lets just say gross sales are approx 9000.00
expenses (vet bills, food, supplies, advertising)
-approx 7000.00
no depreciation
I do not have a room in my house that is 100% for office, so I cannot claim opperating home business
I do not opperate like a business.
we had 1 litter of 6 + 2 puppies from 2010
I do not have a seperate business account
My CPA husband says even though I think of it as a hobby I must list it as a small business otherwise I cannot deduct losses.
He says most small businesses pay too much tax because they forget to claim mileage (he's not home, and I don't know current IRS rate - you'll have to google it). Should count mileage to/from vet, to/from shows, to/from feed store, to/from handler, etc.
I found some information if one wants to file as a hobby.
the income goes on line 20 on form 1040 (other income) write in Hobby Income---amount
the expenses go on 1040 schedule A (itemize deductions) line 23 other expenses--write in hobby expenses---amount
The expenses cannot exceed the income
and expenses minus 2% of the AGI
So if my AGI is 50,000.00 (including hobby income of 10,000.00
and 10,000.00 expenses
the deductions would be
10,000.00 on line 23 as Hobby expenses
Total on line 24 (10,000.00)
AGI (from line 37 on 1040) on line 25---50,000.00
2% of 50,000.00 which is 1000.00 on line 26
subtract line 24 from line 26, which is 9000.00
and put that amount on line 27
BUT if one does not itemize deductions (schedule A 1040), the hobby expenses cannot be listed
My CPA husband says even though I think of it as a hobby I must list it as a small business otherwise I cannot deduct losses.
He says most small businesses pay too much tax because they forget to claim mileage (he's not home, and I don't know current IRS rate - you'll have to google it). Should count mileage to/from vet, to/from shows, to/from feed store, to/from handler, etc.
Can you please tell me how long you have been filing as a small business?
Also, from what I understand, you need to make a profit 3 out of 5 years.
Our CPA say's the same, if you claim it as a hobby you can not deduct expenses. We have been claiming it as a small business for 6 years now, 2 different CPAs told us what the law actually says is "You must be trying to make a profit" three to five years is a rule of thumb.
Our CPA also had a client that went through an audit for this very reason and they won. For 10 years, his client didn't make a profit but he was running it like a small business keeping all his records. The key was he kept good records.
We believe no matter how you file your better off claiming it because if your ever go through an audit the fee's and penalties will be so much greater.
We average one litter a year, I think if I was having one every 3 to 5 years I might claim it as a hobby, I would have to discuss that with my CPA.
Our CPA say's the same, if you claim it as a hobby you can not deduct expenses. We have been claiming it as a small business for 6 years now, 2 different CPAs told us what the law actually says is "You must be trying to make a profit" three to five years is a rule of thumb.
Our CPA also had a client that went through an audit for this very reason and they won. For 10 years, his client didn't make a profit but he was running it like a small business keeping all his records. The key was he kept good records.
We believe no matter how you file your better off claiming it because if your ever go through an audit the fee's and penalties will be so much greater.
We average one litter a year, I think if I was having one every 3 to 5 years I might claim it as a hobby, I would have to discuss that with my CPA.
My CPA husband would agree with the above except maybe the last paragraph. He's had me claim it as a small business from the start. I've tried to get him on here to answer questions but it's tax season, so he's not around much.
