Cash is fine, until you sell to an IRS agent, or a neighbor turns you in. (There used to be rewards for that, maybe there still are?)
If you are a hobbyist, who sells their product, there is a line on the 1040 where you can declare any income-after expenses. You are allowed to deduct your expenses-but only to the amount of money you bring in. No losses, no negative numbers. This is for the hobbyist.
The diference as a business, is then you can take the full deduction, and show a loss two of the first five years.
I am not a professional tax person, this is just what I have learned along the way.
If you go to the IRS website, they have all kinds of information about this- you just have to figure out what you need to know. Everything can be downloaded as pdf files, and read at your leisure.
Say Bjorn, wouldn't beekeepers use schedule F-profit or loss from farming instead of C?
I just pulled a 2001 tax book,(2002 is all on the computer) On the Fed 1040, line 21 is listed as other income. Then in the directions it say to include income from an activity not engaged in for profit (I would call that a hobby) and also to see publication 535 .
Taxes aren't the daunting thing we like to make them out to be, you just really need to start at the beginning, and do it one step at a time. The worst part is not keeping records together, and trying to remember in March what I did the previous June.
[This message has been edited by ChellesBees (edited August 20, 2003).]
Good question. I have a Ag. license to keep bees, (another Pa. thing) but have them addressed at my home. I do have a family farm but do not have anything addressed or licensed there. Now I'm wondering the implications of actually listing it as a farming operation or Schedule C business. (God only know what it takes in Pa. to actually have a "farm" operation.) I think I'll follow my own advice and contact the tax lady.
I'm thinking it has something to do with weather its (farming) a primary business for profit and the primary means of income vs. a scheduled C business thrown into the 1040 total of the household income? Hmmmm......
If I am 13 I don't have to pay taxes right or am I wrong? or dose it depend on how many hives I have?
It depends on how much money you make all together. I don't have the numbers in front of me right now, but basically I'm sure you won't have to worry if you make less than $600.
swarm-trapper Page 18 of instructions for the 2002 1040 states that single dependents must file a return if any of the following apply. A. Your unearned income was over $750. B. Your earned income was over $4700.00 C. Your gross income was more than the larger of- $750 or
your earned income (up to $4450) plus 250.00.
Bjorn - I have done my taxes online for the last 3-4 years, and the program always directs me to the F instead of the C. I don't even keep the bees in my yard, they are somewhere else. On the fed form, they aren't going to care what PA does. The F form throws in just as easy as the C does, and in reality, neither of them fit beekeeping very well.
To any who are interested, what I would suggest is go online, pull copies of schedule F and C and their instructions, and see how you want to sort your paper work. Your tax person will be impressed with how organized you are.
and if I make more than 600$ (is that net or gross)i have to pay
No, unless you have substantial unearned (interest, legal settlement, etc.)income, you can earn up to 4700.00 before you have to file. If you earn more than that as gross income, you will need to do the paperwork and determine if you need to file or not.
Swarm trapper, if you are only 13 and anticipate earning a lot of money on beekeeping, you really need to talk to your parents, or some other knowledgeable adult about taxes. If you are considered self employed, there are other things you will eventually need to learn about, like social security tax, etc. And depending on your family situation, it can also affect your parents taxes.
I keep bees on my farm and include the income/expense as a part of the operation. Just because there are 75,000 head of bees doing the work doesn't in a small box doesn't seem to make it a factory or commercial type of business. I used Schedule F (Intuit Tax software actually). Rules for farms are you need to show a profit 3 out of 5 years, otherwise it's a hobby. There are tax advantages for section 179 property. I'm not an accountant and haven't talked to one but I plan to expense my hive expansions and extracting equipment under the rule rather than capitalizing them for 10 years or so.
This way I can benefit from the tax write off this year and be in a strong position to make a resonable profit next year, avoiding the 'hobby' designation. I avoid anything that conflicts with personal expenses like writing off part of your house or all of your truck. Keep everything on the up and up but it's one of the last tax favorable areas for the little guys.