Chicken Business,Egg business and taxes?

Discussion in 'Managing Your Flock' started by Hansen4211, Feb 20, 2012.

  1. Hansen4211

    Hansen4211 Chirping

    I was just curious to know if anyone actually files a backyard flock as a small business.

    What are the benefits to claiming what you sell in eggs?

    Im confused as to what to do with this part.

    Thanks for your help, I didn't know where to post this thread.

  2. Yoke

    Yoke In the Brooder

    Feb 18, 2012
    How many chickens are you looking at?

    With all the bad comments about the big egg farms, they do produce a lot of "egg like" products at a very low price. There is a lot of competition and every farm must do all that they can to maximize efficiency. These egg farms are very good at what they do.

    These big farms claim all their expenses and still make a profit. Of course, they are required to file taxes.

    In addition to your feed costs, you would need to calculate what percentage of your land was used by the birds and claim that percentage of your property taxes as an expense. If you were to account for all your expenses, including applicable depreciation and utilities, you would very likely be operating at a loss.

    To sell eggs as a business you may need a "food grade" kitchen with the three stainless steel sinks plus one more for hand washing. You will need a separate refrigerator and packing area.

    Once you add in all these expenses, you will have a loss year after year. This may sound good if you think you can just claim these loses on your taxes, but you cannot. You need to turn a profit at some point. The IRS would classify your venture as a hobby and issue the applicable fines.

    It is best just to share eggs with a few of the neighbors and let them chip in a few dollars to share costs.

    Then again, if you are turning thousands of dollars of profit after expenses, your hobby is a business and you must claim all the net income.
  3. Ole rooster

    Ole rooster Songster

    Jun 25, 2011
    Milner, Georgia
    I don't know of one person that has chickens in there yard that sells eggs at work and such that has such a setup. Not one. So we're all breaking the law.
  4. cubalaya

    cubalaya Crowing

    Nov 19, 2008
    central virginia
    guess they have too many laws. should simplify the tax system too. everybody pay the same percentage. no loopholes, but our lawmakers are the ones that write the loopholes in and make the laws to please their lobbyists.
  5. aoxa

    aoxa Crowing

    Neither do I, and I am an accountant :p

    Only one person I know claims farm related expenses/income, and they have cows. You would need to have quite a few chickens to make a profit after you deduct expenses. As for the fridge and separate sink, I've never heard tell of that law in Canada.
  6. Yoke

    Yoke In the Brooder

    Feb 18, 2012
    Yes, most people are breaking the law.

    With regard to eggs in FL. See: Some people sell fertile eggs for hatching. Not my fault if they go home and eat them.

    When is the last time you broke the speed limit. Missed an item on your taxes. I think even Jesus broke the laws of man; Crowd Control, Serving Lines, No handicap Curb Cuts, ect.

    P.S. Curb cuts only needed for people on their way in.
  7. Fred's Hens

    Fred's Hens Crowing Premium Member

    Yes, we do report income. We are primarily a market, organic garden operation, but we also sell eggs, live birds, etc. We track expenses and sales precisely. It sure isn't difficult or time consuming. The only "benefit", I suppose, is that Michigan requires a "farm" to produce $1000 worth of product per year. As a farm, we don't pay sales tax on a great number of our purchases that are directly related to the farm.

    You report any profit on Schedule F on your income tax. It's pretty straight forward.
    Last edited: Feb 21, 2012

  8. aoxa

    aoxa Crowing

    When I took my tax course, I was taught that it is better for someone to report their income from illegal means on their taxes than not. They would be sentenced harder for tax evasion, than if they were caught for their illegal doings (drugs, prostitution, etc). Isn't that something?

    As for reporting at a loss; You can report at a loss if you have some form of income. If you are reporting expenses, but nothing is coming in, your accountant should not let you do so in the first place. If income was over $1,000 before expenses for that year, I would personally consider reporting it. I would also report expenses. Only the legitimate ones. Property tax, Feed, Vet bills, building supplies for coops, electricity, water/sewer and possibly a telephone for calls to customers (at a percentage of course).

    I have seen clients try to claim the weirdest things. Once I had one who tried to claim a paternity DNA test. I get a lot of people trying to claim clothing/hair cuts and manicures.

    I'm getting away from myself now...

    The farm return is actually more detailed than any other schedule. Small business is easy in comparison. Even corporations are easier IMO...
    1 person likes this.
  9. Yoke

    Yoke In the Brooder

    Feb 18, 2012

    Good points.

    I agree that once income climbs over $600 - $1000, it would be easy to list just enough expenses to zero out that income. I know there are additional regulations on claiming losses year after year.
  10. fried green eggs

    fried green eggs Songster

    Mar 25, 2011
    S.E. Michigan
    My husband started selling eggs at his work this winter 6-7 doz a week @ $2 a doz - Great Right? but, according to we are selling at a loss [​IMG]. We are raising our price per doz as, we don't think we will loose any sales and have more people that want to buy from us. and I have more chicks ordered, planning to revamp a shed into another coop. I am seeing our CPA tomorrow to find out if he thinks this is a bussness or a hobby for us.

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