full of antiques as well as my spare bedroom. All the stuff just took over my house and all my available storage. It got crowded and I got tired of the mess.

I also did antique shows as well, which were fun. You meet a lot of nice dealers and customers. But there are fees associated with those as well, and if you get sick or the weather is lousy and you don't have hefty guys to help you (as I don't), if gets tiring loading the cargo van and unloading it - 4 times in all for each show, plus arranging your show booth. At this point, I prefer my gardens. I can schedule my work more easily, and the rewards are greater!
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Old 02-23-2018, 07:21 PM
 
Location: Scottsdale, AZ
7,938 posts, read 4,869,765 times
Reputation: 29107
Quote:
Originally Posted by ss20ts View Post
The thing is a business has to make an income in order to be considered a business by the IRS. After a couple of years, it's considered a hobby and no longer tax deductible....at all.
I wish people would stop repeating this. It's not true. It's an urban legend.

As long as you are at great pains to do business in a businesslike manner and have the records to substantiate that, you can lose money every year. It's still a business.
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Old 02-23-2018, 08:12 PM
 
10,604 posts, read 14,276,347 times
Reputation: 17208
Quote:
Originally Posted by fluffythewondercat View Post
I wish people would stop repeating this. It's not true. It's an urban legend.

As long as you are at great pains to do business in a businesslike manner and have the records to substantiate that, you can lose money every year. It's still a business.
ss20ts is 100% correct.

No, that is only one of the 9 criteria of guidelines they consider when making a determination. As you can see, the IRS specifically deals at length with the concept of Hobby Versus Business and uses that language. You even have to file a FORM if you have a dispute.


Publication 535 (2016), Business Expenses


Not-for-Profit Activities

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. It does not apply to corporations other than S corporations.

In determining whether you are carrying on an activity for profit, several factors are taken into account. No one factor alone is decisive. Among the factors to consider are whether:
  • You carry on the activity in a businesslike manner,
  • The time and effort you put into the activity indicate you intend to make it profitable,
  • You depend on the income for your livelihood,
  • Your losses are due to circumstances beyond your control (or are normal in the start-up phase of your type of business),
  • You change your methods of operation in an attempt to improve profitability,
  • You (or your advisors) have the knowledge needed to carry on the activity as a successful business,
  • You were successful in making a profit in similar activities in the past,
  • The activity makes a profit in some years, and
  • You can expect to make a future profit from the appreciation of the assets used in the activity.


Presumption of profit.

An activity is presumed carried on for profit if it produced a profit in at least 3 of the last 5 tax years, including the current year
.


If your business or investment activity passes this 3- (or 2-) years-of-profit test, the IRS will presume it is carried on for profit. This means the limits discussed here will not apply. You can take all your business deductions from the activity, even for the years that you have a loss. You can rely on this presumption unless the IRS later shows it to be invalid.

They even have a carve-out for the horse racing industry.


From the horse's mouth: (one of MANY publications about Hobby versus Business)


Five Things To Remember About Hobby Income and Expenses - IRS

https://www.google.com/search?q=iRS+...hrome&ie=UTF-8

Form 5213



What are My Self-Employed Tax Obligations?


As a self-employed individual, generally you are required to file an annual return and pay estimated tax quarterly.

Self-employed individuals generally must pay self-employment tax (SE tax) as well as income tax. SE tax is a Social Security and Medicare tax primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the pay of most wage earners. In general, anytime the wording "self-employment tax" is used, it only refers to Social Security and Medicare taxes and not any other tax (like income tax).

Before you can determine if you are subject to self-employment tax and income tax, you must figure your net profit or net loss from your business. You do this by subtracting your business expenses from your business income. If your expenses are less than your income, the difference is net profit and becomes part of your income on page 1 of Form 1040. If your expenses are more than your income, the difference is a net loss. You usually can deduct your loss from gross income on page 1 of Form 1040. But in some situations your loss is limited. See Pub. 334, Tax Guide for Small Business (For Individuals Who Use Schedule C or C-EZ) for more information.

You have to file an income tax return if your net earnings from self-employment were $400 or more. If your net earnings from self-employment were less than $400, you still have to file an income tax return if you meet any other filing requirement listed in the Form 1040 instructions (PDF).



As I said upthread, any hobby owner can say they have a business. They'll pay ordinary income tax and whatever SS and Medicaid they owe. The IRS doesn't CARE unless they try and take tax deductions operating as a net loss.

"Trying hard" doesn't cut it with the IRS or everyone would have the same story. As they hide their cash payments. And they lie about their expenses. Hence: the outrageous home office and mileage rules.

Some self employed people even set up a post office box so they can lie about going there first thing every morning to qualify for max deductions in this area.

Pretty sure all successful self employed people know all about these laws.

Last edited by runswithscissors; 02-23-2018 at 08:28 PM..
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Old 02-23-2018, 08:15 PM
 
Location: Ft. Myers
17,797 posts, read 11,304,779 times
Reputation: 37966
My wife and I went into the iron and steal business after we retired. She took in ironing, and I would steal.

Ok, it's an old joke, but it's all I've got.
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Old 02-23-2018, 09:03 PM
 
577 posts, read 644,386 times
Reputation: 1743
OP, you mentioned an interest in flipping homes. You also said that you could acquire a real estate license because of your former profession. You also like foraging for interesting estate items - so you might have a decorator's eye. Have you ever considered becoming a professional stager?

When we were preparing our home for sale our agent brought in her favorite stager (who also had an RE license). She was incredibly talented and creative, mostly using our things and bringing in small items to enhance the look. She did share that ours was easy due to my exemplary taste - but some homes required much more and she maintained a storage facility where she kept everything she needed.

She worked when she wanted and, because she was really good at it, she had a large clientele of agents who used her services. Our agent said she earned more money than many of RE folks. Just an idea.
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Old 02-23-2018, 09:24 PM
 
Location: Scottsdale, AZ
7,938 posts, read 4,869,765 times
Reputation: 29107
Quote:
Originally Posted by runswithscissors View Post
Pretty sure all successful self employed people know all about these laws.
Oh my, you're a riot! But thanks for the cut-and-paste throwdown.

I've grossed over $4 million in the last 6 years, so I await with bated breath your spectacular returns on, what is it, dog-walking and being a home health aide?

Last edited by fluffythewondercat; 02-23-2018 at 09:33 PM..
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Old 02-23-2018, 09:38 PM
 
292 posts, read 127,992 times
Reputation: 392
Actually the OP has more choices for part time work in her/his retirement years than most of the other posters on this thread.

Their education level is rather helpful in this regard. Perhaps some of the off handed comments might be based on a wee, tiny bit of envy? It is OKAY, life is not always fair in that regard.

Hubby is a lawyer, retired out early, and I am actually surprised at the various "gigs" that he has gotten through consulting positions. The last one ended up with him becoming part owner of the company of which he was contracted to provide services for. It has not required full time corporate hours, but actually about three days per week. I am surprised how well they are doing.

Anyway, I am a bit envious, as I went to medical school and short of finding a cure for human hair loss ( notice that I did not state a "cure for Cancer", as curing/ ending human hair loss would actually be more re-numerical than curing Cancer. AKA, Human vanity trumps all....) I will not be able to procure a similar salary in retirement such as my better half has.

So never say never without knowing all the facts about the OP
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