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TAX TIME, Tick Tock, The Tax Clock is Ticking

BentClocks06 Time to get your business taxes ready.
For artists and makers, running your business in a manner compliant with I.R.S. rules
can make a BIG DIFFERENCE between being declared a "business" instead of a "hobby". This has potentially major financial consequences.

Consuming Conversation stack of teacups by Harriete Estel Berman The IRS defines a "hobby" as "an activity not engaged in for profit" and consequently deductions for expenses are limited. On the other hand, a "business" is allowed to deduct the operating expenses from the business revenue to determine net taxable income.  Read more about this issue: "Business or Hobby? Answer Has Implications for Deductions."

The I.R.S. web site offers videos to help small businesses in convenient, digestible segments. I recommend watching this videos.

Grab your tea or coffee cup!!  The  video series is called Small Business/Self-Employed Virtual Small Business Tax Workshop.

IRSvirtualWorkshop

IRSvirtual10lessons There are 10 Lessons.  I suggest that you listen to all that apply to you. 
If you hover your mouse pointer over the Lesson, it gives you the full name of the lesson and the subjects covered.

The Introduction and Lessons 1 - 4 are fundamental information.  I especially recommend that you listen to at least these four.  You can pause, replay, or skip around.  Start with the Introduction (it is really short.)

Everyone should listen to: Lesson 4. What you need to know when you run your business out of your home.

BELOW are summaries of the first four lessons: 

Lesson 1.  What you need to know about Federal Taxes and your new business
  EIN (Employee Identification Number)
  Record Keeping
  Bookkeeping and Accounting
  Forms of a Business Organization
  Paid Tax Preparer

Lesson 2. How to set up and run your Business so paying taxes isn't a hassle.
  Net Profit and Loss
  Deductions
  Depreciation
  Disability Access Credit
  Self-Employment Tax and Estimated Tax

Lesson.3 How to file and pay your taxes using a computer.
  Describe IRS e-file
  Benefits of e-file
  Electronic Payment Options

Lesson 4.What you need to know when you run your business out of your home.
  
Determine Deduction Eligibility
  
Types of Expenses
  
Deduction Limits  

In my limited experience, there are a couple of issues that have been of particular interest by the I.R.S.:

Withdrawing inventory items for personal use

Accurate and detailed documentation of travel expenses

A receipt for every business expense

Detailed records for Cost of Goods Sold

Records for Finished Goods

Your detailed business records are absolutely essential.

This is my head exploding when I do my taxes.
  Ask Harriete
Watch my head explode.

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