Wouldnt this be some sort of tax fraud?

Question

Earlyer today i was talking to my friend about her sewing thing she has going on. She told me to try it out. She said that she makes all kinds of stuff on her sewing machine and then sales it on craigslist or ebay or puts it int he penny saver to sale. She does this for a living, she said she does it this way so that they dont take taxes out of the money she gets. She was telling me that i should try it out. I want to make the stuff, but i dont want to do it with the same intentions as she does. I want to make clothes for my daughter. But im afraid that when she out grows them im gonna go through them like i always do and get rid of the ones i dont want, if i were to sale them, wouldnt they see they are hand made? I dont want to get cought up in any kind of tax fraud or anything. Is what she doing illegal? And should i be worried about saleing anything int he future that my little girl may out grow. I dont know to much about this stuff, but it seems like my friend has been doing this for over a year and she makes alot i think.

Answer 1

Your friend is committing tax evasion and is looking for trouble, and will most likely find it down the line sometime.  Her income legally is taxable.

Answer 2

this is self employed income Read about self employed tax filing

http://taxipay.blogspot.com/2008/04/tax-...

Answer 3

She is required to report her profit to the IRS and pay tax on it.  Selling things she makes is not illegal.  Failing to report and pay tax on the profit is.

If you make things for your own use and later sell them for less than the material (fabric, thread, etc.) cost, then you do not have to report anything to the IRS or pay any tax (other than sales tax on what you buy).  You have to report money from selling things only if either (a) you are in business (she is, you would not be), (b) you sell it for more than it cost you, or (c) you sell something that did not cost you anything.

Answer 4

Your friend is committing tax fraud if she sells what she makes without paying taxes on the items.

If you make clothes for your daughter to wear, then sell them when she outgrows them, you are only required to pay tax if you sell them for more than it cost to make them. I don't think the IRS is going to be looking at how much it cost to make homemade clothing. They have bigger fish to fry.