tax question

updated thu 3 mar 05

Jeremy/Bonnie Hellman on sat 3 mar 01

Paul,

To answer your question, the auto mileage rate is $.325 (thirty-two and a
half cents) per mile, for 2000. It goes up to $.345 per mile for 2001.
However, you have to make this election (to use the cents per miles rather
than the actual expenses, including depreciation) in the first year you use
the car for business.

My usual explanation for WHY a business doesn't get a deduction for
charitable donations is that 1-you are already taking a deduction on your
business return Schedule C for the value of the materials that went into the
donated pot/s, 2-no one gets a charitable donation for the value of their
time, and it's your time that adds value to the materials that went into the
donated pots/s. It's been discussed several times on clayart, like once a
year. Everyone who learns this is livid, the first time around. Your CPA
is right.

Bonnie

Bonnie Hellman, CPA in PA & CO





>
> Jean,
> This issue was discussed at great length not too long ago on the list,
> but I'm not sure what the heading was for searching the archives.
> But... the bottom line is that your CPA is correct. You can only deduct
> the cost of the materials in the art work that you donate. So if you
> use the cash method of figuring your deductions, which means you deduct
> things when you buy them, you have already deducted the cost of those
> materials. You can't deduct them twice. However, if you use the
> accrual method of accounting, which hardly any artists do, you can
> deduct the materials costs only, when you donate them. Sorry.
> And, as I understand it, you can only deduct donations anyway if you
> itemize your deductions.
>
> Here's another tax question, though. What is the rate this year for
> deducting business mileage on your car? They seem to change it every
> year.
>
> Paul Lewing, Seattle
>
> ______________________________________________________________________________
> Send postings to clayart@lsv.ceramics.org
>
> You may look at the archives for the list or change your subscription
> settings from http://www.ceramics.org/clayart/
>
> Moderator of the list is Mel Jacobson who may be reached at
> melpots@pclink.com.
>

Jean Lutz on sat 3 mar 01

Is it true? You CANNOT deduct anything you give to charity? My CPA is
telling me that anything I make and give to charity directly or for auction
is not deductible.
Jean Lutz

Paul Lewing on sat 3 mar 01

Jean,
This issue was discussed at great length not too long ago on the list,
but I'm not sure what the heading was for searching the archives.
But... the bottom line is that your CPA is correct. You can only deduct
the cost of the materials in the art work that you donate. So if you
use the cash method of figuring your deductions, which means you deduct
things when you buy them, you have already deducted the cost of those
materials. You can't deduct them twice. However, if you use the
accrual method of accounting, which hardly any artists do, you can
deduct the materials costs only, when you donate them. Sorry.
And, as I understand it, you can only deduct donations anyway if you
itemize your deductions.

Here's another tax question, though. What is the rate this year for
deducting business mileage on your car? They seem to change it every
year.

Paul Lewing, Seattle

Wade Blocker on sat 3 mar 01

Your CPA is correct. Since presumably you have already written off the
cost of clay and firing you cannot get another deduction.It seems that
labor does not count for anything. This explanation from my CPA. Mia in ABQ

Jimmy Greene on sun 4 mar 01

You can't....OR can't deduct your pottery donations. It's like this:
(Might be a bit complex, but hang in there with me).

If you maintain an inventory and reflect that inventory as being part of
your "Cost of goods sold," you may take a deduction for your donated art as
an itemized deduction (Schedule A, contributions). However, you must remove
that item from your ending inventory. (You will notice that your Gross
Income income goes UP when the inventory goes DOWN, so there's little
benefit in doing this. You end up getting the deduction, but you ALSO end
up paying more Social Security Tax).[You can think of THAT as being a
subliminal donation to the Soc.Sec. system to help keep it alive, should you
need to use it in twenty-or-so years from now].

If you do not maintain such an inventory, you probably can't take any
deduction.

When you bought your materials, glaze, clay, slip, etc., you probably
claimed a deduction for those purchases. If you did so, you could not claim
a deduction for the donated materials as the deduction has already been
taken when they were purchased! Make sense? Under this situation, if you
DID take a writeoff for the contribution, it would be termed a "Double
deduction."

