Income taxes

If you are going to sell jewelry, you will have to deal with taxes, laws and licenses. Even if you are going to sell as a hobby, a non-profit endeavor or charity fund-raiser, in addition to filing sales tax you may have to claim income on your state and federal tax forms.

You must complete the following federal tax forms for any year in which you have net earnings of $400 or more:

* Form 1040 (U.S. Individual Income
Tax Return);
* Schedule C (Profit or Loss from Business); and
* Schedule SE (Self-Employment Tax).

Know the specific laws in your city and state. Contact your state's department of revenue, your city's business license office, and a personal tax advisor. Don't be afraid to ask questions. In some cases, you may also want to retain a business lawyer.

While it may be tempting to fly under the radar, it can catch up with you in back taxes, audits, fees and penalties, or when you go to sell at a local craft festival but get kicked out because you don't have a tax ID number or business license.

There's no point in my repeating what has already been said in so many ways, so here's a list of some excellent articles with more information on the subject:

Social Security Office: If You Are Self-Employed
Federal Start-Up Requirements for Small Businesses
State Start-Up Requirements for Small Businesses
Local Start-Up Requirements for Small Businesses
Operating Losses: Prove Your Hobby Is a Business
Is Your Hobby a Business?
Make your hobby pay for itself
Is your hobby a business for tax purposes?
Why Reporting Extra Income Doesn't Mean Paying Extra Taxes
Do I have to pay tax on stuff I sell on eBay?
Reporting self employment income to the IRS

But one bit of advice I will give you is to make sure you don't get caught up in doing more than necessary. Have clear goals. If you are starting a business and hope to make a lot of money, this is approached very differently than if you are just trying to make a hobby break even, or if you are trying to help your church make rosaries. You may not necessarily need to incorporate, file a fictitious business name, or track inventory, for instance. Know what you are doing and why, and make sure you understand your lawyer, tax adviser, and government officials, and that they understand you.


Jen Hilton makes one-of-a-kind jewelry sold through her website JLHJewelry.com. She is the founder of the Triangle Jewelry Makers and is featured in the books "Steampunk Style Jewelry: Victorian, Fantasy, and Mechanical Necklaces, Bracelets, and Earrings" and "1000 Steampunk Creations: Neo-Victorian Fashion, Gear, and Art" available at Amazon and other booksellers.