My wife has been selling handmade crafts for about 7 years. She started on Etsy, moved to craft shows, and now only does a couple of Christmas events each year. She’s tired of the bookkeeping and tracking, and wants to treat it more like a hobby. She doesn’t make much (her best year was $1,300), and most vendors she knows don’t even report their sales. If we just report the income as ‘other income’ instead of filing a Schedule C, would the IRS care? Would they start asking questions, or is this small amount unlikely to draw attention?
Why not switch to cash basis accounting? Just record what you spend on materials as expenses and stop worrying about inventory.
The IRS usually won’t dig into small ‘other income’ amounts, as long as it’s reported. But if you want to stick with Schedule C, simplify it. If she donates leftover inventory, count it as $0 at year’s end and call materials COGS. Skip tracking tiny expenses if it’s too much hassle—focus on bigger ones like booth fees and supplies. The IRS won’t complain if you underclaim expenses, just if you overdo them.
Wyn said:
@Harley
Could this trigger depreciation recapture?
Depreciation on what, though? Inventory?
Wyn said:
@Harley
Could this trigger depreciation recapture?
Depreciation on what, though? Inventory?
Maybe on a 3D printer or some equipment she uses to make her crafts?
Wyn said:
@Harley
Could this trigger depreciation recapture?
Depreciation on what, though? Inventory?
I was just throwing it out there. Most small businesses have at least a computer or printer.
I’ve met plenty of craft sellers who admit to fudging numbers for taxes. It’s risky, though, because the state might eventually come knocking about unpaid sales tax. If your wife wants to treat this as hobby income, it’s doable. You’d lose the ability to deduct expenses like booth fees and materials, but you could report it under ‘other income’ on the 1040. That’s usually fine for smaller amounts unless the IRS thinks it’s still a business. Just make it clear the activity is winding down, with fewer shows and less effort involved.
@Isan
Yeah, she’s scaling back. She works part-time now and only does two shows a year instead of four. She doesn’t have as much time for crafts, which probably adds to her frustration with the bookkeeping.
If that $1,300 is net income, you could just report it under ‘other income’ on your 1040. The IRS isn’t likely to get worked up over a small amount like that.
If she’s filing sales tax, she needs to file a Schedule C. Otherwise, you’ll need a good reason for stopping the sales tax payments. Skipping it could lead to a big headache if the state decides to audit.
Honestly, for a small amount like this, you can probably just pocket the money and not worry about the IRS.
If she doesn’t want to treat this as a business anymore, hobby income is a reasonable option. Report it under ‘other income’ on your tax return. You won’t be able to deduct expenses like booth fees or supplies, but the IRS usually doesn’t flag small amounts like $1,300 unless there’s something unusual. Sales tax, however, still needs to be collected and paid if required in your state. Simplify wherever possible, but keep records just in case.
Harley said:
@Joss
Good advice until the part about copying ChatGPT answers.
What’s the big deal if the info is double-checked?
Harley said:
@Joss
Good advice until the part about copying ChatGPT answers.
What’s the big deal if the info is double-checked?
The issue is judgment. Tax advice often depends on nuanced situations, and trusting AI judgment over a person with experience is risky.