Hobby vs. Business?

I live in New York.
I am 16.
I would like to start to develop websites in addition to college and my part-time job. When does a hobby end and business begin? I don't want to be doing anything illegally, but also do not want to take unneccessary steps. Right now, I do a website about every 3 months, with about $100 revenue each time. Does this constitute a business? If not, how much would? If so, what steps should I take to make this legal?

Thanks!

whositt said:

I live in New York.
I am 16.
I would like to start to develop websites in addition to college and my part-time job. When does a hobby end and business begin? I don't want to be doing anything illegally, but also do not want to take unneccessary steps. Right now, I do a website about every 3 months, with about $100 revenue each time. Does this constitute a business? If not, how much would? If so, what steps should I take to make this legal?

Thanks!

Click to expand...

My response:

Now, THAT'S being an entrepreneur! I like that. Going to school, working, and still filling up your time with something worthwhile! That's terrific.

Okay, the IRS gives you up to five years to show a taxable profit before it disallows your business deductions you'll be taking each year. You'll have to show at least a $600.00 per year profit - - that's AFTER all deductions.

Pal, you're in business whether you know it or not. It's just a matter of meeting the IRS threshold. If you can't show profits for each of the succeeding years during the next 5 years, the IRS will disallow your deductions as a hobby.

Good luck, and keep up the good work!

IAAL

not to mention the kid's 16. Geeez, now I do feel old and word out.

So... what do I do? Would you advise slowing down and keeping under $600 revenue or promote myself to make sure I go over... and what kind of accounting practices should I take up? Should I be talking to an accountant as to what expenses I need to be keeping track of? Is there such a thing as a quick reference guide?

Thanks again!

Bad news.... I think you misunderstood his post and thought that the first $600 was 'free'. It isn't. You need to report ANY money you make to the IRS, not just the $600 threshold.

However, with the minimal amount you make, you are very likely tax exempt. So, go ahead and start doing your taxes. You will get a lot of experience for filling out the papers for the rest of your life.....
And you are going to get some experience with Schedule C (Profit and Loss from Business)

Good information can be found at:
http://www.irs.gov/pub/irs-pdf/p17.pdf
http://www.irs.gov/pub/irs-pdf/p334.pdf
http://www.irs.gov/pub/irs-fill/f1040sc.pdf

Finally, welcome to the world of tax filers.

whositt said:

So... what do I do? Would you advise slowing down and keeping under $600 revenue or promote myself to make sure I go over... and what kind of accounting practices should I take up? Should I be talking to an accountant as to what expenses I need to be keeping track of? Is there such a thing as a quick reference guide?

Thanks again!

Click to expand...

**A: don't slow down.