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My small market garden, and my not so small iris website, will probably generate enough income in 2007 that I can no longer ignore them when I file taxes. (I use the word 'business' in the loose sense ere. I have not yet filed the...whatever...I need to be a 'real' business.)
Up until this point, I've not really made any kind of significant profit, and I haven't kept good enough records to sort out regular house-garden expenses from business ones. But this year has been an expansion year, and next year will be even more so.
I figure I'll start keeping excruciatingly detailed records in January so that the 2007 filing will be ready to go. But what advice can you give me?
Do you depreciate your equipment? What if you use the same tractor to plow your market garden that you use to cut the grass at your place? If you feed a large family from the same garden that produces your vegetables for market, do you deduct the cost of, say, garden tools and fertilizers? If you've got a room designated for business related work - in my case, a packing-cleaning-cooling room for storage - do you deduct anything for that?
What if you hire someone to help out occasionally? I haven't yet, but I'm talking to someone this week, someone from our valley who needs a few hours work and income in addition to his regular job. I assume if I essentially hire a neighbor to work for a few hours for a few bucks once or twice it's no big deal, but at what point do I cross the line to having an employee?
For that matter - and I know this differs somewhat from state to state - what are the steps one takes to become a 'real' business anyway? And in what order?
I suspect the real answer is that I need to go talk to a professional - but I'd appreciate help figuring out the questions I need to ask before I do so, even if you don't have the answers. What's you're experience been with shifting from hobby to business?
katie
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