• In case most of you have not noticed, I made changes to the donation amounts as well as the durations for all of the paid membership levels. Things are winding down here, and this seems to be the most prudent way to deal with the "end of life" period of this site.

    Contributor level members - $10 per 30 days
    Sponsors - Eliminated
    Benefactor level members - $25 per 30 days
    Endowment level members - $50 per 30 days

    Account Upgrades Page
  • Responding to email notices you receive.
    **************************************************
    In short, DON'T! Email notices are to ONLY alert you of a reply to your private message or your ad on this site. Replying to the email just wastes your time as it goes NOWHERE, and probably pisses off the person you thought you replied to when they think you just ignored them. So instead of complaining to me about your messages not being replied to from this site via email, please READ that email notice that plainly states what you need to do in order to reply to who you are trying to converse with.

Tax'es, business plans......little help please

Cheryl Marchek AKA JM

Cheryl Marchek AKA JM

New member
Joined
May 21, 2002
Messages
1,668
Reaction score
53
Points
0
Location
Falkville, Alabama, USA
The only sure things in life are death and Tax'es........We all know that.

So recently I bought a couple pretty expensive snakes (Expensive for me) in the hopes of breeding these hets in 2005 and getting myself the high-end morph I want and maybe make back a little of the investment in sales of the babies. ~You don't need to explain that the babies in 2005 probably will not be worth as much as the hets were this year. Unfortunatly I know! Anyway~

So today I was preparing my tax papers for 2002 and it occured to me that if I ever sell any of these the government will sure expect a share of that won't they. (Yes, I know if it's under a certain amount I can still call it a hobby, what is that amount?) Well, is there any reason I can't buy a business liscense this year and write off the "investments" from my regular yearly taxes?

I know several years ago I ran a home day care and I was able to write off the cost of all my supplies as well as a percentage of my mortgage and utility bills, and a percentage of any repairs that had to be made to my home in order to maintain my business. (I think I wrote off 10% of roof repairs one year, and a percent of a new refrigerator another year).

So, I'm sure there could be advantages to purchasing a business license and turning my hobby into a small home business, but I'm sure there will be downfalls as well (Did you know that in the State of Alaska home day-cares may not have plastic trash cans? Technically plastic is flamable. There are a LOT of silly regulations for home day-cares!) So what are the downfalls of declaring my breeding hobby a breeding business?

What do y'all think? Just be happy with my hobby and hope the IRS doesn't notice if I sell some high end morphs in 3 or 4 years? Or buy a license and get serious about this so I can deduct costs now?
 
Nice Topic!!!
I started with the idea that I wanted to do educational reptile shows. I spent alot of money in animals, caging, supplies, feeders and time. I was hoping to try and do it full time and developed a website and logo, blah, blah, blah. I also have claimed everything in my taxes. Well, I became very busy with my auto-detailing business and really did not push forward with the shows. Early last year I decided to work with only Balls and I slowly but surely have been reducing my collection to only Ball Pythons. Its just about tax time this year and I have been wondering the same thing. Did I jump the gun before by involving my taxes? Will there be any problem switching the whole business plan over in my taxes (since all the money from my sales has gone directly to new Ball purchases)? Is it better left as a hobby unless it is your only source of income? I'll be finding out about my situation in the next month or two and I'll keep you posted. Until then, it will be interesting to hear some responses.
Thanks, Tom Baker
 
1. You need to talk to an accountant. Nothing better than professional advice.

With the IRS you need to show a profit after a certain number of years or it reverts back to "hobby" status. The catch-22 (I talked to an accountant before deciding on what to do) is that the IRS may come after you for the declared expenses if it reverts back to a "hobby" and you can't show that you legititamely (sp?) tried to make a business out of it (many off road enthusiasts tried to skip taxes by saying their hobby was a "racing team" and this prompted the IRS to be a little more stricter on this ruling). Having business cards made up, writing a business plan, running an ad in the newspaper all these things show an attempt at making a business out of it and satisfy the IRS.

