hobby income

[Adalaide78]

What is the name of your state (only U.S. law)? UT

I have had my hours at work cut due to a work related accident. In my boredom I've taken up my old hobby of making baby blankets. There is a local store that sells crafts and such and would do so for me and take a small commision. I've read over some old posts and I guess the one thing I'm not finding is about what exactly constitutes income. If a blanket sells for $50 do I report the entire $50 or do I report the profit made on the blanket which would be closer to $30 after cost of materials and commision? I will certainly get "people" to do my taxes to take care of everything for me when its time, but I'd just like to know so I can set aside an appropriate amount of money to have when it comes time to write a check to the IRS.

 

[FlyingRon]

You can deduct the commission (if not already subtracted from what they pay you) as well as the materials involved on your sched C. You can't obviously deduct anything for "labor" (this is what constitutes the income). As long as your "hobby loss" doesn't exceed the hobby income the IRS doesn't get too annoyed. For a proper business loss they want to see a real business motive.

If you expect to have hobby income, you should be paying estimated tax, not just setting it aside.

 

[Adalaide78]

Thanks, I didn't know that. What I get paid will already have the commision deducted. If I decide to sell in the store and not just online I'll have to pay a security deposit and first month's rent up front but after that it will just be automatically deducted from what they pay me. I'm not imagining I could possibly have a loss on this. It's baby blankets in Utah, and not just any old place in Utah, the physical store is in Provo where BYU is. I fully intend to capitalize on young doe-eyed first time mothers. Most people manage to clear about 10 times the monthly rent and more if they are selling things for babies.

 

[JETX]

I've read over some old posts and I guess the one thing I'm not finding is about what exactly constitutes income. If a blanket sells for $50 do I report the entire $50 or do I report the profit made on the blanket which would be closer to $30 after cost of materials and commision?

You report your sales ($50) and then your deductions (material, sales costs, etc.).
You need to review the schedule C form.... and it should be clear how you report your income.

 

[TinkerBelleLuvr]

For your reading pleasure:

http://www.irs.gov/irs/article/0,,id=186056,00.html

http://www.irs.gov/newsroom/article/0,,id=172833,00.html

http://www.irs.gov/faqs/faq/0,,id=199650,00.html

http://www.irs.gov/pub/irs-pdf/i1040sc.pdf

 

[Adalaide78]

Amazing, thank you. I can usually find my way around the internet but the IRS site as well as a few others just leave me lost. It's probably because I'm not really sure exactly what it is I'm looking for. I suppose from looking this over and just a brief glance that while this has started as me being bored out of my mind and needing something to do that if I decide to continue with the intent to make money that it may be considered a business. It certainly looks like its time to make that appointment with "people" and have someone help me make sure that I cross all my T's and dot all my I's. Thanks again, you guys have been very helpful with getting me pointed in a direction.