Small Craft business... Tax questions?

You need to keep all receipts so you can itemize. This is pretty mandatory. You need to know how many sales you had in Wisconsin because you have to pay sales tax to the state in January for that. (I'm in Wisconsin too). No making up numbers. You should have total sales recorded for every event you did (this helps to decide if it's worth doing those events next year too).

Since this is your first year, and sales were low, you can do the numbers to the best of your ability, but keep track of EVERYTHING for next year. Technically it's a 'hobby business' and the first year can be pretty low. However if you claim a loss for 3 years out of 5 you'll be red flagged by the IRS, they believe that nobody stays in a dying business that long so they investigate.

This means you need to keep records of ALL these:

raw materials for making your soaps and candles

boxes and shipping supplies

shipping costs

a travel log of miles to and from events and to the stores for supplies.

receipt books, pens, software used on the computer to keep your records (if you do it that way)

Anything you buy for the business--tables, bags, ribbon to decoratively package something, packing tape, stamps, the crock pot for melting wax, molds, displays, business cards, etc. etc. Any fees--table/booth fees at events, admission fees if those are separate, insurance purchased for this if any, what you paid for the sellers permit, any software, etc.

Keep a notebook and record everything in it and have a manilla envelope to hold all receipts, just date the front of it and use a new envelope each year.

You should not claim a part of your home as a business expense unless that room/phone/area is used 100% for the business. This is a red flag for the IRS. You CAN claim a % of your home as storage though, and not raise that red flag. My upstairs is strictly for my craft work, I have one room up there and it's a 10% claim on my taxes, along with 10% for electric and gas off my yearly bill (heating and lights). This is a legit deduction.

Remember that you'll owe self employment tax too--don't skip over that line on the tax forms! You may be wanting to have someone do the tax forms for you next year to see how they're done and then follow that example. The person would need to know how much $$$ amount you have in stock and supplies, for the tax forms. You need to do an inventory of the items not sold, and all supplies you've got that have not yet been used.

I have wanted to do a craft-related business for many years. Lack of capital has been my greatest hindrance/ I'm attending a seminar at the end of this month to learn how I might teach & and share my crafting ideas through a blog.

if you don't have actual records to verify actual amounts and you think you lost money on the whole endeavour, then do not file for a loss. DO NOT ESTIMATE INCOME AND EXPENSES! Start keeping accurate records ASAP and start reporting from here on out.