BREEDERS and IRS - Page 1

It's been awhile since I've been on here.  Quick question since I had a discussion with my doc.  Are you as breeders required to report earnings of breedings/litters to the IRS?

He says yes because if you make a certain amount of money for the year it is concerned a reported income and if found out that one is not you will be owing the IRS.

True or False?

I believe you do just like any other income..... now find out how many actually do

income is income

but there's usually so many more expenses then income so its really easy expanse out every bit of the income and make it a wash.

cost of stock - and depreciation, stud fees, registration fees, food & treats, all vet care, club fees, trial and show entries, mileage when ever a dog is in the car... all fair exemptions

part of the house or yard used for breeding and housing.....



 

Yes you have to report it at the end of the year.  Like SistasMom said it never showes you make much money.  Food, Bedding, Vet bills, supplies (collars leashes toys etc).  Part of your mortgage payment, your electric bill, your phone, internet, mileage on your car etc all count as expenses so keep all the reciepts, you typically show a loss.

Ok.  I just spoke to my other doc today and he was saying yes too.  I guess that is the difference between a licenses breeder and not licenses.  The one who does have a licenses reports at the end of the year but the ones who don't take their chances and will owe uncle sam big money if they get caught for a long period of time. 

Well, the only way they are caught is if they are reported (which that person who reports is rewarded by the IRS) or you get sued(or if you sell to military/police you leave a trail).  So why take the chance of doing so with out being licenses?  I'm pretty sure if people or clients are looking for a quality dog for work or whatever, they would ask the breeder if they are licenses?  If they say no, then there is a chance that the client would report.  So why the risk?  I do see where you all are coming from with the money for the litter pays for all your expenses.  My thing is yes it does but if caught your penalty fees will probably be more than your expenses over the years, right?

(A) Why are you talking to doctors about tax issues?  You need to talk to a Certified Public Accountant, preferably one who routinely deals with kennels, breeders and livestock operations.

(B) You can be sued by anyone you sell a dog to, not just the military or police.

(C) The whole 'licensed versus unlicensed' thing is most likely a local matter--the only kennel licenses the Federal Gov't issues are for what are considered to be 'commercial' kennels, AKA 'puppy mills' in some cases (not all).  The USDA kennel licenses are for wholesalers of dogs, breeders who sell dogs to other wholesalers, those who sell dogs to research facilities,  and any breeder with more than US$500.00 gross annual sales (note that this is GROSS, not NET, so your cost offsets don't count toward this).  There is an exemption for "Hobby breeders" who have less then US$500.00 gross annual sales, AND who own no more than 3 breeding females AND who sell the offspring into pet channels only (must meet all 3 criteria). Those who sell breeding stock to other breeders may be required to be licensed as well.
http://www.aphis.usda.gov/animal_welfare/downloads/aw/awlicreg.pdf

(D) Whether you are Federally licensed, locally licensed, or not licensed at all isn't what determines whether or not you have to pay taxes on monies generated by the sale of dogs...IRS tax laws determine that, and as complicated as THAT is, I wouldn't trust info or advice on the subject from anyone other than a CPA.

I have a patient who is a CPA and I will when I see him.  The only reason I spoke to docs is because we had down time in the office and they are knowledgable about taxes (general).  Yeah, they know nothing of breeding but know how to run a business and know what goes into it when it comes to IRS and TAXES. 

This was a general conversation.  I didn't think breeders had to pay anything because I didn't look at it in a  business aspect.  One being they do it at home and no helpers to pay out to (nothing to get caught up on).  Plus, other minor factors.  I will review the link you provided, thanks just wanted to get a general answer and why.

For the military and police that comment from the doc was it leaves a trail where the person gets tracked down vs a regular ol joe off the streets that make a purchase.

RDH.... what kind of doctor are you and where do you practice?

Dr. Ravi Iyer, MD
Vienna, VA

If you breed your dogs, sell puppies regularly and you do not have a kennel license - the answer is unfortunately YES.  If you have a license – it’s treated just as a regular business.

IRS considers breeding a hobby - therefore you have to report income BUT you cannot deduct the expenses... Not really fair as the breeding costs can be pretty big...

Oh, I see.  Well, I see the income part but still don't think breeding should be a business unless you have workers involve but I guess it is what it is. 

I'm not a doc...well as of yet.  I applied to dental school so I'm waiting for the verdict.

Thanks guys for the insite.  Just wanted to know.