There are no deductions allowed for the value of your time as an artist (Or
for anything else, for that matter). Therein lies the greatest value in
your work, but it ain't goin' on your tax return.

NOW, if you don't have an operation that you show on your tax return (Called
a Schedule C, Sole proprietorship), and you don't show the expense of your
materials anywhere on your tax return, you MAY take the deduction for the
value of the materials in the piece that you are donating (Whoopee.... five
bucks or so... unless you throw/build B-I-G pots). But THEN, if you're
audited, they'll ask if you DO sell these things, & if you DO, you'll be in
deep poopoo as ALL income from ANY sale technically belongs on your return.

As with the rest of our beloved tax system, there ain't no easy answer to
anything, and if you think there IS, some goof like me can make it long &
confusing.

Bottom line is:

Keep good records,
Take all the deductions you are entitled to,
Pay the Piper at the end of the year, and
Be thankful you have the opportunity to live in this country where the tax
rates are SIGNIFICANTLY lower than the rest of the free world.

KLeSueur@AOL.COM on sun 4 mar 01

In a message dated 3/3/01 6:59:42 PM, jlutz@AZLINK.COM writes:

<< Is it true? You CANNOT deduct anything you give to charity? My CPA is
telling me that anything I make and give to charity directly or for auction
is not deductible. >>

:You can only deduct your materials and you've probably already deducted
them on another line item. One of the things that makes shows requiring a
donation such a drag.

Kathi LeSueur

Carole Fox on thu 3 jan 02

Hi . I'm trying to figure out if I owe sales tax. I have a studio in =
Maryland, where I have done business with one gallery( wholesale =
account). All other sales were made in near-by Delaware where there is =
no sales tax. Does this mean I owe no taxes??=20

This is my first year claiming income from my studio. Does anyone have =
suggestions for resources I can use to find out what obligations I have =
as a business owner?=20

Carole Fox
Silver Fox Pottery
Elkton, MD
cfox@dca.net

Karin Abromaitis on thu 3 jan 02

In Maryland, you can call the State office of sales and use tax. The pho=
ne number is 410.767.1300 or 1.800.492.1751. Basically if you collect th=
e sales tax on the sales of your work, you must pay the sales tax to the =
state. If its wholesale, they collect and pay the sales tax, you don't. =
When you get a sales tax and use number, you're in the system, and they =
will send you the forms you need. Its very easy.
Karin Abromaitis

----- Original Message -----
From: Carole Fox
Sent: Thursday, January 03, 2002 4:20 PM
To: CLAYART@LSV.CERAMICS.ORG
Subject: Tax question

Hi . I'm trying to figure out if I owe sales tax. I have a studio in Mary=
land, where I have done business with one gallery( wholesale account). Al=
l other sales were made in near-by Delaware where there is no sales tax. =
Does this mean I owe no taxes?? =20

This is my first year claiming income from my studio. Does anyone have su=
ggestions for resources I can use to find out what obligations I have as =
a business owner? =20

Carole Fox
Silver Fox Pottery
Elkton, MD
cfox@dca.net

_________________________________________________________________________=
_____
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k.com.

Bonnie/Jeremy Hellman on sat 30 mar 02

Bruce Girrell has posted 2 web sites that discuss the IRS view of business
vs. hobby. I did a quick reading of both sites and I'd recommend them to
anyone with an interest in this topic, as well as for people looking for
tips on which expenses might be business expenses.

To repeat those sites are:

http://www.iboost.com/manage/business/your_business/40004.htm
http://www.bankrate.com/ndaq/itax/tips/20010403a.asp?prodtype=itax

Neither article is very long, and both looked to me to be written in user
friendly English.

