Are you keeping track of your expenses so you can write them off at the end of the season to reduce your taxable income?
Yes - the money you make at the farmers market is legally taxable income. I wrote the following several years ago.
As the summer farmers market season approaches vendors are
nurturing their vegetable plants and fruit trees, polishing their recipes and
dreaming of beautiful Saturday mornings without rain. Farmers market vendors
should also be thinking about the Internal Revenue Service.
"Why should I
worry about the IRS? This isn't a business; it's just something I do on the
weekends to make a little extra money."
"To make a
little extra money." That phrase is the answer. "A little extra
money" earned by selling your vegetables or home-baked breads is income
and subject to tax laws. IRS Publication 583 is a great resource for
small-business owners. It explains the basics of setting up a business in order
to satisfy the IRS at the end of the year.
Most farmers market
vendors would be considered a sole proprietorship and would report their income
with their personal tax return at the end of the year. A recordkeeping system
is a must to know how much you earned over the summer and what your expenses
were. This system can be as simple as a ledger book with an envelope of receipts
or software on your home computer.
Angie Mohr, a Chartered Accountant and Certified Management
Accountant and author of the Numbers 101 for Small Business series of
books has a great advice. While Angie reminds small-business owners
to get their year-end records in order, I suggest farmers market vendors
finalize their record-keeping at the end of the summer market season. Everything
is fresh in your mind and it will be ready when it's time to file your tax
return.
I've been a farmers market vendor since 2007. I've upgraded
to a computerized spreadsheet for tracking my expenses and income but I used
ledgers during the first few seasons.
Farmers Market Vendors: Know Your Income
This step is the easiest to follow and the most important.
Other than accurately reporting your income to the IRS, it makes sense to know
if you are making money at the farmers market. Buy a ledger book at the office
supply store; write down the date and how much money you had at the end of the
day. Don't forget to subtract your starting bank!
Farmers Market Vendors: Know Your Direct Expenses
Tracking expenses is different for a vegetable vendor than a
baked goods vendor. Produce sellers will have the majority of their expenses at
the beginning of the season as they buy seeds and plants, plus any fertilizer
they might use. Do you buy containers or baskets to package your vegetables?
Most vegetable
vendors are using their garden for a dual purpose - home use and selling for
income. Be sure to keep track of the yield so that the seed and other costs can
be divided accurately.
For baked goods
vendors, the majority of the expenses are ongoing and easier to identify.
Ingredients, packaging materials and labels are expenses.
Farmers Market Vendors: Know Your Other Expenses
I keep a mileage log in my car to track my miles to every
farmers market we attend and every supply trip. Most farmers market vendors won't be able to itemize home
business deductions due to the exclusivity requirement.
Farmers Market Vendors: Keep Your Receipts
After recording my expenses, I keep my receipts in a
legal-size envelope in dated order in a separate envelope for each month. It's
best to not mix business and personal purchases on the same receipt, but if you
do buy everything in one purchase be sure to exclude the personal purchase in
your ledger.
Our table at the Mount Vernon Farmers Market on the Square |
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