Not Sure How It All Works 🤔

Baby Talk
1

Since the tax laws have changed, I pretty much gave up on making & selling reborns. The idea of having to keep up with all expenses and stuff, is overwhelming and makes me lose interest.

I’m wondering how it all works if I decided to make & sell reborns again. So here’s some questions…

What all do I need? (As far as licenses etc.)
What all do I need to document?
How do taxes work?
Is it worth it? :thinking:
What if I sold reborns at a local booth for cash?

Thanks!
If it helps at all, I live in Florida.

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To make it legitimate you will need to get a business lic. from your city. It should be about 50 bucks. You will need to keep all your receipts for everything you buy, I mean everything, paper towels, baby clothes, tape, diapers, paint, kits, every paint brush, sponge and tip. Just get a big box and pop them in it.

If you have one card you can dedicate to purchasing just for reborns it will save you a load of work come tax time.

I would set up a personal account with PayPal. (that is all I will say about that).

A lot of people are setting up accounts with several payment processing companies (PayPal, Venmo, strip…) and spreading payments out to avoid a 1099K. I am not doing it, not telling you to do it, just commenting that I have heard about this.

If you sell at an art show, doll, show, community seasonal booth, they will ask you to get a sellers permit. You will need to report sales and pay sales taxes to your community if they collect them where you live. If you have a sellers permit you can buy wholesale if you need to with that number.

Keep your inventory as simple as you can.

Keep track of babies you have to scrap that get ruined, babies you donate, and anything that gets wasted or ruined.

If you want to write off your workspace you have to have a dedicated place to paint that you use for nothing else, nothing.

If you do well and sell regularly you will be asked to pay self employment taxes and pay estimated taxes depending on what you make.

In January your payment platform will give you a copy of your 1099K that they will be sending to the IRS. This tells the IRS what you made and they will ask you to pay all the takes w2 workers pay the first year then they will estimate that and collect it on a schedule depending on what they project you will make the next year. This keeps you from getting hit with a big tax bill.

The upside is that if you spend more than you make (and many do) it will be a loss that you can write off on your taxes, the bad news is you can only take a loss two years out of five I believe, maybe three?

It is a lot of work. From now on people who have a side job will have earnings reported after you have made 600 bucks.

This bites for people who are just trying to side hustle for a little extra Christmas money, to help out with things kids need…

The problem is that so many people are gig working, doing side hustles, creating a little business at home. Alone they don’t create missed tax revenue but together we are all spending and making a lot of money. Then you have all the reselling scammers and money laundering fools who kinda blew this for us.

We will find a way to do this, or we just won’t.

Electronic processing makes a global economy work easily but it also makes us all more accountable to Uncle Sam. Paying taxes is a good thing, it’s how we take care of each other but it is also unfair to just getting by folks, while billionaires pay nothing.

Not trying to make this political, I am just bummed about it.

I say, paint babies because you love to.

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Sounds like a lot of work that I’m not interested in. It’s really unfortunate, I enjoyed the hobby but that’s what it has always been for me, a hobby. I’m definitely not interested in making it into a business so I guess I probably won’t make reborn dolls anymore. :neutral_face:

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Are you wanting to sell reborns as a business or a hobby? The tax rules are somewhat different.I’ve vendored at doll shows and never been asked to report sales since they were made in a different county.
@Gabriell explained it very well and has some good ideas on keeping it simple. Even though you can only claim a loss for a specific number of years, you can claim a doll or two and offset the rest with expenses. You can do this even if you just go over the $600. I sell as a hobby. I just don’t sell enough dolls to make it a business. I live on social security alone and don’t make enough to even have to file taxes anymore.

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Since you most likely just did your taxes you could do a fake tax return and add in what you made selling babies, report it as a hobby and see how it would have affected your taxes. If it isn’t a big deal then just claim it as a hobby, you won’t get write offs but you won’t have to pay self employment taxes.

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I don’t think you can take expenses unless you claim it as a business.

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The last doll I sold I paid $0.02 more than I sold it for… :joy: and that wasn’t including the expenses for things like paper towels, glue, wedges, etc.
I’ve only once made a true profit from a doll, this was maybe 2-3 years ago. So definitely not a business.

