right arrow
Examples: Monday, today, last week, Mar 26, 3/26/04
We’ve got a new look! Walk through the key updates here.

What counts as a "business"?

SighaaSighaa 17 replies8 discussionsRegistered User Posts: 25 New Member
One of my extracurriculars is (insert very specific type of art here, omitted for privacy). I've made and sold several pieces on contract, and have a website for this purpose. I've made several thousand off of this (thing), but nothing close to what a restaurant owner or some-such would make - so my question is, can I list in the activity portion under (this) that I run my own business involving the sale of (this) ? Or is that dishonest - I don't really know what qualifies as a business.
17 replies
· Reply · Share
«1

Replies to: What counts as a "business"?

  • T26E4T26E4 23243 replies1031 discussionsRegistered User Posts: 24,274 Senior Member
    I would assume you've listed your artistry elsewhere. Why don't you list on the same area, something like this:

    “X years of ABC artwork. Honors: A, B and C. Commercially sold D pieces for $8,000.”
    · Reply · Share
  • am9799am9799 911 replies27 discussionsRegistered User Posts: 938 Member
    I always thought whatever involves exchange of money is a "business" but maybe I am wrong.
    Especially if you run your own web site and personally facilitate the sales of your work I see that as a business.
    Or is the term "professional" used more in the case of art? Like if you sell you are a professional artist otherwise you are just an artist?
    · Reply · Share
  • Madison85Madison85 10290 replies407 discussionsRegistered User Posts: 10,697 Senior Member
    edited December 2014
    @sighaa Are you reporting your business income and expense on Schedule C of Form 1040?
    edited December 2014
    · Reply · Share
  • JustOneDadJustOneDad 5726 replies119 discussionsRegistered User Posts: 5,845 Senior Member
    Exactly. A business would consist of licensure, registration, tax id and reporting. Short of that, it's best to just say you sold some.
    · Reply · Share
  • Parent1337Parent1337 382 replies8 discussionsRegistered User Posts: 390 Member
    It's a business, and tout your business proudly. Nobody is going to be checking for tax returns!
    · Reply · Share
  • thumper1thumper1 73033 replies3180 discussionsRegistered User Posts: 76,213 Senior Member
    edited December 2014
    Nobody might check for tax returns, but if this student is applying for need based aid, his $8000 income should appear on his financial aid application forms....and yes...someone could easily connect the dots.
    edited December 2014
    · Reply · Share
  • SighaaSighaa 17 replies8 discussionsRegistered User Posts: 25 New Member
    No, I did not report it on a tax return. Proooobably should have though :pensive:
    · Reply · Share
  • SighaaSighaa 17 replies8 discussionsRegistered User Posts: 25 New Member
    *Before someone calls the IRS, the bulk of it was reported somewhere on my Dad's. He ran away a year or so ago and I have no way of contacting him to ask how it was reported.*
    · Reply · Share
  • doresearchdoresearch 133 replies0 discussionsRegistered User Posts: 133 Junior Member
    edited December 2014
    Maybe looking at it like this will help: You are an artist who has sold your work, you are not a gallery owner who sells art. To have a legitimate business you need a business license and you need to have filed a business tax return. Even the IRS acknowledges that some "Business" are only "hobbies"

    Also, if you Dad filed the tax return in question jointly with your mom or other person, then she can obtain a copy of the return for that year.

    For your college resume, I would take the advice of @T26E4 and show the sales as part of your art experience.

    Here are the IRS Guidelines for a business:
    http://www.irs.gov/uac/Business-or-Hobby?-Answer-Has-Implications-for-Deductions
    Business or Hobby? Answer Has Implications for Deductions
    In general, taxpayers may deduct ordinary and necessary expenses for conducting a trade or business. An ordinary expense is an expense that is common and accepted in the taxpayer’s trade or business. A necessary expense is one that is appropriate for the business. Generally, an activity qualifies as a business if it is carried on with the reasonable expectation of earning a profit.

    In order to make this determination, taxpayers should consider the following factors:

    Does the time and effort put into the activity indicate an intention to make a profit?
    Does the taxpayer depend on income from the activity?
    If there are losses, are they due to circumstances beyond the taxpayer’s control or did they occur in the start-up phase of the business?
    Has the taxpayer changed methods of operation to improve profitability?
    Does the taxpayer or his/her advisors have the knowledge needed to carry on the activity as a successful business?
    Has the taxpayer made a profit in similar activities in the past?
    Does the activity make a profit in some years?
    Can the taxpayer expect to make a profit in the future from the appreciation of assets used in the activity?

    The IRS presumes that an activity is carried on for profit if it makes a profit during at least three of the last five tax years, including the current year — at least two of the last seven years for activities that consist primarily of breeding, showing, training or racing horses.

    If an activity is not for profit, losses from that activity may not be used to offset other income. An activity produces a loss when related expenses exceed income. The limit on not-for-profit losses applies to individuals, partnerships, estates, trusts, and S corporations. It does not apply to corporations other than S corporations.
    edited December 2014
    · Reply · Share
  • Madison85Madison85 10290 replies407 discussionsRegistered User Posts: 10,697 Senior Member
    edited December 2014
    It certainly sounds like you have earned business income. Be sure to include it on your 2014 Form 1040, Schedule C. You will owe self-employment income tax on the profit, and possibly federal and state income tax as well.

    Does anyone else see this disconnect in thinking on CC like I do? Kids who make mention of income-earning activities on college applications, but then fail to report the income on their tax returns, and then apply for federal aid.

    Fraudulent.
    edited December 2014
    · Reply · Share
  • twoinanddonetwoinanddone 21937 replies14 discussionsRegistered User Posts: 21,951 Senior Member
    Are you trying to highlight your craft or the fact that you are a successful business owner? If the craft, then you want to highlight those aspects, but if you want the admin to know that you've learned a lot by selling your product, running your business, then call it a business and talk up what you've done to market your business.
    · Reply · Share
  • SighaaSighaa 17 replies8 discussionsRegistered User Posts: 25 New Member
    @twoinanddone mostly my craft. The only reason I ever started selling was because I needed to fund my craft in the first place
    · Reply · Share
  • SighaaSighaa 17 replies8 discussionsRegistered User Posts: 25 New Member
    edited December 2014
    Also @Madison85 I'm not applying for federal aid, and I've spent every cent I've made on more materials for the craft - so if making pieces and not selling them counts as part of the "business," then my net income would be negative.

    Idk if that counts as fraudulent, but I certainly won't be paying for college with that income, and the income won't be continuing into college - nowhere near enough time.
    edited December 2014
    · Reply · Share
  • JustOneDadJustOneDad 5726 replies119 discussionsRegistered User Posts: 5,845 Senior Member
    Parent1337 wrote:
    It's a business, and tout your business proudly. Nobody is going to be checking for tax returns!
    It's not about tax compliance. No one cares about that here. Part of having a "business" is licensure, record keeping and tax returns. The OP asked about running a business and simply selling some things is not running a business.
    · Reply · Share
  • twoinanddonetwoinanddone 21937 replies14 discussionsRegistered User Posts: 21,951 Senior Member
    If you lose money or reinvest, you may not own any taxes. You need to check the 'hobby business' tax laws. You can usually offset any gains with losses or costs of your business/hobby.
    · Reply · Share
This discussion has been closed.

Recent Activity