Woodworking as a side business and tax implications?

[John Sincerbeaux]

I have been selling my woodworks for over 10 years out of my home shop. Although the business is extremely small, I keep it very legitimate. I sell my work through galleries, competitions, and private commissions.... ie, it is very easy to prove it is not just a hobby. I have never been audited.

As far as CPA's go, I believe every tax payer in America should use one. And if you're not, you are leaving money on the table.
Further, my CPA says, every tax payer should have a small business on the side.

My real job pays the bills, health insurance, and my retirement nest egg. It also affords some nice machinery but we are "realistic" in how much we write off every year.

[Steve Milito]

Steve is correct about there being an exception to the double entry set of books rule for S Corps. As a practice I won't file an S Corp return that is single entry. Too many potential issues with the election, verifying the payroll, and transferring the business at a later date. I have seen S corp returns prepared that way ( small businesses with < $250K in assets ) but IMO if you can't run a double entry set of books, you shouldn't choose S Corp- but Steve is correct.

Losses from one entity may be allowed against income from another but there are complicated passive loss rules that must be understood and planned for. Way too involved for here. Dave

EDIT. Steve is also correct that GAAP is irrelevant ( maybe even stupid ) for small businesses.

Yes, none of what I posted is 100% accurate, 100% of the time; just rather 'rules of thumb'. There are tax consequences and additional expenses as well as benefits to owning a business. Frankly, IMO, it isn't worth the trouble unless you really plan on putting the effort to generate real revenue.