You'll need to watch those local ordances so you don't get suprised (like the plastic trash can thing) as city governments are weird.
 
An addition.

I can't stress enough the importance of a business plan. Even if it's just an organized list of notes on where you think you should be going. I talk to small business owners every day and I can't believe how much time, energy and money they waste performing actions that do little to nothing to further their business. I ask them how these actions further their company towards the goals they have set only to find out there is no set goals. Spinning wheels with no where to go.
 
Thank you so much!

I'm REALLY appreciating all the replies so far. Keep them coming. Business plan. Right. Heard of it, but never seen one. (I'm SURE internet could help) Local ordinance. I'm a little worried about that as TECHNICALLY my Home Owners Association does not know that I have a house full of mice and snakes. The HOA CC&Rs stated that I could keep no reptiles on COMMON AREAS (I'm declaring the inside of my home a NON-common area) and that I could not breed animals, but again with the COMMON AREA thing.

Before I started thinking of calling it a business I was thinking if I had to (Like if my loud mouth kids go tell the neighbors "We counted moms mice the other day, she had 256, but she harvested so there is probably only a hundred there now) I'd just tell them I have three different snakes (I have three different COLORS of snakes) and dare them to prove otherwise (Without coming on my private property!).
 
Business Plan Layout

This is a structured business plan. Not necessary that you need one this structured right of the bat.

The main points when I write mine (again most of these are for internal use as I try not to get outside financing).

1. What do you do.
Look honestly at what you provide.

2. List your competitors.
I also list what they do well and what they don't do well. Keep it non-emotional (he has funny hair isn't a business bonus or fault:D ). This will allow you to see where you can excel without competing directly with a strong company.

3. What is your end goal.
How big do you want to be. How many different areas do you want to service. This will help keep you focused when your browsing the classifieds and see something that is cool but not in the area you want to go.

4. Look at where you are strong and where you are weak.
This will give you your selling points and also point out the problem areas that need work. Remember no company in the world is strong in all areas.

5. Plan of action.
This is last because with out all the other stuff this step is pointless. How are you going to achieve your goals from step 3 by exploiting your strengths from point 4 and buttressing your weaknesses.

6. Do
This last step is where 9 tenths of the small businesses in the US fail. They never implement the dreams and plans. Worse scenario is that you fail. Everyone does at one time or another. Just learn from it and start again. ;)
 
I took this road a few years ago. I saw the potential for some nice tax write offs and discussed it with my tax preparer. Would I do it again? No. Unless you really want to make it a buisness, it's more trouble than it's worth.
I've lost money on this hobby from day one, and have no real desire to do anything differently. Breaking even would be nice, but I don't want to be affiliated with the market any more than necessary. Too much self serving, cut throat attitude out there. Once you turn your hobby into a buisness, the rules change, and you are no longer completely free to to as you wish, that is if you plan to succeed.
I'll refrain from going on a tangent here and move back to the topic at hand.

I will offer a few of the specifics that applies to me. I am a breeder, and for tax purposes I am viewed as any other livestock breeder. There is no buisness license required for that, at least not here.
My tax preparer was quite familiar with cattle and hog farmers, and simply applied the same rules to my situation. As a result, breeding stock and food supplies are deductable, as are cage materials.
The year I decided to do this was a year I had significant expenses and it looked appealing. My cricket bill for the year exceeded $1000 and mice purchases neared that. I had also bought a digital camera, which wouldn't have been purchased if I wasn't breeding snakes. There was $2500 or so in animal purchases that year as well. All that added up to a nice deduction since my offspring production didn't nearly amount to my expences.
The down side is receipts must be kept for all those things, and it likely places you a step or two away from Joe Nobody, increasing the possibility the IRS will cast a probing eye your way.
 
Clay is right 100%.

If your doing this to grab a couple quick tax right offs. It's not worth the time or stress.

