[Jewelry making - Article 00856] - Re: [Orchid] How to close up a business

[Kimberly Starbard]

========[ Invite a Friend - http://www.ganoksin.com/invite.htm  ]========

Hi:

>     There's a limit, though. If you don't make a profit for three years
>     out of the last five, the IRS is likely to deem it a "hobby" and
>     disallow any further deductions for losses.

    It's actually a little worse than that. If the IRS comes in at any
    point and deems you a hobby, here's how it goes "Hobby losses can
    only be deducted to the extent that one has hobby gains". They will
    disallow losses in the current year and also go back to prior years
    and disallow losses you have taken prior. They will recalculate the
    previous years' taxes based on the fact that you are reclassed to a
    hobby. Not good. 

    The good news, though, is that it is not hard to prove you are not a
    hobby, but a real business. The number would have to be checked
    again, but it used to be 400 hours a year. Basically, if you spend
    more than 400 hours a year on your endeavor, it is a business. What
    you would do is keep a log book or other record of how much time you
    spend making pieces. I also keep my acceptance/rejection letters from
    shows and records of any other things I spend time on that pertain to
    the business. 

Good Luck
Kim

Kim Starbard
http://www.kimstarbarddesigns.com
http://www.covebeads.etsy.com
____________________________________________________________________
T h e   O r c h i d   L i s t
Open Electronic Forum for Jewelry Manufacturing Methods and Procedures
____________________________________________________________________
Orchid FAQ:
~ http://www.ganoksin.com/orchid/faq.htm
Orchid Archives:
~ http://www.ganoksin.com/orchid/archive
Orchid Galleries:
~ http://www.ganoksin.com/orchid/gallery.htm
Invite a Friend:
~ http://www.ganoksin.com/invite.htm
____________________________________________________________________
Tips From The Jeweler's Bench - Article Archive
~ http://www.ganoksin.com/borisat/tip_sear.htm
The Jeweler's Selected Bibliography List
~ http://www.ganoksin.com/jewelry-books
Buy Orchid Jewelry:
~ http://www.ganoksin.com/shop
____________________________________________________________________
-Unsubscribe:
-Email: orchid-request AT ganoksin.com Body=unsubscribe subject=blank
____________________________________________________________________