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I didn’t make more than $600 this year and have stopped the hobby altogether because of the tax issue.

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You might be right about that. I can’t remember. I do know I filed with just a resale permit, not a business license.

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So, what if I don’t want to be a business and just a hobbyist? Is it different how I keep track of expenses and pay taxes? Last year I made around $1600 off doll sales. My expenses were probably around $700. This is and has been only a hobby, not a business, for me.

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@jenhai comment made me to go and look at the amounts .
And right below that it was amount threshold for self-employed people.

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The sales permit is mostly a local sales tax thing. The business lic is a county thing. You can actually be fined in most counties if you are operating a business without one. Hefty fines. For us it is mostly to prove to the IRS that we consider ourselves a business and claiming any losses are legitimate losses, and not a work around to get a tax break.

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This is good information for those who are trying to figure out how they will proceed, I have never seen this.

I just found out you can pay your minor child (maybe grandchild?) up to 12K a year to do work for you in your business. You have to keep a log and W2 them but because they are minors and don’t meet the tax paying threshold it is tax free and helps your bottom line. I think there are extra added tax incentives if that money is placed into a particular college savings account.

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I use to when I started, and I think a couple people here still do keep receipts in case they are ever audited, so they can prove that after expenses they did not profit or did not profit enough to have to report it.

I think that may change now. If you are reporting but claiming it as hobby income you may not write off expenses on a schedule C. So you would just report sales, not allowed to deduct what you spent. I could be wrong, but it is how I understand it, a hobby has to be not for profit.

I would think if you are making a couple thousand a year it shouldn’t impact taxes too much, but you can do a practice tax form and see how it looks for your personal finances.

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So, then, I must register myself as a business, because I may make $20 to $100 profit off a doll…not including all the work hours put in that none of us artists will ever see in $$.

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County or state?
Is it different? Gonna have to ask Hubby… He just filled for a LLC and we got the registration letter… and it says if we want a copy of the certificate it is an extra $73. I think he paid over $100 already to register it… ugh. fees… :upside_down_face:

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I think so, a hobby is something you do for pleasure, like collecting baseball cards, making quilts, or collecting vintage cars.

The idea is t0 keep people from profiting from a “Hobby” without paying fair taxes.

If you are only profiting a 100 bucks a baby (which isn’t bad) and if you sell 50 babies a year that’s not kinda cool, that’s a bit of money but if you add it to your household income does it make a big difference on your tax liability. What would 5K mean to your taxes taxes? It depends on your tax bracket, how close you are to being in the next one, if you are low income would banking that money mean losing some aid or an EIC?

If you are a hobby and you are selling 50 babies at 300 dollars each, remember if it is a hobby you can’t count profit, only report gross sales. (As a hobby it can’t be a profit thing) That is 15K but no self employment tax. How would that affect your taxes?

I think taking an average year and doing some dry run tax returns, using the two different scenarios (outside of just regular taxes without babies at all) will give you a better picture.

This frustration is what I was feeling before taxes, I did two more scenarios and found that I paid a little more when I claimed myself as a business even though I got to write off all my expenses, mostly in time, energy, and self empoloyment taxes. I also can’t write off start up costs because I have already been doing this a while and have already invested, you can’t go backwards. If I claim it as a hobby I get a smaller refund but I don’t have to do all the paperwork, I don’t have to pay quarterly taxes and it doesn’t make a huge difference.

For me personally with my own financial situation I think keeping this a hobby and only selling a limited amount of babies a year is how I might move forward. I have a few collectors who may be willing to pay friends and family, we have developed a trust but that still leaves a paper trail I may not be comfortable with.

I know there are work arounds and smarter people will find them but if we get audited I will feel like crap, this affects my whole family.

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I wish I could make 50 of them a year. I am lucky if I get four done. My husband has an excellent job and makes a good salary, so if I made more than what I do, I am not sure we would not get bumped into a higher bracket. I haven’t really wanted to look at it because like some others, I’m not not interested in keeping a ton of paperwork because I don’t see myself as a business, nor do I really want to be.

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