Friday, March 8, 2013

Become a creative business person

The other day I was reading one of our local newspaper call the VALLEY MESSENGER. My friend Sharon Rachal wrote an article call 'Become a Creative Business Person' and this is what she wrote. (I will be rewording some of it to fit this blog and also add what my tax man told me during our tax visit the other day.)

We all start off with something that we love to do and call it a craft or hobby. Then comes the day when we start selling our work and we realized we can turn that craft or hobby into a business. We are now a creative business person.
Y'all may be asking your self what dose creative business person mean? Number one, it means earning a income from doing something that we love to do. But it also means keeping good records.

Did y'all know if you sell art work, hair bows, vintage items, clothes, jewelry, crochet, photos, etc. as a hobby is taxable? But with your first sells y'all are now a small mom and pop business. Or are ya?

Ignorance of the law is no excuse. Under the federal income tax, any income, regardless of the source, is taxable. Not only is the income generated from your craft or hobby taxable, but even those monetary awards.

There is a definite advantage to making your craft or hobby a business. One, it allows ya to deduct so many things: magazines. books, supplies. education and even your gas mileage. I would like to stop here...

  I ask my tax man about this and he told me that with the IRS this is a big gray area. The IRS will only give me so many years to turn my hobby into a business, but if I can't meet their standers than they will look at my business as a hobby and I will then be penalize to give back the deductions. 
But this dose note  mean that I cannot take advantage of the some deductions.
If y'all belong to (woke for or volunteer) to a non profit than y'all can take off on our tax's, gas mileage, supplies, booth fees, etc. but let see what else Sharon has to say...

It is very important once ya start earing income to keep good books. Sharon keeps a book in her car and log everything: listing dates; time and purpose of the trip.

If one donates art works or items to a charities or organizations, only the expense of making it is deductible-not what it normally sells for. Again I want
to stop here...
 I ask my tax man about this and he told me that yes this is right but, let's say I donates a piece art work, I can only deduct the cost of materials but if I donate a painting that is a year or more older I would have to get it appease to clam the full price of the paining. But let's move on....  

Sharon also said, Think like a creative business person. To be a business, a profit must be made three out of five years.

For more information, check with IRS on www.irs.gov



 
Until next time Happy Creating and God Bless
 
J.D. Fields of Art Work by Lady Bug


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