do we need to file tax on the coral sales?
- Thread starter zle
- Start date
PasstheTorch
Well-Known Member
I don't think so.....
gadolinium
Gadolinium
Your not selling enough to worry about it. Did you give a receipt when they bought it? Do you keep an inventory of your merchandise? Just enjoy your tax free earnings.
STiTCH87
Saltwater OCD Victim
I never file taxes on anything except my paycheck. Otherwise, they'll always find a way to take more money from you than they need to know you even made. Unless you bought a car, house, or anything else over say $5,000 I wouldn't claim it.
I wonder if I should claim my $4,000 vacation to Key West... Lol hmm...
I wonder if I should claim my $4,000 vacation to Key West... Lol hmm...
new2saltyfish
Non-member
I'd file taxes on it...once they start kicking out illegals and tax them for prior transactions...until then they can kiss my a**
So I could claim the $35 I made on frag sales this year, and then deduct the thousands I spent on keeping the tank to grow them? How much paperwork is involved
As a hobby you could file your income and then deduct expenses up to the amount of income. If the amount $ is small it it is hardly going to be an issue and I doubt anyone in the IRS would ever care until your income is greater than your expenses. As a business one can deduct expenses in excess of income. The business must pass a subjective IRS test to be considered a business rather than a hobby. A lot of details on what that entails, but suffice to say, good luck in the audit that will almost certainly come if a claim of $35 income versus thousands in expenses is made.
stingythingy45
Well-Known Member
So I could claim the $35 I made on frag sales this year, and then deduct the thousands I spent on keeping the tank to grow them? How much paperwork is involved
+1
I would be claiming a loss of over $500 in just electricity cost....yeeeesh...
There are so many urban legends on here regarding taxes it's not funny.
You would only have to file if you were running it as a business and produced a profit. Even if you were foolish enough to waste your time filing taxes, you would quickly find out that you cannot offset personal income with losses from a business that was not your primary source of income. If you claim losses if you do file as a business, you are only allowed to offset future profits in the business. You will not get a refund or offset your other income by producing losses selling corals.
Furthermore, you can only claim expenses for the percentage of use that is dedicated to the business. So a real simple example would be, you have a 400 gallon fish tank for personal use and 100 gallons for business use. You would only be able to claim 20% of your expenses as a deduction. Do people fool around with this? Yes, but they are breaking the law. What is more likely is that the IRS would disallow all of the expenses.
All of this goes along with classic tax myths like, "I made less money because I was pushed into a higher tax bracket." Um no, you didn't. The marginal income was taxed at a higher rate, not all of it.
The other classic myth is, "well the business doesn't care because it just can just write off the expense from taxes, it doesn't cost them anything." Wrong again. Yes, they may be allowed to deduct an expense, but that only saves them whatever their tax rate is, so they may save $0.40 for every dollar they spend. A business will go broke real quick spending a dollar to save 40 cents.
I am sure some people were joking, but if you get audited by the IRS, you won't be laughing.
You would only have to file if you were running it as a business and produced a profit. Even if you were foolish enough to waste your time filing taxes, you would quickly find out that you cannot offset personal income with losses from a business that was not your primary source of income. If you claim losses if you do file as a business, you are only allowed to offset future profits in the business. You will not get a refund or offset your other income by producing losses selling corals.
Furthermore, you can only claim expenses for the percentage of use that is dedicated to the business. So a real simple example would be, you have a 400 gallon fish tank for personal use and 100 gallons for business use. You would only be able to claim 20% of your expenses as a deduction. Do people fool around with this? Yes, but they are breaking the law. What is more likely is that the IRS would disallow all of the expenses.
All of this goes along with classic tax myths like, "I made less money because I was pushed into a higher tax bracket." Um no, you didn't. The marginal income was taxed at a higher rate, not all of it.
The other classic myth is, "well the business doesn't care because it just can just write off the expense from taxes, it doesn't cost them anything." Wrong again. Yes, they may be allowed to deduct an expense, but that only saves them whatever their tax rate is, so they may save $0.40 for every dollar they spend. A business will go broke real quick spending a dollar to save 40 cents.
I am sure some people were joking, but if you get audited by the IRS, you won't be laughing.
No, I don't. However I am an equity analyst and taxation knowledge is part of the job. This is more towards personal taxation, of which I am no expert, but I do know I am correct about this.
I am oversimplifying everything, so I am sure in some limited circumstances you could deduct some small amount. However the time and expense required to do so would be more than any benefit you would receive. The notion of using a hobby to lower income taxes has been tried a million times and it doesn't work.
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