Tax Strategies for a Sideline Business
Millions of Americans today have a sideline business, especially in this tough economy. This has become easy with the advent of eBay and other online marketplaces. But sideline businesses, such as dog breeding and gentleman farming, have been around for years.
Starting and running a sideline business can be a savvy move, especially in tough economic times. It can be a way to supplement your current income. It can be a safety net in case of a job dislocation. And it can be a way to test the waters for a full-time business in the future, say, on retirement.
For a further discussion of business expenses, see IRS Publication 535, Business Expenses.
Reporting Sideline Business Income
There's a basic rule when it comes to income from a sideline business: You must report it. There is no minimum revenue or number of sales you must make before income becomes reportable. You must report income, whether or not it is reported to the IRS (such as on Form 1099 for payments to independent contractors).
Of course, all of the revenue you take in may not necessarily be profit. You can deduct expenses (subject to the limits explained throughout this book as well as the hobby loss limit next), which may mean that there is no income subject to tax.
If your unincorporated business sustains ...