I have a hobby which is the main source of my income...how do I pay my taxes?

Question

I've never done taxes myself before. I always had a paycheck stub from work and let somebody take care of that from there.

But since then I left the job and commit full time working on my artwork commisions...It started out as a hobby and now its big enough to be my main source of income that pays bills and such. But it can't be considred as a business if it's not registered right? What is it considered as?

But how do I pay taxes on this? I really want to pay taxes now...Im afraid Ill get in trouble if I don't.

Also my income is always comming through paypal....what important information needs to be recorded from that?

What do I do???

Answer 1

No, not true - it doesn't have to be registered to be considered a business for tax purposes. And whether or not it's a business you'd still report it the same way - the only difference is that you can't deduct net losses from a hobby against other income, where you can if it's a business. Since you are making your living from it, the IRS would consider it a business though, although since you have a profit, not a loss, that distinction doesn't change the taxes.

Keep good records of your income, and any associated expenses that allow you to make that income. Then enter that info on a form 1040 schedule C, and fill out a form 1040 schedule SE to calculate your self-employment income (social security and medicare). The numbers from the bottom of those two schedules will transfer to a 1040 form where you'll calculate your income tax and total tax including the self-employment tax.

If you are going to owe over $1000 total tax for the year, you need to make quarterly estimated payments, with form 1040ES, to the IRS,

Answer 2

You need to talk to a CPA and get books set up to keep track of all your business expenses and income. I hope you have some kind of system of tracking it and have all your receipts.

You should file quarterly estimated taxes. Otherwise, you will be hit with big tax bill at the end of the year. There are also penalties for not filing quarterly estimates.

Answer 3

You need to keep track of all your expenses and deduct that from your sales. That is is your net income.

Maybe the first year or two go to a tax prep professional to file your taxes. After that you can use those forms as a guideline of which forms you need to file.

You have to declare your gross sales then show what your expense are to deduct from the gross sales. You would deduct supplies, like paints and brushes and surfaces. Don't forget travel expenses..... That includes depreciation of your vehicle and gas and oil.....

Answer 4

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Answer 5

If your "hobby" is turning a profit, it is not a hobby, that's called a business and congratulations. Now you need to figure out what your actual profit was over and above costs.

The IRS calls a business that doe not realise a profit with in three years a "hobby"

Answer 6

We use a tax guy just because it gets rid of any fear of doing it wrong ourselves. It's really not that expensive and I've found it's well worth the money and one less worry.

Answer 7

wow, that's a thinker.