Bonnie
Bonnie D. Hellman, CPA in PA & CO


----- Original Message -----
From: "Bruce Girrell"
To:
Sent: Saturday, March 30, 2002 10:40 AM
Subject: Re: Tax Question


> Althea Vailwrote:
>
> Because I have a full time job (educator) that is not connected to
pottery,
> and my income from my pottery is small compared to the income from
teaching,
> he said the IRS will look at my pottery business as nothing more than a
> hobby.
>
> We're in much the same position. I am a computer programmer and my "day
job"
> certainly supplies most of the income. To make matters worse, we earn
enough
> that claiming a loss from something like a pottery business looks as
though
> I'm looking for ways to cheat on my taxes.
>
> I have talked to our accountant a number of times about this. He tells us
> that the IRS has a number of things that they look at in determining
whether
> something is deemed a hobby or business. I don't remember them all but one
> thing is whether or not the business generates a profit. They assume that
a
> business should be showing a profit in three of five years. If the
business
> does not show a profit, they will consider a pattern of decreasing losses
as
> a sign that you are trying to make a profit. They consider how much you
are
> personally investing in the business. They look to see if you keep records
> in the manner of a business. Are you advertising and doing things that
would
> help incrrease sales? Things like that. Here are some informative sites:
>
> http://www.iboost.com/manage/business/your_business/40004.htm
> http://www.bankrate.com/ndaq/itax/tips/20010403a.asp?prodtype=itax
>
> Good luck.
>
> Bruce "I ain't no accountant, tho" Girrell
>
>
____________________________________________________________________________
__
> Send postings to clayart@lsv.ceramics.org
>
> You may look at the archives for the list or change your subscription
> settings from http://www.ceramics.org/clayart/
>
> Moderator of the list is Mel Jacobson who may be reached at
melpots@pclink.com.
>
>

Gary Ferguson on sat 30 mar 02

I'm not an accountant but I have always done my own taxes.

If your pottery is considered a Hobby you can only deduct expenses up to =
the total of your income (can't declare a loss). If your pottery is a =
Business you can declare all expenses (even exceeding income). =
Basically if you are going through all the motions of a 'real' business =
you should consider your pottery a Business and take all the deductions =
due to you. Probably many you have not thought of even. :)

Gary Ferguson
Clay Artist
www.garyrferguson.com

Althea Vail on sat 30 mar 02

I just returned from having my taxes prepared and am confused about the stand my accountant is taking on my pottery business.  I'm hoping others can clarify some points for me.  Because I have a full time job (educator) that is not connected to pottery, and my income from my pottery is small compared to the income from teaching, he said the IRS will look at my pottery business as nothing more than a hobby. I do claim my expenses at tax time, but my accountant likened the many hours I am in my studio to someone who cooks for a hobby and spends lots of time in the kitchen.  I'm wondering if I need to change accountants.

 

This is my third year declaring my pottery as a business, I'm legit with all of the paperwork  I have my work out on consignment , I do one or two shows a year, I have an Open Studio each year.  I don't have any students or teach in my studio; not ready for that until I retire from teaching.

 

My questions are:  what are the determining factors to determine whether one is engaging in a hobby or building a business?  What have your tax accountants said?   Help.

 

Althea Vail

 

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Eddie Krieger on sat 30 mar 02

I'm essentially doing the same thing you are--I'm working 32 hours/week as a
pharmacist and I have the pottery business on the side. Pharmacy wages
better than my pottery wages at the present by a large margin. I just set up
my pottery business again last year. My accountant had no problem with doing
so. I should show a slight profit this year but I certainly didn't have one
last year.

I thought I would have a huge write off with the add-on I did to my studio.
I spent around 9 thousand and thought I would be able to depreciate it off in
10 yrs or so. Nope--39 year depreciation. No way I'll see that asset
depreciate out. That's depressing.

If you're making a profit or show a good effort to do so, there should be no
problem. That's my opinion and definitely not a professional one.

Eddie Krieger
Dry Creek Pottery
Abilene, Tx

Bruce Girrell on sat 30 mar 02

Althea Vailwrote:

Because I have a full time job (educator) that is not connected to pottery,
and my income from my pottery is small compared to the income from teaching,
he said the IRS will look at my pottery business as nothing more than a
hobby.

