In an earlier message you asked..."There has to be a way to simply claim the income the same way you would if you just sold some things on ebay or a rummage sale. Any tips around this?"
I have a friend who just started a small home based business, and she told me about the hobby vs. business aspect of doing her taxes.
Since you're just getting started, you could claim your income from your endeavor as a hobby, but you can deduct the total hobbby expenses only to to the extent of income that you receive.
There are rules for determining if something is a business of hobby, and I think you can get away with the hobby idea for now. You may want to check it all out on the IRS website. www.irs.gov
I also checked some other websites, and here are some tidbits of information that I found so far:
A hobby is an activity with an element of personal pleasure and no motive for profit. From a tax standpoint, hobby income is of minor consequence because the deduction of losses is limited to income. The IRS presumes an activity is a business if a profit was made in three of the last five years, including the current year.
Hobby income is reported on Form 1040, line 21. (other income line) The total income is reported, without any deduction for expenses. Hobby expenses are deducted on the appropriate lines of Schedule A. (If you itemized deductions) There is no self-employment tax on hobby income. It's taxed like the rest of your income.
The Form 1040 instructions do not specify a specific marginal entry to use. The standard is to write “hobby income” rather than naming the hobby. This will indicate that you are applying the hobby rules to this income and associated expenses.
I'm sure all of this will give you something to think about.
How is your home roasting coming along? Are you gearing up for another year at the Farmers Market or pushing on to roast for a few accounts? I'd love to hear an update. I have similar dreams to do the same. Quite often people wanting to jump into coffee on a deeper level ask why not? It's great reading your posts because it gives those people (me included) inspiration to just get out there and share their passion So thanks for sharing your story!
All the best,
Paul - you are corrct - it is time. Offically our local market does not open until the 16th of this month. This weekend there is another opportunity to sell our product at the local Town & Country Day. We had a local Organic Produce and Beef business (Fox Hollow Farms and their Vital Foods program)interested in our coffee and they are selling at their booth at a different farmers market - next county over. So far it has been moving pretty good. Also, this business has a farm store on their farm to sell theor produce and beef and they want to sell our beans there too. They are great folks!
As for our roasting - we are offically "La Grange Coffee Roasters". We have a web site under constructioon by my lovely wife at: http://www.smellthesmoke.net - our roastery has been inspected and passed by the state and local officials and we are green lighted for coffee sales at markets all over the state. With our permits we can sell and sample coffee. I spoke to our state revenue department and wee do not collect sales tax on food - coffee is consumable - a food. My branding is getting in shape but I'm behind on securing a fixed tax advisor and lawyer. I am using Quickbooks Pro 2009 (ouch) and still working through my lack of knowledge with the software.
Working on Mothers Day coffee Gift Bags for this weekends Market via Vital Foods and Fox Hollow Farms booth sales. Basically a smaller coffee bag with special gift wrapping for those last minute buyers.
Life is busy and good! I love the COFFEE business!!!
WOW - I'm back online here at the forum...it's been a long time since we've been posting...not sure what happened but was unable to login for months!
Following up...market started back this past May...we are dripping coffee via Hario V-60's now instead of the melita's. Bagged sales are up and return customers are many. Serving iced pour overs now. They are very popular. Still interested in a retail store front but not found. Whole Foods is very interested in us locally. They contacted me at a local (Louisville) Barista Bash - tasted our product and started inquiring. I referred them to a thread where I touched on the topic of haveing local roasters products on the shelf at local grocers. http://prima-coffee.com/content/whats-next cut and past this thread in your browser if you want to read more about it.
I'm going to be in the market for a new roasters soon. My YM2 is a workhorse, but too small as some of you here may have told me when we were considering what to do about a roaster first. If you want to go to this site, you can see the YM2 I bought - this is the one I bought.: http://web.mac.com/victor.mondry/Site/U ... 15_kg.html
Anyway - it's good to be on the forum again and feel free to shout out.
in my state, NM, there are not many regulations about the handling of coffee (food safety). there are plenty of regulations about roasting coffee. (fire codes, state inspections, etc.) within a commercial locations. (sigh. how well I know)
I used to roast at my home, located outside city limits. our subdivision has very large lots, and no one cared about chaff and smoke from a 2 kilo roaster. I didn't sell the coffee I roasted, it was for my coffee shop and I had a hard time keeping up with our needs. I bought a 3 kilo US roaster two months ago and still am not inspected and approved. everytime the fire chief or the state inspector learns something more about coffee roasters, they give me something else to comply with. everytime we change our plans, the contractor moves to the next person on his list. so we keep getting bumped.
I sold my YM 2 to a woman who is building a roasting business whereby she will roast and deliver #s of roasted coffee (ground if they want) to offices and individuals.
it is a good little business to start!
sorry, no I don't know much about her business. she called me a week or so ago, still setting up. I helped her with adjusting flame. I do know she has roasted for one of my competitors for several years, and she referred to her customers. she works another job too.
Things have been good and the roasting at home is now very good. So much so that I'm out of space for beans, boxes, stuff in general. I need a larger roasters and a new space. Anyone have a lead on a larger roaster for sale...like a YM5 or a USR 5kilo???
here is a link to some of Dan's roasters from US Roaster Corp http://revelationroaster.com
There are also a few on you tube.
Great guy to do business with. I own two of his and never had any problems and if I did he always answers his phone!
The plan now is to move operations out of our home basd roastery and into a retail spot in our small town. We have the following. We are getting ready to have more capacity (5kilo roaster coming). We believe we had the best spot but the owner of the building decided he didn't want to modify the space to meet the local fire code requirements for this type of business so we have our eye on another location around the corner fro this one and feel it has promise. Low rent, is mostly built out already, lots of character. I hope to talk to the owner this week about what we want to do and if he is into some light modifications and improvements. He is running for State Senate and is just interested in getting a business in there and getting them to make money (he said). He is very flexible on the lease term - he said he had no problem with a 6 month lease. Last renter was a BBQ business that moved because they wanted to serve wine/beer and the space could not seat 100 people. Required for this town.
Need some good things to happen in the next few weeks!!! Any more thoughts I need to consider??? This has been a long thread and a lot of good discussion has been shared!!! Thanks to all!!
I'm finding that with me holding on to my day job, this will nto be easy. I knew that goining into it but it is coming more to light now that we are serious about the deal. Some of the people we had lined up to work have moved on or backed out or otherwise did not work out like we planned...and some funding has gone away. The risk is too high right now to keep moving forward so we have put it all on hold for now. All on the same day we were going to start the build out!!! Bummer!