Tuesday, December 20, 2011
End of the Year Drudgery
As 2011 rolls to a close, I realize that it is once again time to get ready for the tax man. The state of Missouri has already kindly mailed me the form to pay my state sales tax for the year. But that is just one small piece of owning a business which (hopefully) makes sales. Because I set up my publishing company as an LLC, the business is essentially run through on our personal tax form. But I still need to get to my accountant all the expenses and income that were incurred by the business during the year. Considering that the IRS says that you must make a profit in three of the previous five tax years in order to be considered a business and not a hobby, I always think twice about which expenses I want to declare. It is hardly fair that they will take 2009 into account since I just established the business in November of 2009, but no one has ever accused the IRS of being fair. I have not sold many books in 2011, so unless I want to declare only minimal expenses for the year, there is no way that I can show a profit for the year. The fixed expenses of website hostings and securing the domain names for myhousehistory.net and provenancepublishing.com and .net probably exceed the profits from book sales this year. Since I declared a loss for 2009 and 2010, does that mean I have to declare a profit during the next three years in order to maintain status as a business and not a hobby? I guess this is a conversation I will be having with my accountant next month.
Posted by Kim Wolterman at 3:46 PM
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So, what is the pitfall of hobby status? What about much larger start-ups that don't make a profit for the first few years?
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