Tax Form Question.....What A Joke!

[capesams]

What I was saying is that if you sink[spend] $10,000.00 in setting everything up..they give you 3 years to break even on what you've spent...expenses vs profits....after those 3 years are up that you should be making a profit beyond expenses..otherwise something starts to smell fishy to them.You can't have a loss in your operation year after year after year.

Everything you buy to set up shop with that you'll need to make that product that doesn't go out to get sold ,the state will tax you on it[in manufacturing]..they call it use tax..your town will tax the same items too...it's called excise tax.Everyone going to get a cut of your money but you.

[Gloucester2]

Originally Posted by capesams

What I was saying is that if you sink[spend] $10,000.00 in setting everything up..they give you 3 years to break even on what you've spent...expenses vs profits....after those 3 years are up that you should be making a profit beyond expenses..otherwise something starts to smell fishy to them.You can't have a loss in your operation year after year after year.

Close - but no cigar Steve. You're referring to the IRS "hobby/loss" rules . . . the general guidance is that if you don't generate a profit in 3 out of 5 years the IRS may question whether the "business" is just a "hobby". The usual example in business school is and "artist" that goes into business . . . may sell a painting or two generating some income but expenses greatly exceed income. The IRS will let it slide for several years but may question it at some point as a hobby. The best way to demonstrate it is a "business" is advertising, business cards, a store location, etc.

I can think of many businesses that go thru cycles of loosing money for many years . . . hospitals for instance.

Some one page JPowers - he's the real accountant around here

[BigFish]

My biggest question is the tools I have....I bought them all before I became a "business".....they were not a write-off so how can they tax me on them???

[Gloucester2]

"Technically" <someone better really call JPowers now> they should be "converted" from personal property to business property at their fair market value when the business commenced . . . I know, I know a quagmire when we're talking about dozens of hand tools, uncertain values, mixed business and personal use, etc. - but accountants gotta eat too


Create an inventory, come up with a reasonable value, take a deduction for depreciation (3 years seems like a reasonable useful life) and the savings will more than offset any excise/use tax you may incur.

That will be one plug please Just kidding !

gOOD LUCK.

[Karl F]

yep G2..
BigFish INC. buys out BigFish Larry Hobbyist.... Corparate aqusition, so to speak

[Raven]

Larry you should have that tool inventory on paper in a safe place
in case of fire or theft anyways.

[Tagger]

That sux Larry ,,, sounds like the old Whitey shakedown of buisness owners .. Pay me for protection of us .. Maybe it wasn't so bad when England ran the show here .

[Karl F]

There is talk of doing this on the cape in some towns on Personal Property for homeowners.. have them inventory appliances, high end TV's, Stereos, PC's, electornics.. etc... Tools.. etc.. and pay an excise tax on that.. I know in Eastham, if you own a house or cottage and rent it.. you got to do that on the appliances already, guy who works part time with me has a small rental cottage, and he just got whacked with it...

As that *&%*! Tip O'Niel used to say.. "All Politics is Local"... well, All Corruption is Too.. Starts right at everybodys local Town Hall and Goes Up the Ladder all the way to DC.. Both Sides of the Aisle.. Thieving Bastages...

BUT.. if it's the Law.. ya better pay