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tonyainlubbock1
New Member

Should I just eat the costs of starting a part time business?

I became a consultant for a hair jewelry company last year. I bought about $400 worth of inventory and had about $150 worth of expenses. I earned about $130 in commissions and about $50 in sales of inventory. I'm very very part time, and expect to stay that way long term. I know I need to file my commission income. But I don't have a clue about the costs of my inventory and expenses, or if it even matters because it's so little. If this is an option, which would be better, trying to figure out what I should do, or just eating the costs and say the inventory is mine instead of a business?

1 Best answer

Accepted Solutions
DianeW
Expert Alumni

Should I just eat the costs of starting a part time business?

If this is a hobby you can report the income and then deduct any actual expenses that are ordinary and necessary for you to receive and keep the products to the extent of the income value.  These expenses could be used as an itemized deduction for any amount that exceeds 2% of your adjusted gross income (AGI).  The difference would be added to other itemized deductions so that TurboTax could maximize your deduction.

Whether the expenses are used on itemized deductions or whether you use the standard deduction the income must be added to the return.

To record your hobby income and deductions you can follow the steps here.

  1. Sign into your TurboTax account - 
  2. Search hobby income in the upper right
  3. Then Jump to hobby income, loss
  4. Enter your income and expenses
  5. TurboTax will calculate your allowable expense and total itemized deductions

Be sure to add all itemized deductions to maximize the hobby expenses.

If you decide that this is more of a business, for which you plan to profit you could utilize the business Schedule C.  It's all right if you aren't quite sure yet.  You can always report it as a business if you find it becomes more than a hobby later.  

Either way you TurboTax will help you get the most beneficial results.  The IRS does not  allow this to be reported on a Form 1040EZ or 1040A.  It's more complicated than the short form.  TurboTax Self Employed online will work for this.

If you want to record it like as a business, instead of a hobby and use the expenses you can use TurboTax Self Employed.

You can go directly to the area to enter the document by following these steps.

  1. Sign into your TurboTax account - 
  2. Search schedule c in the upper right
  3. Then Jump to schedule c
  4. Enter your income and expenses

View solution in original post

2 Replies
DianeW
Expert Alumni

Should I just eat the costs of starting a part time business?

If this is a hobby you can report the income and then deduct any actual expenses that are ordinary and necessary for you to receive and keep the products to the extent of the income value.  These expenses could be used as an itemized deduction for any amount that exceeds 2% of your adjusted gross income (AGI).  The difference would be added to other itemized deductions so that TurboTax could maximize your deduction.

Whether the expenses are used on itemized deductions or whether you use the standard deduction the income must be added to the return.

To record your hobby income and deductions you can follow the steps here.

  1. Sign into your TurboTax account - 
  2. Search hobby income in the upper right
  3. Then Jump to hobby income, loss
  4. Enter your income and expenses
  5. TurboTax will calculate your allowable expense and total itemized deductions

Be sure to add all itemized deductions to maximize the hobby expenses.

If you decide that this is more of a business, for which you plan to profit you could utilize the business Schedule C.  It's all right if you aren't quite sure yet.  You can always report it as a business if you find it becomes more than a hobby later.  

Either way you TurboTax will help you get the most beneficial results.  The IRS does not  allow this to be reported on a Form 1040EZ or 1040A.  It's more complicated than the short form.  TurboTax Self Employed online will work for this.

If you want to record it like as a business, instead of a hobby and use the expenses you can use TurboTax Self Employed.

You can go directly to the area to enter the document by following these steps.

  1. Sign into your TurboTax account - 
  2. Search schedule c in the upper right
  3. Then Jump to schedule c
  4. Enter your income and expenses

View solution in original post

fanfare
Level 15

Should I just eat the costs of starting a part time business?

you get to write off your inventory cost as you sell it,
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