Taxes for a Hobby Demo
 

I am thinking about siging up as a hobby demo, what do I need to do about taxes.

What do other hobby demos do about taxes?

I believe you have to make a certain amount before the IRS cares. In my first half year, I didn't have to worry about it.

Now, I'm just keeping track, just in case. If I place a supply order, it goes into an "expense" folder.

I get very little Instant Income cos basically it's just me and one friend committed to ordering and I give her the discount because that's how we set it up when I signed up. (We would have been co-demos if it was allowed.) I sell a little bit to a friend now and then, so I do keep track of that when I get any income there. Also, SU! gives you a rebate if you sell a certain amount, but they have a nice monthly Activity Statement you can print out to keep track.

Also, if you sign up, the first year I imagine your starter kit would be a deduction, and if you don't make much, you can take a loss for three years before the IRS says, "Okay you aren't really in this for the money." LOL

Hope this helps...

http://www.stampinhappens.com/newbie.html

Okay, I don't know if that will automatically link but that is something I found in a CTMH FAQ site. I can't figure out when it was dated, so the info may have changed.

We do Turbo Tax and I use Schedule C for my job as an independent contractor. Because of pregnancies and moves, I never had to pay any of the taxes b/c I didn't earn enough in the two years I was a contractor. In 2002, I called the IRS about what the 'magic number' was to have to start paying taxes. I think he said it was $1000.

The taxes are paid quarterly to the IRS. You figure out what you owe (or guestimate) the regular taxes PLUS the self-employment tax. Half of the self-employment tax can be deducted from your income. Just like a "regular" job where the taxes are done for you, if you paid too much then you get a refund in April or if you didn't pay enough, then you owe Uncle Sam.

Also keep REALLY GOOD records - mileage, expenses, income, postage, etc.

Hth...this is really important to me b/c I already file Schedule C and I don't want to screw anything up.

If you are just a hobby demo, I wouldn't worry about having to pay quarterly taxes.

Now I'm thinking, we file jointly and I would have to make a lot to affect what DH pays. Yes we would have a penalty if I didn't pay quarterly and made a lot of money. But you said Hobby Demo so....

It's very hard to give tax advice, because it differs from state to state and even in counties and cities. And within households. :)

But yes, keep good records, right from the start, as menehune said.

I am curious how many demos pay quarterly taxes. I think I'll pop over to the demo side and ask. :)

A few notes:

SU! remits the state and local sales taxes (exc. Alaska, Hawaii and territories), and unless your state requires it, you do not need a sales tax license.

They also note that "some jurisdictions require direct sellers to obtain a business or occupational license to conduct home demonstrations or sell products at open houses" and to contact your local agencies to find out.

They don't send out 1099's for instant income, but 1099 forms will be issued for a demonstrator�s override commissions, prizes, awards, etc., if you get to $600 in the year.

You have to report all income earned (instant income and volume rebates). As a hobbyist, you also are allowed to write off UP TO the amount earned. Basically you put the money in and take it out so that it doesn't affect your overall income. You cannot show a loss (which reduces the overall income) for more than three out of five years if you plan to file your SU expenses and income as a business. If you earn more than $600 net, you're supposed to pay Self-Employment tax -- basically Social Security and Medicare. That's all I remember.

I also remember reading a disclaimer that said the tax code about some of the Direct Sellers/Hobbyist stuff was being rewritten so that things might change for filing 2005.

I was wondering about this...I know you need to keep receipts for gas mileage supplies and that sort of stuff. Is supplies anything that you use for your business? Here is my exact ?...I am having my first class at my home-in order to do what I would like to do for the demo of the cards I need to order 60.00 worth of products...are these tax deductable or is supplies only catties,order forms,business cards and things like that? Hope it doesnt sound silly-just wonderin??

Yes, the supplies that you use for your workshops or demos are deductible.

This is my biggest concern. I'm a lawyer (hey, got a 86 on my tax final, but that was in 1977!). Anyway, I want to be super honest but just want to be a hobby demo and don't want any hassels. Can't figure out why I should have to report anything at all. I see the 20% discount as the freebie for buying the demo kit. However, the IRS doesn't always see things my way. The IRS has a publication on direct sellers (which is what SU demos are called in the IRS world)

http://www.irs.gov/publications/p911/ar01.html if the link doesn't work look for publication 911 on the irs website.

By the way, it says that hostesses are supposed to pay taxes on the value of the hostess gift they earn! Or am I not reading this correctly???
Good grief!!

You don't have to report the Instant Income (20% discount) if you didn't get it - i.e., when buying from yourself. SU! doesn't report it - it's up to us to keep track of what we take in there.

I'm sure that freebies we earn would also be included in our income, it is with any job. When DH got to go on an awards trip a few years back, they included the value in his W-2 at the end of the year.

But it's up to us to figure this all out and see if it's enough to trigger a tax. In my case, it's doubtful. And I wonder how many people figure they don't have to report everything if the IRS isn't even aware of it!! :) But that's true for any group, not just demos.