We're in much the same position. I am a computer programmer and my "day job"
certainly supplies most of the income. To make matters worse, we earn enough
that claiming a loss from something like a pottery business looks as though
I'm looking for ways to cheat on my taxes.

I have talked to our accountant a number of times about this. He tells us
that the IRS has a number of things that they look at in determining whether
something is deemed a hobby or business. I don't remember them all but one
thing is whether or not the business generates a profit. They assume that a
business should be showing a profit in three of five years. If the business
does not show a profit, they will consider a pattern of decreasing losses as
a sign that you are trying to make a profit. They consider how much you are
personally investing in the business. They look to see if you keep records
in the manner of a business. Are you advertising and doing things that would
help incrrease sales? Things like that. Here are some informative sites:

http://www.iboost.com/manage/business/your_business/40004.htm
http://www.bankrate.com/ndaq/itax/tips/20010403a.asp?prodtype=itax

Good luck.

Bruce "I ain't no accountant, tho" Girrell

Bonnie/Jeremy Hellman on sat 30 mar 02

Althea,=20

Each Schedule C is examined on its own merits whether or not you are a =
business or a hobby.=20

The general test of whether you are a business or a hobby is whether =
you are running the business like a business, with a profit motive. Are =
you doing all those things that businesses do to try to make a profit? =
Think of a large business- they get professional advice, they advertise, =
they don't spend a lot of money frivolously on unnecessary expenses, =
they try "hard" to get sales, increase sales, retain sales. Etc. Etc. In =
other words, to an outside observer do you look like a business?=20

One of the classic tests is whether or not you've turned a profit in 2 =
of the last 5 years. If you've only been in business for 3 years, it =
would be 2 of the last 3 years. It doesn't have to be a large profit, =
but the assumption is that if you were trying to support yourself solely =
from the Schedule C business, after 2 years of loss, you'd probably be =
out of business (and not taking losses in that 3rd year). So if you're =
looking to deduct a loss against your other income after 2 previous =
years of loss, this is when you'd want to examine whether you look like =
a business.=20

My discussion with my tax clients who have more than 2 years of losses =
is whether they are REALLY trying to make a profit in that business. =
What are they doing? Or is this just a fun activity that they get to =
deduct? Do they expect to make a profit this year?=20

When I talk with my clients and they really sound like they're trying to =
turn a profit, but didn't, and are now trying different things to try to =
realize more revenue, we go ahead and deduct the loss. But if the client =
is doing the same old thing year in and year out and not making a =
profit, this looks like a hobby.

Another thought is that in some cases where capital equipment has been =
purchased, you have the option of deducting up to $24,000 in 2001 as =
Section 179 depreciation. You don't have to deduct the entire purchase =
price under code section 179. You could deduct a portion of the cost and =
depreciate the rest. Furthermore, in the last few weeks congress passed =
and the president signed a tax bill that gives you a new 30% bonus =
depreciation, so there is even more flexibility for qualified capital =
assets purchased and placed in service in 2001 and 2002. Therefore, if =
you have purchased capital equipment you have a certain amount of =
control about whether to create or increase a loss in your Schedule C =
business.

In situations where clients with secondary businesses that appear to be =
enjoyable and appear to be hobbies for other people (such as ceramics, =
sculpting, raising orchids) these are open to closer scrutiny. It is =
also been noted that statistically in certain states Schedule Cs are =
more likely to be audited than in other states.

In summary, the difference to the IRS between a business and a hobby is =
the profit motive. Are you engaged in this activity primarily for the =
profit? More importantly, does it look to an outside observer like you =
are engaged in this activity with a profit motive? This will determine =
the tax treatment on the Schedule C.

