Thrown into Retirement (legal, best, mother, taxes)

[RVlover]

'As some of you know, I just spent a year in the hospital.

I come out, retired. I can't work again.

I can go fishing, hunting and such but not what I used to do. I was kind of Thrown into retirement. I'm only 56.

I'm financially stable, well almost. haha '

REPLY: Im sorry to hear you are disabled so young. Im 55 and healthy (so far as i know) .. and have just semi retired , on purpose though. Have greatly downsized , live in a cheap part of Florida, and am frugal with my money which all helps.

'I have some questions but let me explain first. While I was in the hospital I had time on my hands and went back to old hobbies. Leather work. While laying in bed I would make wallets, purses and such. I make them from scratch, don't buy kits. So when I got out of the hospital, on full disability I got me a cabin up in the mountains.

Here I had all this leatherwork I'd made, plus more I'm making every day. I stopped by the local watering hole and somebody commented on my wallet. I went to the truck and brought in my "Bag". I sold over $5,000 the first day. I now have standing orders for, literally, thousands more.

REPLY: Wow...you have a real good talent and something thats in demand. Great !

'I can't work, by the Fed's. Can I sell my leatherwork? Do I claim it?

The hides I make into purses and such are hides I tanned. I shot them, I tanned them, I built them. Do I need to claim this?

If I do, I'm in trouble, I'm making more then I did when I was working. It was just a hobby. But I've been at it for over 40 years.'

REPLY: I believe you can make up to $10 k. without having to file an income tax return , so, legally...you are supposed to claim that income you get from your leather business. While it may be tempting to not do so, if you get caught you will be in trouble big time ; big fines and possible jail time depending on how much you chose to cheat the Government out of . My Accountant told me that they are cracking down on this now. Im sure you can make a nice living selling your wares and paying taxes on it, so, whats the point in allowing greed to set in ? You are in a very good financial and business position considering your health , and thats something many dont have --- not even those who havent a disability .

I havent read the entire thread, so, im wondering if youre married ? Does your wife work ? Im divorced with no kids, so, it makes things a bit simplier when you do retire. I wish you many blessings in your life, regardless of your disability setback.

[LittleDolphin]

Sounds to me me as though your "hobby" is actually a money-making business...if you want to be ethically/legally above-board, this income should be reported the same as any self-employed business person's income would be--along with deducting your expenses and overhead and such..and you should be paying into SS just like any other sole business owner.

Artists, writers, and other small business people do this all the time...it's income, even if viewed as a hobby or passion or craft.

The fact that the Feds say you can't work (in your former occupation?) makes little difference--you are working and producing income...

Having said that, I've heard tell of other folks who deal strictly in cash and don't report income...but that's a risk you'll have to judge for yourself...me, I like to sleep at night...

[forest beekeeper]

That sounds great!

You have a skill and a business that is in demand.

Find a tax attorney, have him setup your business for you, with a tax-plan. You need to form your business within the context of that tax-planning. So that even while making lots of money, you have no taxable income from it.

Good luck, and remember:
Never lie, never cheat, be totally honest with the IRS and you will be fine.

[Tesaje]

I come out, retired. I can't work again.

I can go fishing, hunting and such but not what I used to do. I was kind of Thrown into retirement. I'm only 56.

Hmmmm. I don't know what your disability is but last time I checked, fishing, hunting and such is pretty physically active. Count your blessings.

You have 2 different sets of laws to deal with your profitable "hobby."

The IRS has one set with specific limits to how much you can make from a hobby versus it becoming a business. They deal with this all the time. Any competent accountant or the info on the IRS web site can give you the details. Failure to report income is fraud and they can and do send people to jail for it. If you make more from your hobby than you made at your career job, then it most likely requires reporting and tax paid.

The second set of laws is your disability payments. This is completely independent of the IRS laws. There are limits on how much income you can earn to keep the tax payers from paying for people like you who have a disability for one job but are very capable of earning a handsome living at another. And do.

Your choices are:
Keep your disability payments and don't sell/earn anymore than the limit.

Pay your taxes.

Commit fraud.

It is pretty clear cut and there is a lot of easy to get documentation on just this sort of thing on the govt web sites.

[Curmudgeon]

When you're selling goods, no matter who produced them, you are engaging in a business/commerce. Thhat's taxable. Much of it is also deductible to include cost of materials, labor, etc.

