WP_Post Object ( [ID] => 16157 [post_author] => 5 [post_date] => 2018-02-27 07:00:59 [post_date_gmt] => 2018-02-27 13:00:59 [post_content] => In the past decade, local food and product sales at farmers markets, farm stands, and community-supported agriculture have grown immensely. In fact, total annual sales at U.S. farmers' markets are estimated at $1 billion, according to the Agricultural Marketing Resource Center. Whether people are looking for a side hustle to gain some extra income or have a passion for producing a particular product, farmers markets are a haven for commerce. Most farmers' markets are operated on a seasonal basis, opening in the spring and closing in the fall. Year-round markets are open in more temperate climates. Farmers markets are abuzz with money interactions. The seller posts their price, the buyer offers a cash payment for the goods. Because these transactions are primarily cash-based, you may wonder about the tax implications of these farmer’s market transactions… Reporting Cash Income on Your Taxes Cash transactions are standard at farm stands, farmers markets, and agricultural trades. While cash can seemingly go under the IRS radar, this is a source of income and should be claimed on your taxes. The IRS considers extra money you make for side jobs as self-employment income. Report this cash income on tax form Schedule C. If you make more than $400 from your side job, you'll need to file a Schedule SE and pay Social Security and Medicare taxes on the income. Bartering Taxes Consider this scenario: You are a farmer’s market seller selling honey. You forgot to eat breakfast so you want some bread to go with your honey. You exchange a loaf of bread for a jar of honey from the bread maker across from you. Did you know in this scenario, you might actually be taxed for this? Yes, whether a one-to-one or multi-person transaction, the IRS says trading a product or service for another is taxable bartering. In this scenario, the products are technically income to both sides, like cash, and the IRS would like you to report the fair market value of goods on your tax returns if the exchanged amount of the transaction exceeds $600. How will the IRS know about trades or how much cash changes hands? This should be done via Form 1099-MISC. Hiring Staff Maybe your little side gig has gotten bigger than you imagined and need extra help. Another tax-related consideration of a farmer’s market business is hiring staff. You can choose two options: a contractor would be given Form 1099-MISC, while an employee would be given a W-2. So, what’s the difference between employees and contractors? Employees work set hours, have employer-sponsored benefits, and are generally on a bi-monthly payroll, while independent contractors set their own schedule and are paid by the job. Most farmer’s market extra hands will be independent contractors, not employees. Word of Caution: Maintain Good Records The IRS doesn’t like fuzzy numbers when you are reporting cash income on your taxes. Good recordkeeping is essential for two reasons:
There's lots of good produce at the farmers' market. Despite the potential taxes and however you pay for your produce, get to your local farmers' market and enjoy it. [post_title] => Farmer's Market Tax Tips [post_excerpt] => [post_status] => publish [comment_status] => closed [ping_status] => closed [post_password] => [post_name] => selling-at-the-farmers-market-remember-these-tax-tips [to_ping] => [pinged] => [post_modified] => 2018-02-19 16:07:13 [post_modified_gmt] => 2018-02-19 22:07:13 [post_content_filtered] => [post_parent] => 0 [guid] => http://blogs.hrblock.com/?p=16157 [menu_order] => 0 [post_type] => post [post_mime_type] => [comment_count] => 0 [filter] => raw ) 1
- It saves time come tax preparation time and it is essential during an IRS audit or questioning to help explain your return, a common scenario for cash-based businesses. Keep records of every transaction by date, category, and buyer.
- Maintaining records of receipts, invoices, and other financial forms ensures you’re tracking the right numbers come tax time. (Software programs and mobile apps can help you out, too.)
With H&R Block Tax Pro Review, an H&R Block certified tax pro will review your taxes prior to you filing your return to ensure that you get your maximum refund guaranteed.