Tax questions

[Cactus]

Folks,
I am a newbie here and I hate to ask too many questions without giving anything in return(especially being such a new member). Hopefully I will be able to give something back to this forum in the future in the way of advice or suggestions.. There appears to be a lot of talented and knowledgable people here.
I have a tax question if anyone cares to respond I would be most interested in hearing your advice/suggestions etc.....

I have about 90 acres on my homestead and have been harvesting some timber off of the land for a couple of years.I work full time away from the homestead and harvest timber with my tractor on my days off.
I know the timber I have sold will have to be claimed as an earned income and I have expenses from equipment repairs and labor and I have paid to have the logs hauled.
Should I consider setting my farm up as a business or leaving things as they are and file a 1040 ?


Thanks in advance

 

[DocHeb]

Welcome to TBN.

Different states have different tax laws, so filling out your profile will get you more specific advice for the state level, as well as requirements within the state for filing as a business.

In general, the IRS is quite aware of "pseudo-business" attempts to get out of taxes by writing off expenses. You will need to have a formal business plan, and demonstrate that this really is a business and not just a hobby or one-time fling.

I'm sure those more knowledgeable will be able to chime-in here.

 

[dmccarty]

Cactus,

Be careful with Timber Taxes. Its as clear as mud. Its complicated. Before you started Timbering did you have a Timber Cruise done to set your Basis?

I spent a great deal of time years ago learning about Timber Taxes since I could not find an accountant who knew anything on the subject and my use was a one time sale. Well, there maybe a sale way in the future but not anytime soon. My sitiuation was simple but figuring out what to do with the taxes was not simple.

If you are going to run this as a business get an good accountant who knows how to handle timber.

Later,
Dan