A business can deduct all ordinary and necessary business expenses, even =
if the "net income" is a "net loss". A hobby can only deduct expenses to =
the extent of income. In other words, you cannot create a net loss if =
you have a hobby. You can use $0 or more as net income on your Schedule =
C.
The classic tax reply to your question is "It depends on the individual =
facts and circumstances." I know this sounds like a cop out, but it's =
really the only reply. When I have clients who are not turning a profit, =
we discuss what they can do to make more money, similar to the =
discussions on clayart. I also want them to do more of the things that =
make them "look" like a business, if they are not already doing those. =
They should have a business bank account, business cards, get =
professional advice (which they are doing if we're talking ), cut =
back on spending if possible.

The IRS requires you to include all income on your Schedule C, but you =
are not required to include your expenses on a Schedule C. When I've had =
clients with hobbies where expenses were greater than income, we only =
used expenses equal to income. We have complied with the law and not =
caused additional taxable income.
Bonnie
Bonnie D. Hellman, CPA in PA & CO
(glued to the computer doing tax returns & reading occasional clayart)
----- Original Message -----=20
From: Althea Vail=20
To: CLAYART@LSV.CERAMICS.ORG=20
Sent: Saturday, March 30, 2002 8:24 AM
Subject: Tax Question


I just returned from having my taxes prepared and am confused about =
the stand my accountant is taking on my pottery business. I'm hoping =
others can clarify some points for me. Because I have a full time job =
(educator) that is not connected to pottery, and my income from my =
pottery is small compared to the income from teaching, he said the IRS =
will look at my pottery business as nothing more than a hobby. I do =
claim my expenses at tax time, but my accountant likened the many hours =
I am in my studio to someone who cooks for a hobby and spends lots of =
time in the kitchen. I'm wondering if I need to change accountants.

This is my third year declaring my pottery as a business, I'm legit =
with all of the paperwork I have my work out on consignment , I do one =
or two shows a year, I have an Open Studio each year. I don't have any =
students or teach in my studio; not ready for that until I retire from =
teaching.

My questions are: what are the determining factors to determine =
whether one is engaging in a hobby or building a business? What have =
your tax accountants said? Help.

Althea Vail



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_________________________________________________________________________=
_____ Send postings to clayart@lsv.ceramics.org You may look at the =
archives for the list or change your subscription settings from =
http://www.ceramics.org/clayart/ Moderator of the list is Mel Jacobson =
who may be reached at melpots@pclink.com.=20

Earl Brunner on sat 30 mar 02

Do you ever show a "profit" on your business? This may be where your
accountant is coming from. You can't take a loss every year or even
more than a certain number of years in a row and still call it a
business. You don't have to make much of a profit, you just can't
always take a loss and write it off.

Althea Vail wrote:

> I just returned from having my taxes prepared and am confused about
> the stand my accountant is taking on my pottery business. I'm hoping
> others can clarify some points for me. Because I have a full time job
> (educator) that is not connected to pottery, and my income from my
> pottery is small compared to the income from teaching, he said the IRS
> will look at my pottery business as nothing more than a hobby. I do
> claim my expenses at tax time, but my accountant likened the many
> hours I am in my studio to someone who cooks for a hobby and spends
> lots of time in the kitchen. I'm wondering if I need to change
> accountants. This is my third year declaring my pottery as a business,
> I'm legit with all of the paperwork I have my work out on consignment
> , I do one or two shows a year, I have an Open Studio each year. I
> don't have any students or teach in my studio; not ready for that
> until I retire from teaching. My questions are: what are the
> determining factors to determine whether one is engaging in a hobby or
> building a business? What have your tax accountants said?
> Help. Althea Vail
>
>
> -----------------------------------------------------------------------
> MSN Photos is the easiest way to share and print your photos: Click
> Here
>
> _____________________________________________________________________________
> Send postings to clayart@lsv.ceramics.org You may look at the archives
> for the list or change your subscription settings from
> http://www.ceramics.org/clayart/ Moderator of the list is Mel Jacobson
> who may be reached at melpots@pclink.com.

