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Hey guys, I have a hobby-business... not even a business. I literally fix watches in my spare time (out of fun) and then sell them on eBay. I do REALLY good and thorough work, and as such, the money I make from the watches has been steady. Again, this is only a hobby... I try to keep at least 8 watches on eBay every week... but they've started to fly off sooner than I can fix them and stock them. I don't have a business, and this money literally just goes into my daughter's 529 College Savings account.

What I'm trying to account for though is that the money I'm making from this definitely exceeds someone who's clearing out their garage. Since the beginning of this year, I've made about $10k on buying, restoring, and reselling watches, and I expect that I'll probably end up doubling that before the end of the year.

In a situation like this, where I'm just doing this for fun... how do I account for this on my taxes? I'm committed to using Turbo Tax, so I'm not going to be talking to my "tax advisor" or any such thing. But I want to know what others in a similar situation do.

I also have a rental property in Florida, and with that, my income is total expenditures, plus depreciation, plus taxes / mortgage / insurance, minus revenue = profit... and that's what I claim. Is this similarly how I'm going to be doing it with this?

How about for the time spent? I spend on average about 1-1.5 hours per watch... obviously this doesn't cost me anything except my time, but how can I account for that?

Thanks guys!
 

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Discussion Starter #3
You probably need to talk to a CPA
So, respectfully...

I stitched a knife wound myself rather than go to the hospital, I restored two of my own homes from studs... laid tile, did the plumbing, electrical, drywall, carpentry, every damned thing myself. Taught myself how to program first, then worked, and only then got my degrees because I needed a checkbox. I've done every repair to my cars since I turned 18.

I'm not about to get help on something silly like this now... I'm all about literally doing everything myself except major surgery, hahah. This is a moment of weakness for me... I'm stopping and asking for directions. There's got to be someone on here that restores watches as a side hustle... and I'm just looking for advice.
 

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i dont think you should be taking in depth financial advice from strangers on the internet. Get yourself an accountant and take it from there.

Congratulations by the way. What you've managed to achieve with your hobby so far is very impressive.

Edit: Just read your previous post. in that case join an accounting/finance related forum
 

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I can respect wanting to do things yourself, but if I was in your situation I would at least ask for directions on a forum dedicated to running small businesses. You will no doubt find some people who make money from watches here, but what's important is if they:

1. Are having a turnover that's roughly similar to yours.
2. Are doing it in a similar fashion to what you're doing.
3. Know what the hell they're doing.

Otherwise their directions probably won't help you. You really have a business and taxation question, not a watch question.

That said, congratulations on turning your interest into a successful business, and good luck finding the info you need. I think you should bite the bullet and ask a CPA because the DMV won't come after you with a cactus and some lube if you make a minor mistake on your car. The IRS... well, they probably won't give you the benefit of lube, and there are some places that's hard to stitch yourself.
 

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You should report it, everything is documented and recorded on ebay so if you are audited you will get fined.
 

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Remember, they got Al Capone on tax evasion.
 

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So, respectfully...

I stitched a knife wound myself rather than go to the hospital, I restored two of my own homes from studs... laid tile, did the plumbing, electrical, drywall, carpentry, every damned thing myself. Taught myself how to program first, then worked, and only then got my degrees because I needed a checkbox. I've done every repair to my cars since I turned 18.

I'm not about to get help on something silly like this now... I'm all about literally doing everything myself except major surgery, hahah. This is a moment of weakness for me... I'm stopping and asking for directions. There's got to be someone on here that restores watches as a side hustle... and I'm just looking for advice.
Whether you are making money from watches or anything else its all income and you could be liable for tax on it speak to an accountant or if you don't want to ignore the advice its as simple as that
 

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There are plenty of articles on the net to guide you; I linked one below. You already answered your own question with your rental property description: revenue minus costs equals reportable income. Turbo tax has a spot to add in additional income.

Costs would include buying the watch in the first place, replacement parts, time/labor, eBay fees. What you use for a labor rate should be reasonable given the industry, i.e watch repair.

