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Taxes under cottage food law

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This topic contains 1 reply, has 2 voices, and was last updated by  David Crabill 3 years, 11 months ago.

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  • #17274 Reply

    julanne strobbe

    Okay so last year my friend and I were trying our hand at making cake pops. Lo g story short more and more people were interested in the pops and we started a facebook page where we could advertise them, and we expanded to cakes. We charge for cost of supply and for our time to make the orders. We follow all cottage food laws and consider it a business but in no way shape or form a sole business where we could live off of the profits (pretty much just something we like to do and to bring a little extra spending money on here and there). Is there a limit before we have to pay taxes or do we not have to file? It’s all very confusing and I don’t want to assume we don’t have to pay and get slapped with an audit and a huge fine in a few years. Thank you in advance

    #17296 Reply

    David Crabill
    Keymaster

    You need to pay annual taxes on all income you make, even if your business is operating at a loss. There is no limit — technically, your first order should have been reported. If you want to bypass income tax requirements, you would need to give away your products (not collect money). Once you start making a certain amount of money, you need to pay estimated taxes every quarter.

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