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Hi -- I'm sure this question has been asked before but I can't seem to find a definitive answer. Last year I purchased a heat press, a vinyl cutter, and some vinyl and have been doing a few jobs for friends. I have yet to make back my initial investment. I do not have a business license or a tax id or a storefront or anything like that.

I am doing my taxes now and I am really confused about what I am supposed to declare/do in regards to this. Is this a small business? do I declare my profits? am I supposed to pay self-employment taxes? can I just declare it as misc income and be done with it?

I am very confused.
 

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You should ask your accountant, but it really sounds like a hobby, in which case you cannot deduct anything. If you had made any attempt to be a business then you might be able to write off their deprecatory value (for large equipment you usually can't write it all off in one year anyway) but since you did not you just bought some expensive toys to play with.

Maybe next year if you start a business you can "sell it" to your business, (used value, of course). Again, you would have to talk to your accountant about the proper way to do this, but you may simply be completely out of the money.
 

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Like federal income tax, self-employment tax is levied according to the amount of earnings, not the length of time a person works. It means that the amount of time that a taxpayer works on his own has no basis on calculating the self-employment tax he owes. So exactly you must pay self-employment tax on the net income you earned, no matter how long it took you to earn it. Cheers.


 

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While maybe not likely, another real risk you have of getting into some trouble is not collecting and paying sales tax. States right now all need money and if you were found operating illegally you might be prosecuted. Your local town probably requires a license and/or permit as well.

If you plan to continue to sell your work save yourself the possible headaches (and fines) and get yourself legal.
 
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