--
Earl Brunner
http://coyote.accessnv.com/bruec
mailto:bruec@anv.net

william schran on sat 30 mar 02

Althea - My accountant told me years ago that my pottery business and
my job that pays me money, ceramics educator are closely related and
that I should declare myself as a business, which I have now for who
knows how many years. Whether you are a business in the eyes of the
IRS is a matter of you proving, should they ask, that you are active
in the pursuit of that business - exhibiting, etc.
Bill

Bobbruch1@AOL.COM on sun 31 mar 02

I am not a tax expert and hopefully Bonnie H will respond to William Schran's
post. However, if you are getting a form W-2 from the school where you teach,
I can't see how you can include that income in a Schedule C to match up with
losses from a ceramics studio. However, if you are teaching part-time and
getting a 1099 with no benefits and pension from the school, you might have a
case. JMHO

Bob Bruch

<<<<From: william schran
Subject: Re: Tax Question

Althea - My accountant told me years ago that my pottery business and
my job that pays me money, ceramics educator are closely related and
that I should declare myself as a business, which I have now for who
knows how many years. Whether you are a business in the eyes of the
IRS is a matter of you proving, should they ask, that you are active
in the pursuit of that business - exhibiting, etc.
Bill

william schran on sun 31 mar 02

Bob - You wrote:
"I am not a tax expert and hopefully Bonnie H will respond to William Schran's
post. However, if you are getting a form W-2 from the school where you teach,
I can't see how you can include that income in a Schedule C to match up with
losses from a ceramics studio."

I teach full-time and that income is entered as a salary on my tax
forms. Income from pottery sales, honorariums for judging exhibitions
or lectures and any other income related to my personal business, are
listed on schedule "C". I do not enter any of my salary, reported on
W2 from my full-time teaching on schedule C.
If I teach a class/workshop separate from my salaried teaching
position, I would enter that on my schedule C. Just wanted to make
this clear.
Bill

Bonnie Staffel on sun 31 mar 02

Dear Althea,

My simplified answer to your question. Are you in it to make a profit? My
understanding is that two out of five years should show such a profit. That
is the criteria I was given.

Regards, Bonnie Staffel

iandol on sun 31 mar 02

Dear Althea Vail,

You say <connected to pottery, and my income from my pottery is small compared to =
the income from teaching, he said the IRS will look at my pottery =
business as nothing more than a hobby. I do claim my expenses at tax =
time, but my accountant likened the many hours I am in my studio to =
someone who cooks for a hobby and spends lots of time in the kitchen>>

I am uncertain what your IRS rules are but you if you declare the income =
you should be allowed to claim "legitimate expenses". Your accountant =
will tell you what these are. But you cannot claim wages on an hourly =
basis for the time used to make that income as though you were paying an =
employee. If you do you will have to pay Income Tax. If you do not =
declare the income there are no expenses which can be claimed and it =
then will be classed as a "Hobby or Pastime" Tax reliefs are only =
available on income which is taxed.

Just ask that Accountant to give a fuller explanation before you think =
of changing. You have to quiz them with the right questions to get the =
information which is applicable to your situation.

Best regards,

Ivor.

Longtin, Jeff on tue 2 apr 02

Althea,
Looks like you've gotten several reponses on this already but I'll add my
experience. While improving my mold-making skills I've had to keep "day
jobs". At the same time I've made molds for lots of people. I intend to be a
potter someday. My mold making is just a way to bring in extra money. The
IRS told me if I intend to be a mold-maker someday the mold-making revenue I
generate now could be reported as business income. However, they told me,
since I intend to be a potter someday my mold-making revenue is just hobby
revenue. They never mentioned profit being a part of the equation.
Good Luck
Jeff Longtin

-----Original Message-----
From: Althea Vail [mailto:altheav@HOTMAIL.COM]
Sent: Saturday, March 30, 2002 7:25 AM
To: CLAYART@LSV.CERAMICS.ORG
Subject: Tax Question


I just returned from having my taxes prepared and am confused about the
stand my accountant is taking on my pottery business. I'm hoping others can
clarify some points for me. Because I have a full time job (educator) that
is not connected to pottery, and my income from my pottery is small compared
to the income from teaching, he said the IRS will look at my pottery
business as nothing more than a hobby. I do claim my expenses at tax time,
but my accountant likened the many hours I am in my studio to someone who
cooks for a hobby and spends lots of time in the kitchen. I'm wondering if
I need to change accountants.