If you are doing 10k in sales and expect to do up to 20k you need to start taking steps to avoid getting jacked up with the IRS

Good article on actions you need to take to keep yourself out of trouble



Sent from my iPhone using Tapatalk
 

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Whether you think of it as a business or not, it is a business. Your profit is income. Your expenses are deductible from your gross. Your contributions to a 529 may be deductible. TurboTax can handle this. Even if it’s strictly a hobby, profit may be taxable income.

My opinion is just that. I am not giving financial advice.
 

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Discussion Starter #12
Thanks guys for the responses!

So you’re looking for advice - just not advice you have to pay for?
EXACTLY!


You should report it, everything is documented and recorded on ebay so if you are audited you will get fined.
Lol, where did I say I wasn't? I'm asking what the best way to report it is on my taxes.

There are plenty of articles on the net to guide you; I linked one below. You already answered your own question with your rental property description: revenue minus costs equals reportable income. Turbo tax has a spot to add in additional income.

Costs would include buying the watch in the first place, replacement parts, time/labor, eBay fees. What you use for a labor rate should be reasonable given the industry, i.e watch repair.

If you are doing 10k in sales and expect to do up to 20k you need to start taking steps to avoid getting jacked up with the IRS

Good article on actions you need to take to keep yourself out of trouble

This is exactly what I'm looking for! Thank you! I appreciate it.


I can respect wanting to do things yourself, but if I was in your situation I would at least ask for directions on a forum dedicated to running small businesses. You will no doubt find some people who make money from watches here, but what's important is if they:
Honestly, there are a lot of people on here that I assume buy / sell watches. Everyone that gives me the time of day on my auctions on eBay, I link them to WatchUSeek if they're interested in getting in the hobby. It just seems like this is the best place to find people who are doing the exact same thing I'm doing.
 

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I paid the extra $40 OR $50 bucks on TurboTax to have access to professional tax advice should any questions arise. I did so when I was helping my son with his taxes because I suspected that we might have a question about how to report one category of income, and it was money very well spent. The first advisor who contacted us was clearly a "call center" worker bee who could not offer more than some best guesses. I respectfully asked to have the issue bumped up to the next level. Later that night, an attorney/CPA with more than 30 years experience called us back. I suspect he does this work in semi-retirement. Anyways, he could not have been more knowledgeable or helpful. He knew the issue perfectly and also knew how to enter it into the TurboTax program - two separate issues - since Turbotax itself was not really set up well for the situation. He stayed on the line with us while we entered the info and verified that the program treated it exactly the way he said it should. Money well spent.
 

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Thanks guys for the responses!



EXACTLY!




Lol, where did I say I wasn't? I'm asking what the best way to report it is on my taxes.



This is exactly what I'm looking for! Thank you! I appreciate it.




Honestly, there are a lot of people on here that I assume buy / sell watches. Everyone that gives me the time of day on my auctions on eBay, I link them to WatchUSeek if they're interested in getting in the hobby. It just seems like this is the best place to find people who are doing the exact same thing I'm doing.
Whether you buy and sell watches or buy and sell bags of cement makes no difference if you make a profit it counts against income What surprises me is that you seem to have done so much on your own you are having to ask advice on a really simple question that you should have been able to find out yourself
 

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Discussion Starter #15
I paid the extra $40 OR $50 bucks on TurboTax to have access to professional tax advice should any questions arise. I did so when I was helping my son with his taxes because I suspected that we might have a question about how to report one category of income, and it was money very well spent. The first advisor who contacted us was clearly a "call center" worker bee who could not offer more than some best guesses. I respectfully asked to have the issue bumped up to the next level. Later that night, an attorney/CPA with more than 30 years experience called us back. I suspect he does this work in semi-retirement. Anyways, he could not have been more knowledgeable or helpful. He knew the issue perfectly and also knew how to enter it into the TurboTax program - two separate issues - since Turbotax itself was not really set up well for the situation. He stayed on the line with us while we entered the info and verified that the program treated it exactly the way he said it should. Money well spent.
I think I'm going to do this. I had the option last year (I do Rental and Small Business edition of Turbo Tax), but never felt like I needed to use the "phone a friend" feature. For rental property, it was pretty self-explanatory. I was reading through the link that @ctlawyer posted, and found another nested link. The interesting thing is that it'll even let me claim part of the square footage for my home as a business expense, and every time I drive to the post office, that's another business expense. Incidentally, since I've bought everything from eBay, and sold everything on eBay, that shouldn't be too difficult. The only other things I've purchased was an ultrasonic cleaner from Amazon, and crystals and a few things from Esslinger.com. So not difficult at all. The only thing that isn't clear to me yet is whether or not I need to have an LLC in order to claim these deductions; however, I'm still parsing through the Dave Ramsey links.