The minute you say "I'm a business", your open to every government organization trying to get into your wallet. It's a daily struggle to keep those hellhounds away (gee, did my dislike of government thieves show there :D )

On the other side to take an idea and build it into a living, breathing entity is quite an amazing thing. Add to the fact that your doing something you enjoy (my wife is jazzed that her "job" now is to take care of the lizards on a daily basis, instead of shuffling paperwork around an office) then it can be the correct choice for some. Just realize there is a serious side to it if your going to be around more than one breeding season.
 
Ah, always love Daniel's advice--what an asset to the community.

I will agree with a lot of what has been said. The deductions are not worth it unless you are serious. All the paperwork and constant watching and correspondence with the IRS is only worth it if you plan to make it a real business. Audits too--a real PITA (happened to me with minimal deductions and income!).

You may want to think about a business that includes the reptiles, but spans beyond it to make it worthwhile to do all the work.

Dana
 
At what point do you think it's good to declare it a business? And at what point is it illegal NOT to declare it a business?
I'll be lucky if I make 35$ off this hobby this year, but I've got a lot of $ invested in breeding stock so hopefully :eek: I'll be making some sort of decent $$$ down the road. But I don't know at what point I should still be calling it a hobby and at what point we should officially be a business. And I don't know anything about taxes, I'm lucky I managed to fill out my 1040 EZ last year.
This is a good discussion!

Erin B.
 
There isn't a set point to declare it as a business. If you are using your personal name as part of the business name then you don't even have to file as a DBA. Keep all your receipts and at the end of the year, you can decide what to do. (I believe we have our animals set as assets so we can take the tax right off the following year [depreciation] meaning that the right off comes when we are selling the first batch of young, offsetting each other)

It really pays to sit down with an accountant in July or Sept of the year and make sure you have a game plan. The IRS has a legion of lawyers and politicians trying to take your money. You need to bend their rules to keep that money and it would be impossible to do so without professional help. If you get everything organized and the rough numbers outlined a consultation will cost you less than $100.00.
 
Here's a tax question I was curious about: Suppose you raise your breeding stock from babies, and don't breed them from anywhere from eighteen months (dragons) to three or four years old (many snakes). Is any of the expense of raising the breeding animals (before going into business -- this is assuming you haven't sold anything beyond the hobby level at this point) deductable? Or are the exisiting animals brought into the business as an asset?
 
I think as long as you have all your receipts (paper trail for the bean counters) you bring them in as starting equity. For example if they are valued at $10,000. The first $10,000 you make is given back to your wallet without being taxed as it's not really profit just recouped investment.
 
Yes that is correct. I think they let you go back 3 years of start up costs as long as you have receipts. Or you can set it up right away and then have carryover deductions for several years.
Dana
 
I'm not in the reptile business, but I imagine it is just like any business, so here are a few thoughts. If you don't show a profit in at least one of the first five years you are in business the IRS will consider your business a hobby. I don't know if they then audit your books for the last 5 years or not. Taking home office deductions WILL raise a red flag with the IRS, be sure you keep accurate records. There is no substitute for accurate records, I have a very simple system that works well for me. At the start of each year I buy a "Dome" book & a mileage log for my vehicle, both available at any office supply store. Every day I fill out my mileage log, & each week I enter all my expenses & receipts in my dome book. I then file the receipts/invoices. At the end of the year I hand the last page of my dome book & my mileage log to my accountant, & she fills out my taxes. I also keep a separate checking account that I use for my business.
One other thing, a lot of people that go into business buy stuff they don't really need & won't use because it is a "tax deduction". Keep in mind, a tax deduction only means that you get a discount on the item that equals your tax bracket. Unless you really want or need the item it doesn't always make sense to spend a dollar to save fifty cents.
 
Keep in mind, a tax deduction only means that you get a discount on the item that equals your tax bracket.
Click to expand...

Oh, this one gets me. My step father will make comments like "Don't worry it's all a tax right off anyhow". Your 100% correct that "tax right off" is only a percentage and you still have to squeeze that cash out of somewhere to make the purchase in the first place. I tried to tell the people at Staples I only needed to pay for part of it because the rest is a tax right off (they can get it from uncle sam) but they wouldn't go for it :D
 
Back
Top