Cut Your Taxes with Epinions
Feb 28 '00 (Updated Jul 08 '06)
The Bottom Line Write-off part of your Epinions income against taxes.
A great way to cut your taxes is to start a sideline business – which is exactly what you’re doing writing Epinions and then getting paid for them. In effect what you’re going to learn is how to deduct your hobby (writing). Now you have to determine if its worth your while to do this, and you should consult a tax professional – but this article will lay out the basics and provide food for thought.
The basic premise is that just because an activity is fun doesn’t mean you can’t take a deduction for it. All you have to do is show that you intend to make a profit. You actually don’t have to make a profit, but you need to prove that you intended to. The great thing is that any losses you incur are deductible against your regular wages and salary.
2006 Update So note the key word intent. You'll actually find that things become much easier if you show a profit in at least 2 of the first 5 years and note the comment about Epinions only sending you a tax form if you make more than $600 in the next paragraph. If you do make more than $600 from all writing sources, or you want to establish a precedent then just be choosy about what you want to write-off. Maybe you can say 25% of your broadband costs, printer paper and consumables and some office supplies would be a good start. Claiming a home office deduction would put you on dicey grounds for an audit.
Lets take a quick detour to the tax laws. Right now, any income you get from Epinions you should technically declare on Line 21 of your 1040 as “Other Income”. Whether you do this or not is up to you and your ethics. If you earn more than $600 in a year, Epinions will send you a form detailing your earnings AND the IRS will know about it too – so you have no choice.
So you can claim these deductions against your hobby income. Note that the first two of them require you to set yourself up as a business – which is a simple thing to do.
1. You can deduct contributions to a Keogh retirement plan or an SEP (Simplified Employee Pension).
2. You can deduct salaries paid to your children. This is good as the deduction is taken at your tax-rate, which is hopefully lower than your kids (either 0 or 15%). You can pay your 12-year-old to clean up the office or file papers for you.
3. Home Deductions. If you use part of a room exclusively
to generate income – then you can claim it as a home office. This means you can deduct a portion of mortgage interest, insurance, utilities etc.
4. Other deductions. You can also deduct part of your ISP fee as a business expense and even a portion of a new computer or peripherals if it is directly attributable to your hobby. Filing cabinets, that new leather executive chair and so on are also deductible.
5. Theoretically you can also pay your kids to perform office work for you and get a double dip. See my other Epinions on this subject.
Several members have claimed that you could deduct the cost of items that you are going to review. You’re on tricky ground here. If you can convince the IRS that you will get enough E*Royalties back for that review you did on a Digital Camera – good luck. Just remember that you have to be able to prove your intent to make a profit from your hobby.
Again, I am not a tax professional – but I have been earning several thousand dollars a year as a freelance writer. So consult a professional about this, but it may be worth your time to do that !!
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Epinions.com ID:
jcare
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 - Top 500 |
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Location: Southeast Pennsylvania
Reviews written: 269
Trusted by: 219 members
About Me:
Bullets can hurt people. Both in guns and PowerPoint.
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