This is my third year declaring my pottery as a business, I'm legit with all
of the paperwork I have my work out on consignment , I do one or two shows
a year, I have an Open Studio each year. I don't have any students or teach
in my studio; not ready for that until I retire from teaching.

My questions are: what are the determining factors to determine whether one
is engaging in a hobby or building a business? What have your tax
accountants said? Help.

Althea Vail


_____

MSN Photos is the easiest way to share and print your photos: Click
Here
____________________________________________________________________________
__ Send postings to clayart@lsv.ceramics.org You may look at the archives
for the list or change your subscription settings from
http://www.ceramics.org/clayart/ Moderator of the list is Mel Jacobson who
may be reached at melpots@pclink.com.

Working Potter on wed 3 apr 02

Wear the old ''A potter is...''Tee shirt to the audit,lol.

In a message dated 4/3/2002 8:35:10 PM Eastern Standard Time,
mark.potter@VISIONAGE.NET writes:


>
> Don't be meek here. The IRS is wrong and they know it. They always use these
> scare tactics on self employed people, but if you fight it, you'll win. I
> mean that. Deduct every darned expense associated with making and selling
> those molds!
>
>

Sharon Villines on wed 3 apr 02

> At the same time I've made molds for lots of people. I intend to be a
> potter someday. My mold making is just a way to bring in extra money. The
> IRS told me if I intend to be a mold-maker someday the mold-making revenue I
> generate now could be reported as business income. However, they told me,
> since I intend to be a potter someday my mold-making revenue is just hobby
> revenue.

While this appears to be a correct legal interpretation of the tax law (I'm
not a tax lawyer), it also illustrates the lack of understanding of what
artists do.

Being an artist usually means one has a variety of skills, all of which
relate to one's occupation as an artist. Better to define yourself as an
artist so the umbrella stretches to cover all your income producing
revenues.

If you are a creative person, unless an activity has different tax laws
applied to it (daycare, farming, etc.) it is best to use a broad definition.
Otherwise the tax law could be interpreted to say since your "intention" is
to be a potter, any clay _sculpture_ you sell is hobby income and cannot be
included on a Schedule C.

Sharon.
--
Sharon Villines, Arts Coach
http://www.artscoach.ws
ArtsCoachFAQs is now free!

Julie Milazzo on wed 3 apr 02

I just picked up around twenty different tax
publications, trying to figure out which one(s) may
apply to my business. No luck yet, but I did find some
helpful information for the pottery "hobbiest"
inpublication 535. You can pick it up at any IRS
office. Okay, anyone have a clue about what forms I
need to fill out if I've been setting up a business
since last year, selling stocks to do it, and not be
in business yet? I haven't earned a penny yet, and
expect most purchases to be capital expenses, with
capital gain from the stocks, but severe net loss from
the (not quite existant) business. I own the name,
have an EIN, and bought this particular property for
the business zoning, though I live here. Fun one. I
think I have to fill out a schedule C, along with my
1040. Any other ideas? I'm searching, but the tele tax
help is a condescending uninformative joke, and the
IRS website isn't much help. These publications are
useful, but if anyone just happens to know what I need
to do, I would appreciate the help. Thanks! Jules
--- Sharon Villines wrote:
> > At the same time I've made molds for lots of
> people. I intend to be a
> > potter someday. My mold making is just a way to
> bring in extra money. The
> > IRS told me if I intend to be a mold-maker someday
> the mold-making revenue I
> > generate now could be reported as business income.
> However, they told me,
> > since I intend to be a potter someday my
> mold-making revenue is just hobby
> > revenue.
>
> While this appears to be a correct legal
> interpretation of the tax law (I'm
> not a tax lawyer), it also illustrates the lack of
> understanding of what
> artists do.
>
> Being an artist usually means one has a variety of
> skills, all of which
> relate to one's occupation as an artist. Better to
> define yourself as an
> artist so the umbrella stretches to cover all your
> income producing
> revenues.
>
> If you are a creative person, unless an activity has
> different tax laws
> applied to it (daycare, farming, etc.) it is best to
> use a broad definition.
> Otherwise the tax law could be interpreted to say
> since your "intention" is
> to be a potter, any clay _sculpture_ you sell is
> hobby income and cannot be
> included on a Schedule C.
>
> Sharon.
> --
> Sharon Villines, Arts Coach
> http://www.artscoach.ws
> ArtsCoachFAQs is now free!
>
>
______________________________________________________________________________
> Send postings to clayart@lsv.ceramics.org
>
> You may look at the archives for the list or change
> your subscription
> settings from http://www.ceramics.org/clayart/
>
> Moderator of the list is Mel Jacobson who may be
> reached at melpots@pclink.com.


