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Need tax stuff help

516 Views 2 Replies 3 Participants Last post by  gardenmom
Okay, I am going to be selling some things I make locally, possibly online as well.
A local mom who makes soaps told me I could just add the income on our personal tax returns at the end of the year. That sounds too easy to

How do I figure out if I need to charge sales tax, how much I can make before I have to claim as a business and can just do it as a craft hobby, etc???

I'm in IL btw
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Check out your state's dept of revenue website, that should have most of the info you need regarding starting a business. Every state has different rules regarding registering the business, registering your business name, collecting sales tax... it varies tremendously from place to place.

I was able to request a big (several inches thick) manual entitled "Starting a Business in Minnesota" when I was first starting out- that was invaluable.

Good luck on your business venture!
For sales tax, it's a state-by state rule so contact your state like annethcz said. Also, for getting a business name and business bank account (so people can write checks to 'soapstyles' or whatever you want to call yourself, instead of just using your name), here in NY you have to go to your county office and file a DBA form ('doing business as'). I think it cost under $30 when I did it. You can get dba forms at office supply stores--you need to bring your own, at least I did. Bring it there, look up to make sure no one else is using your business name already and then a notary in the county office signs it for you and puts it on file and you get a few notarized copies for the bank. If you're just using your own name, you can use a personal bank account as well, and skip this or do it later when you feel it's justified. Of course, it's by you'll have to check.

For federal income tax, you can be a sole proprietor without too much of a hassle. I do my business books using a common software program, and hand the 'profit and loss' breakdown to our accountant to do it. We have two home businesses, so we do one for each. The accountant fills out these forms for each business, using just our SS#'s as 'taxpayer ID's--
'Schedule C--profit and loss from business'
'Schedule SE--self employment tax' (yes you have to pay your own social security on profit).
He then fills in the appropriate matching spaces on the 1040. I'd do it myself (it's pretty straightforward), but we have other complications on our taxes so we just pay the accountant to do it all...

Don't forget that you can file a loss as well, and take the loss off your taxes against your other income (for up to 3 years in a row I think). So that can help if you don't expect to be really profitable until you get it off the ground. My business has been profitable 2 out of the past 4 years...

Also--a warning from my experience. DO NOT file as a partnership, even if your partner/spouse is helping you. We had a previous business that way, and did our own taxes..even the people at the IRS offices who were supposed to 'help' had no idea what forms to file as a straight partnership--it's a mess. I suppose a paid CPA would know what to do....

Of course, double check all I said above, but it's a start. Feel free to PM me for more info. I'm a stickler for paperwork--I hate it but am good at the details, or so I'm told--so I get stuck with it in this family!
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