Small breeder question....

Hello,
I have been breeding chameleons for a few years now and have recently been selling quite a bit with payments coming via paypal. My concern is with Uncle Sam (IRS) in particular. I dont have a business license and am pretty sure that I dont want or need one. Im only talking about a potential of selling $5000 - $10000 worth of animals at best. With expenses and reinvesting the majority of what is made back into my hobby/business is it just a matter of keeping good records of my expenses and transactions in case of an audit. I dont need them poking around thinking Ive made tons of extra cash, lol. I just mention the Paypal part because that would be an easy verifiable way for the govt. to see how much in sales I have had. Just looking to the future to make sure I cover my bases and do things the correct way
Thaks for any and all input!
Jason.

Hi Jason- short answer yes they can gleen info from CC companies who report that info to them. The positives of reporting your income is the ability to take deductions that are involved in your business activity.

Originally Posted by CrocEnc

Hi Jason- short answer yes they can gleen info from CC companies who report that info to them. The positives of reporting your income is the ability to take deductions that are involved in your business activity.

Hi Chris, thanks for the feedback! In order to take the deductions would I have to actually get a business license?

Different states vary in their business setups but in general you just need a DBA and you can use your SS # as your tax ID. You would just file your taxes as normal reporting the income as well as including your deductions. They only tax actual income which would be the difference between the two figures. Be careful that you are functioning as a business and keep good records as inappropriate hobby deductions are often an audit flag. Just be honest in your accounting and you will have no problems.

Originally Posted by CrocEnc

Different states vary in their business setups but in general you just need a DBA and you can use your SS # as your tax ID. You would just file your taxes as normal reporting the income as well as including your deductions. They only tax actual income which would be the difference between the two figures. Be careful that you are functioning as a business and keep good records as inappropriate hobby deductions are often an audit flag. Just be honest in your accounting and you will have no problems.

Thanks again for the advice!

OP, while you may not be "running a business" you will want to hang on to any receipts for your expenses if you accept PayPal. PayPal and other merchant processors are legally required to report certain payment data to the IRS if you exceed $20,000 AND 200 transactions within a calendar year. Just in case you do get one, your expense receipts offsetting all of your hobby income will help you avoid a tax bite.

https://cms.paypal.com/us/cgi-bin/ma...ng_us/IRS6050W

Originally Posted by bcr229

OP, while you may not be "running a business" you will want to hang on to any receipts for your expenses if you accept PayPal. PayPal and other merchant processors are legally required to report certain payment data to the IRS if you exceed $20,000 AND 200 transactions within a calendar year. Just in case you do get one, your expense receipts offsetting all of your hobby income will help you avoid a tax bite.

https://cms.paypal.com/us/cgi-bin/ma...ng_us/IRS6050W

Thanks so much for the info, thats what I am doing

This is why criagslist and local sales/trades are king

According to actual law you also have to charge and pay your states sales tax, unless you are selling out of state.

Originally Posted by Gloryhound

According to actual law you also have to charge and pay your states sales tax, unless you are selling out of state.

Thanks!