__________________________________________________
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Yahoo! Tax Center - online filing with TurboTax
http://taxes.yahoo.com/

Mark Potter on wed 3 apr 02

Don't be meek here. The IRS is wrong and they know it. They always use these
scare tactics on self employed people, but if you fight it, you'll win. I
mean that. Deduct every darned expense associated with making and selling
those molds!

-----Original Message-----
From: Ceramic Arts Discussion List [mailto:CLAYART@LSV.CERAMICS.ORG]On
Behalf Of Sharon Villines
Sent: Wednesday, April 03, 2002 9:35 AM
To: CLAYART@LSV.CERAMICS.ORG
Subject: Re: Tax Question


> At the same time I've made molds for lots of people. I intend to be a
> potter someday. My mold making is just a way to bring in extra money. The
> IRS told me if I intend to be a mold-maker someday the mold-making revenue
I
> generate now could be reported as business income. However, they told me,
> since I intend to be a potter someday my mold-making revenue is just hobby
> revenue.

While this appears to be a correct legal interpretation of the tax law (I'm
not a tax lawyer), it also illustrates the lack of understanding of what
artists do.

Being an artist usually means one has a variety of skills, all of which
relate to one's occupation as an artist. Better to define yourself as an
artist so the umbrella stretches to cover all your income producing
revenues.

If you are a creative person, unless an activity has different tax laws
applied to it (daycare, farming, etc.) it is best to use a broad definition.
Otherwise the tax law could be interpreted to say since your "intention" is
to be a potter, any clay _sculpture_ you sell is hobby income and cannot be
included on a Schedule C.

Sharon.
--
Sharon Villines, Arts Coach
http://www.artscoach.ws
ArtsCoachFAQs is now free!

____________________________________________________________________________
__
Send postings to clayart@lsv.ceramics.org

You may look at the archives for the list or change your subscription
settings from http://www.ceramics.org/clayart/

Moderator of the list is Mel Jacobson who may be reached at
melpots@pclink.com.

Bobbruch1@AOL.COM on fri 5 apr 02

Does the term "opened for business" mean that you don't yet have any sales,
or that you are not yet making a profit? It seems as though this post is
saying that you can accumulate expenses only if you haven't started making
any sales ......... is that correct? Also, would you have to be filing a
Schedule C (business income and loss) every year with your tax return in
order for the expenses to qualify for amortization purposes, or is it OK to
just keep a running total waiting for the business to open?

Thanks,

Bob Bruch
<<<<<<From: Olivia T Cavy
Subject: Tax Question - Start Up Costs

<<<happens for US taxpayers with start up expenses for a new business.

<<<expenses but have not yet "opened for business", those expenses are not
deductible. Many of them are accumulated to be amortized over 60 months as
start up costs WHEN the business is finally operational.

<<<money so you don't have to deal with this issue which is discussed under the
IRC code section 195(a). You CAN actually make this election in the year in
which the expenses are paid (for a cash basis taxpayer) but you
can wait until the year the business opens. We're talking about the type of
expenditures that would be deductible IF the business had been operational.
Capital assets are depreciated when they are actually put into service.