Collecting Scrap metal

[oceanlovin'ea]

I just had a client bring in receipts for a scrap processing place. I would guess he collects different kinds of metal and takes it in.

First time I have ever had someone add this to income. Is it taxable?

Thanks. Linda F

[DaveO]

Depends on source of the scrap

If he is selling scrap that he owns that was not part of a depreciable asset I would say no. If he is collecting from other people scrap then he would have taxable income. If he is buying and selling he may have a business. With copper prices so high thieves are stealing the copper out of vacant homes and houses under construction.

[Jiggers]

Depends, #2

Do you collect aluminum cans along the road and cash them in for cash? Do you report it?

Again, depends! If you are talking about just a few bucks a year, no. Big bucks, you might have to report it.

You remodel your house and you have some left over metal or old metal that was removed in the remodeling. Do you report it? No, this is a refund of your original cost.

What about a farmer that may have junk from pastures, used obsolete parts, metal from old barns, etc. that he takes to the recycling place for cash? He has to report that income because he wrote off the stuff as repairs, supplies, or depreciable assets!

[oceanlovin'ea]

Alongside the road

is where he got this stuff. It was $1376 during the year.

Some cans. He might have gotten some of the stuff from dumpsters where he cleans. I'm sure he didn't take it from anywhere he shouldn't have but it was just stuff he found and so he had no basis in it.

Linda F

[oceanlovin'ea]

Where to put it?

Would you include it in his schedule c income? Or would it be other income not subject to self employment tax?

Linda F

[Bill Tubbs]

Hobby vs. Business

Would you include it in his schedule c income? Or would it be other income not subject to self employment tax?

I'm guessing his intent on doing this is to make money (vs. doing it just to save the earth; save landfill space, etc.). Sounds to me that it's Sch C.

But, take a look at the hobby vs. business rules to make sure.

Bill

[DaveO]

Unless he has expenses we wishes to use to offset the income it really seems like a “hobby” or exercise program that generates a little cash. While he may do it regularly it doesn’t seem to rise to the level of a trade or business. When he starts buying scrap for the purpose of reselling it, my opinion would change. I would list it as other income.

[Chief]

Scrap Metal

Linda: Your post reminds me of a time I was quite Young and two of my step brothers collected scrap metal and sold it to people who shipped it to Japan for them to make weapons of. They were drafted and went to the Orient to fight the Japanese who used that same scraped metal against them in combat. That experience has stayed with me all these years. I agree with the other posters if the amount is insignificants I would not include it as income.

[Jan]

I probably wouldn’t report it as income either, but if your going by the tax law, all income should be reported, I have a friend who is a retired IRS agent, I use to do his taxes when he was still working, he show $20.00 as other income on line 21, I ask him what the income was, he said his neighbor borrowed his lawn mower one week-end and gave him $20.00. I said we don't normally report income like that, he said, I know, but his neighbor was another IRS agent, he wasn't sure if he would report him. What a way to live, always in fear.

[DonPriebe]

How can in NOT be a Schedule C item?

So far we know that he collects scrap metal and sells it (post #1). Some of it he gets from the dumpsters he cleans (post #4). We also know that he is self-employed, because he currently files a Schedule C (post #5). I will make the big jump and assume that his Schedule C business involves "cleaning dumpsters", or taking the material in the dumpsters and disposing of it. He is in the waste disposal business. He would reasonably deduct any tipping fees for disposal; why would he not also reasonably count as revenue any material sold to scrap dealers?

[OldJack]

If the client didn't want to pay taxes on the scrap income... he should never have told the tax preparer! If a preparer is going to sign the tax return he must report all income he is aware of or not do the tax return. Its not up to a tax preparer to ignore taxable income. I agree this is self-employment income for Sch-C.

[Unregistered]

Old Jack is right......

If the client didn't want to pay taxes on the scrap income... he should never have told the tax preparer! If a preparer is going to sign the tax return he must report all income he is aware of or not do the tax return. Its not up to a tax preparer to ignore taxable income. I agree this is self-employment income for Sch-C.

There's your answer, although I don't suggest that people hide these things from their Tax Preparer. It is not up to us to decide whether or not to report taxable income on our client's tax return. If the income is taxable we include it on the tax return. This income is taxable.

The client's intent determines how it should be reported. The choices are Schedule C-ez, 1040 "other income", Existing Schedule C "other income", or if it is an ongoing business use a separate Schedule C. If he's partnering with someone else.......well.......you know what to do.......

MAW
Income Tax Professional

[DonPriebe]

Nit Pick

Schedule C-EZ is not an option, since he already files a Schedule C. (You can't file both a C and a C-EZ, or more than one C-EZ).

[Unregistered]

DonPriebe is right about C-EZ

DonPriebe<< Schedule C-EZ is not an option, since he already files a Schedule C. (You can't file both a C and a C-EZ, or more than one C-EZ). >>

Thank You, Don,
You're correct.

MAW
Income Tax Professional

[Jesse]

What if employee?

So far we know that he collects scrap metal and sells it (post #1). Some of it he gets from the dumpsters he cleans (post #4). We also know that he is self-employed, because he currently files a Schedule C (post #5). I will make the big jump and assume that his Schedule C business involves "cleaning dumpsters", or taking the material in the dumpsters and disposing of it. He is in the waste disposal business. He would reasonably deduct any tipping fees for disposal; why would he not also reasonably count as revenue any material sold to scrap dealers?

From Linda's posts I took it as he collects the scrap from where he works and she is contemplating whether he will need to file a schedule C or put it on line 21 "other income".

So IF he is collecting from where he works as an employee and currently files no schedule C would you file a schedule C (or C-EZ ) or put it on line 21 "other Income".