Whether they buy and sell watches or buy and sell bags of cement makes no difference if you make a profit it counts against income What surprises me is that you seem to have done so much on your own you are having to ask advice on a really simple question
Love it! I know this isn't British humor because I've watched a LOT of Monty Python, Top Gear, and seen all the Margaret Thatcher speeches, so this is obviously cynicism!

7 Signs that You Are a Cynical Person

To answer your question though... I didn't just wake up one morning and discovered that I knew how to mig-weld. I hopped on YouTube and watched some videos, asked for advice on message boards. There's always that one guy though on every message board that's like... "Why don't you just take your car to a shop."
 

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Not an expert, but start here:



Then try IRS Code 183: Activities Not Engaged in For Profit. Seems to address the opposite scenario of people trying to claim deductions on losses in hobbies, but seems to have some info on the business or hobby designation.


You really should talk to an expert if you foresee this continuing - there are many implications to how/when you file, and probably also with timely payments (quarterly deposits).
 

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WengerTodd said


There's always that one guy though on every message board that's like... "Why don't you just take your car to a shop."

I think you will find it was more than one person advising you to get proper advice but it's up to you You asked the question and got answers
 

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Discussion Starter #18
Not an expert, but start here:



Then try IRS Code 183: Activities Not Engaged in For Profit. Seems to address the opposite scenario of people trying to claim deductions on losses in hobbies, but seems to have some info on the business or hobby designation.


You really should talk to an expert if you foresee this continuing - there are many implications to how/when you file, and probably also with timely payments (quarterly deposits).
This is excellent, thank you! Reading the link now.
 

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So, respectfully...

I stitched a knife wound myself rather than go to the hospital, I restored two of my own homes from studs... laid tile, did the plumbing, electrical, drywall, carpentry, every damned thing myself. Taught myself how to program first, then worked, and only then got my degrees because I needed a checkbox. I've done every repair to my cars since I turned 18.

I'm not about to get help on something silly like this now... I'm all about literally doing everything myself except major surgery, hahah. This is a moment of weakness for me... I'm stopping and asking for directions. There's got to be someone on here that restores watches as a side hustle... and I'm just looking for advice.
Sorry but no. This isn't a couple hundred bucks of money from babysitting. $30k a year extra is a serious side job, and you have a paper trail because you sell on eBay. You are literally running a business. Talk to a professional. You may be eligible to deduct costs of tools, the workspace, listing fees if you itemizing, and even part of your mortgage if you have a dedicated working space. All of this is specific to each state.

A single consultation session will costs no more than a few hundred dollars, and will avoid (1) paying too much tax and (2) paying too little so that the IRS man shows up.

WengerTodd said


There's always that one guy though on every message board that's like... "Why don't you just take your car to a shop."

I think you will find it was more than one person advising you to get proper advice but it's up to you You asked the question and got answers
If we're running with the car analogy, this is an engine rebuild. You could do it in your garage, but judging from OP's questions it's time for the pros to take over.
 

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Discussion Starter #20
If we're running with the car analogy, this is an engine rebuild. You could do it in your garage, but judging from OP's questions it's time for the pros to take over.
I've rebuilt the following engines in my garage:

2000cc Porsche 914 Type-4 motor for my 1973 VW Bus
2.8 liter GM V6/60 for my 1987 Pontiac Fiero V6
1969 Oldsmobile 455 Big Block w/ "C" heads .040 overbore TRW forged pistons
2.4 Liter DOHC TwinCam L4
 
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