Craft show Income and Expenses

[jamesz001]

I do a couple of craft shows a year and sell lapidary related products. Is not a business (no name, licenses, etc.) but not really a hobby. How should I report the money (income and expenses).

[MollsBBU]

Some people find that their hobbies can be profitable and turn the hobby into a business. Sometimes it's difficult to tell the difference between a hobby and a true business.

When there is doubt, the IRS and the Tax Court have looked at each case independently. There is often no one single rule that can be relied upon to say that a business is a hobby or a hobby is a business.

Some of the factors the IRS and the Court looks at are:

 (1) The amount of time you spend at this hobby or business can be a determining factor. If you have other trades or businesses, or if you have employment with someone else, it may be obvious that the activity in question is a hobby because you may not have sufficient available time to devote to the concept of making this activity a business.

 (2) Your intent in this particular activity also weighs heavily in whether or not the activity is a hobby or a business. Intent is usually determined by considering other factors. Do you keep records as though this were a bona fide business? Do you spend sufficient time to show intent to make a profit? Do you advertise? Do you do other things that are characteristic of a person who's trying to make a living at this activity?

It's not a cut and dried decision, but if your activity is a business, your best defense of its business nature is to treat it like a business. 

There is a presumption that if you make a profit three out of five consecutive years at this activity, the activity is probably a business. 

To report your income and expenses as a hobby -- please note you will be required to upgrade to TurboTax Deluxe at a minimum:

1. Click the Federal Taxes tab
   You may see Continue and/or I'll choose what I work on
2. Select Wages and Income from the list under the Federal Taxes tab line
3. You should land on the Your Income page
4. Scroll down to the "Less Common Income" section
   You may click Show more to expand the section
5. Next to "Miscellaneous Income, 1099-A, 1099-C" click Start/Update/Revisit
6. You will see a screen titled "Let's Work on Any Miscellaneous Income"
7. Next to "Hobby income and expenses " click Start/Update/Revisit
8. The next screen will allow you to enter totals for each
   

To report your income and expenses as a business then you need to report it on Schedule C. The best software for this entry is TurboTax Home & Business, but you can try these steps to report it in lower versions:

1. Click the Federal Taxes tab
   You may see Continue and/or I'll choose what I work on
2. Select Wages and Income from the list under the Federal Taxes tab line
3. You should land on the Your Income page
4. Scroll down to the "1099-MISC and Other Common Income" section
5. Next to "Income from Form 1099-MISC" click Start/Update/Revisit
6. Enter $1 in Box 7
7. Follow the interview screens and answer based on this income
8. You will reach a screen "Did you get cash or other income for nonemployee compensation?"
9. Enter a description and the amount of cash you received
10. Depending on your interview screen answers, you'll see "OK, now let's work on your nonemployee compensation expenses"
11. You'll be able to enter cell phone, mileage, and up to $100 in miscellaneous supplied to be deducted in TurboTax versions below Home & Business
    Click here to browse the benefits of using TurboTax Home & Business.
    
12. When you see the screen that asks "Did you have any of these expenses for the nonemployee compensation work?" if you select yes, you will need to file with the Home & Business version.
13. After this entry is completed, you will land on a "1099-MISC Summary" screen. 
14. Delete your 1099-MISC here by clicking Delete on the line next to the entry you just made. 
15. Now, you have successfully entered an amount that populated to your Schedule C (step # 9) and you deleted the 1099-MISC because you didn't actually receive one.

To enter this in Home & Business:

1. Start under the Business tab
2. Continue, then click I'll choose what I'll work on
3. In the "Business Income and Expenses" section, next to "Profit or Loss from Business", click Start or Update
   --If you haven't input your business information already, you will be prompted to at this point
   --Or, if you land on the "Here's the business info we have so far" page, click Edit next to your Business
4. You will be redirected to your business page. In the "Business Income" section, click Start or Update
5. Next to "General Income", click Start or Update
6. Manually enter a description and amount for this income here

[Carl]

"s not a business"

The IRS will most likely not agree with you on that, since you most likely sell your product with the intent of making a profit, and you do so on a recurring basis. As far as the IRS is concerned you earned that money while self-employed and "in business" for yourself. So all of that business income and related business expenses would be reported on SCH C as a part of your personal 1040 tax return.

But to help you make a determination of "business or hobby" that has a better chance of being "in line" with the IRS rules, please review the information at https://www.irs.gov/newsroom/hobby-or-business-irs-offers-tips-to-decide and remember, interpret the information from the IRS's point of view. When it comes to dealing with the IRS, your point of view and interpretation doesn't hold any weight.