Tax law advice/direction. You know you want to...

[angry.bob]

Here’s the scenario.

I have a lot of different websites on a lot of subjects. Recently, for a variety of reasons, I’ve decided to put up some “review” websites relating to my own hobbies. For example, lead gaming miniatures (Warmachine, Rackham, etc). I was planning to buy miniatures, review them based on a variety of criteria, so on and so forth. What I want to do is write off the cost of the miniatures (and other items bought for review purposes such as electronic equipment, movies and TV box sets, cars, etc). Is there a site that outlines the rules regarding what I can or cannot write-off? Does anyone know? Because I’ll be damned if I can find any information and I’d rather not have to hire a tax attorney just to ask this one question.

Durka Durka Jihad

[DarkDryad]

I belive you have to form a business to do that.

[Viin]

You don't have to form a business, really, but you would have to start doing a Schedule C with your taxes. You'd be doing a Sole Proprietorship with your own name as the business name. If you wanted to use another name (Angry Bob Productions, etc) then you'd have to register the trade name with your state.

Note: You also cannot show a loss for more than 3 years in a row, or it's considered a hobby and you can't claim those deductions anymore.

Overall, the IRS doesn't like it when you claim deductions from a "business" that isn't generating any revenue, so make sure you keep records of all expenses and income in case you are audited. You should have a separate business bank account to make it more kosher. Official documentation like a business plan would also help the IRS see that you are/were trying to have some sort of revenue stream from the business and aren't using it just to write off a hobby.

So, unless you are planning on doing an actual business (with ad revenue or something) then I wouldn't bother - much too easy to get in trouble with the IRS. (And don't forget, they can come back years from now and demand taxes they think you should have paid today).

[angry.bob]

THe web business is already a couple years old. I'd just been putting the money into our regular account and paying taxes on it at the end of the year. The problem is that it's really blown up this year and is making way, way, way more than it was last year. What I want to do now is set up some "review" sites to get them established in their respective hobby communities and then over the course of a year or so convert them to retail sites with heavy non-commercial content to maintian their rankig and traffic. In the meantime (and possibly after), I want to defray some of the tax burden from the increase in earnings by buying things I'd be probably buy anyway, but write them off as being related to a business venture. But the business itself is making almost too much money so I don't need to worry about showing a profit.

[Viin]

Cool, then you are all set.

Just record what you bought and for how much (keep the receipts too), just a simple excel spreadsheet would work (don't lose it).

I do something like this:

Date        Item Name       Bought From       Price             For

With 'for' detailing what the item is for and/or how it was used.

That's it, deduct away. (Alas, I'm sure you can find a better guide to business deductions on the IRS website or the Small Business Administration website). Good luck!