I started filing as Hobby years ago, but one day I got a letter from the IRS asking me to file as self employed. I had to pay less taxes like self employed than hobby, so I was happy. Not sure about the forms.
You should talk to an accountant about this. As an accountant myself, I have seen "dog businesses" get audited and lose if too many years of losses are reported.
If you are going to be reporting as a business, you will use Schedule C and attach it to your personal tax return. However, you have to be careful if you have too many losses for too many years, then you will be reclassified as a hobby.
BUT, I cannot stress enough, talk to an accountant.
If you go back and forth, you will get audited. You file as a business or a hobby, not do one this year and the other the next. If you file as a business for to many years, 3 i believe with all losses, they do red flag you and ask why..Its unethical to file as a business knowing you are going to take/claim losses, filing as a hobby is the best way, but-
As before, talk to an accountant!
When you report as a hobby, all of the income is reported on page 1 of form 1040 (line 21) and the expenses are reported as miscellaneous itemized deductions on schedule A, subject to the 2% limitation on Adjusted Gross Income. Expenses cannot exceed income and because of this reporting requirement, you may have to pay tax on all of the income and only get a portion of the deductions...not the best overall scenario. The income and expenses do not just "net out".
OP, i asked this question on 2/22, going to that page may help you. Also, the post i have copied below is JUST what an accountant told me a week ago. Talk to an accountant first and keep every receipt and keep GOOD records, of EVERYTHING. for sure your milage, as that is where you would benefit if you claim as a business, you can use it under hobby, yes, but you cap your losses at what youve made, none over as a hobby.
Subject: Re: Taxes!!!!
Name: my tax guy
Date Posted: Feb 22, 09 - 11:32 AM
Message: I was advised that it would be unethical and illegal to claim losses when there is no intent to make a profit. Of course, I have to actually prove I don't make a profit most years. I keep records as if I am including debits and credits on a tax return, but as long as most years I do not make a profit, I do not claim anything.
While you're thinking of taxes you should also think about liability. Liability from the dogs is a good reason to be an LLC if you are claiming the income/expenses of dogs on your taxes. See a small business attorney in addition to the accountant. Your tax accountant should be able to refer you to one. We all should think in terms of liability to seperate our own personal property such as a house from the dogs should someone decide to be over zealous litigously for some silly little item. We all know how people are today.
Yes I agree however even an LLC needs insurance to protect it's own assets, in this case your dogs and everything you have "in the business name" whether it be your van, supplies, kennel building, etc..