[Tightwad]

Originally Posted by LittleDolphin

Sounds to me me as though your "hobby" is actually a money-making business...if you want to be ethically/legally above-board, this income should be reported the same as any self-employed business person's income would be--along with deducting your expenses and overhead and such..and you should be paying into SS just like any other sole business owner.

Artists, writers, and other small business people do this all the time...it's income, even if viewed as a hobby or passion or craft.

The fact that the Feds say you can't work (in your former occupation?) makes little difference--you are working and producing income...

Having said that, I've heard tell of other folks who deal strictly in cash and don't report income...but that's a risk you'll have to judge for yourself...me, I like to sleep at night...

Dealing in cash only would make you part of what's called the "underground economy" of millions of people who live cash only lives.

Once choice you have to make is to be a business or a hobby since you can't be both for long and sell what you make. Since you are classified as 100% disabled you also run the risk of being charged with fraud 'cause you can , and are, working making decent money.

[mathjak107]

How to Calculate Taxes for Hobby Expenses and Income | eHow.com

[ElkHunter]

Don't get me wrong. I'm not trying to "Get Out" of anything. Simply asking what I need to file and where.

I'm listed as 100% disabled. Without going into details, I can work but only 10-15 minutes at a time. At least doing what I do for a hobby I can lay it down and come back later.

I certainly don't want to circumvent the IRS or Social Security Disability. Just had some questions so I could better ask when I went to SS office. They say I can do some work, but there is a cap. Depending on what I do.

This leather business is nice but it's very limited. For instance, right now there are a lot of bikers going through gearing up for the Sturgis Ralley. Next month I would be lucky to sell 2 purses. Plus, with my disability I can't put in "Hours" to build. Few minutes at a time and then set it down.

As far as fishing and hunting goes, I have to belly up to the crick now. Can't hike anywhere. Same with hunting. Can get out and take a shot, but tracking is left up to the youngun's.

[fauve]

I think the best thing for you to do for *now* is just to keep it simple and keep it cash. If you receive a check, even one written to cash and it has "leather goods" or "belt", etc., anywhere on it, cash it. Do not deposit large sums of cash. Do not sell bulk to a store should you have the opportunity without charging them sales tax or getting a copy of a certificate that excludes them from paying sales tax (in Florida no sales tax is charged on items intended for resale). If you do sell a large order do not neglect to apply to the Dept of Revenue for a sales tax certificate, and start filing quarterly sales tax returns. It is MUCH easier to get tripped up by state investigators than the IRS for this sort of stuff.

Once you start selling to businesses, you MUST start filing federal returns along with the sales tax returns - that's essentially the point of no return.

[texdav]

Originally Posted by Plain Jane 3953

I cannot figure out, Mr ElkHunter, if you are on Social Security or not. But let's assume are you. I work and pay taxes, therefore my tax dollars are used to make a monthly payment to you so that you can eat and maintain a roof over your head. I want my tax dollars to be used for this purpose if people are too ill/disabled to work and have lost their ability to earn a living. I would with pleasure pay more in taxes, for example, for everyone to have health care because I believe that benefits society as a whole. If someone called me a "socialist" it probably wouldn't be too far off the mark.

But anyway, you now claim that you are making more money than when you worked (I assume this is your profit you are referring to). Well if that is the case, why shouldn't you claim this money you are earning from your "hobby" and why should I be paying you SSI?

No if he is on social security and worked for years he has paid into social security. Those that have not do not get dsiabilty unless its on someone else accoutn because of death.He does get a increase becuse of disabilty tho over noraml amount he eraned.You need to make sure your not a democrat because they only want to tacx certin class to pay for heath acre not veryone as you suggest for heath care.They have no proposal to put a tax on all like socail security does except those exempted by teh courts. I suggest you write your congressamn and say you for a overall tax on all wage eraners just like social secrity and aginst the pesent porpoasl that tax just a few.I thinkk what he is worried about is the fact that its hard to get disability and his hobby may not be a long term earning thing as many are not.Your certianly not a socialist if your infavor of a genral tax to support things.Socialist want a plan ecomy and governamnt control of all means of production and the right to control the product porduced.That means they will say what job you are assinged to and them what you will be paiud to buy form them;kind of the company store all over agian.