When those of you who get 1099's from affiliates do your taxes, do you write anything off?
My new tax guy told me I could write off just about anything if I had something written about it... I'm not sure if that sounds right. What are the limits?
In general you can write off the expenditues you made to generate the income.
I would write a long reply, but others have done an excellent job of pointing out you CAN take deductions against income earned from HubPages. One thing to be caredul of is the hobby rules. If you do HubPages as a hobby, expenses are only deductible up to income and deducted on Schedule A, miscellaneous deductions subject to 2%. Hobby income is listed on the front page of Form 1040.
With a super 100 rank from HubPages, I doubt you are a hobby. Intent to make a profit and actions that indicate you intend to make a profit should avoid the hobby label.
Also, don't be tempted to throw personal expenses on the tax return as a deduction. The IRS will not consider it a necessary expense to buy a $1,000 flat screen TV so you can review it in a hub. However, books and other similar items used to build your business are solid deductions.
I will give you my .02 worth, since I actually am a tax professional (For 19+ yrs). There are alot of details I could go into, but the long and the short of it is this: Your expenses must be "Ordinary and Necessary" in the course of your particular business. Those are the words of the favorite uncle at the IRS! Ordinary and Necessary. Keeping immaculate records for those ordinary and necessary expenses will help you sleep better, especially if you get hit with a letter from the IRS. Audits are ON THE RISE! Please keep good records.
The IRS says an expense must be "ordinary and necessary." The IRS defines necessary as "appropriate and helpful." What counts as ordinary? If a computer-game developer buys other people's games, that's an ordinary expense to him. It's not an ordinary expense for me unless I'm writing and have the potential to write about computers or what effect computer games have on the brain.
By the above definitions, if you, as a product reviewer purchase any product and then write about its benefits or flaws you CAN write that product off as an expense. Just make sure you keep good records and receipts.
Reply to Livingwithrichard.
The IRS also includes "reasonable" in "ordinary and necessary." Is it necessary to buy a car to review it in an article? The IRS says "no." It is not necessary to BUY the car to review it. You could take the car for a test drive at a dealership.
Small items can be OK. A book for $10 could be borrowed from the library, but the IRS generally does not care about these little expenses and allows them because you probably will make a profit from the review. If it is unreasonable you will turn a profit buying the item for the review, it is a hobby, not a business. Hobby rules are different for business rules. And you will NOT like the hobby rules.
Good question. This will be my first year to get 1099s from the affiliates. Hopefully, someone has a bit of experience with it.
I'm no help, I'm spoiled, my wife is an accountant. I've never had to do mine.
I only came over here because I thought you said taxis...but then I remembered I don't drive them anymore.
@Whitney - I asm not American so your mileage may vary - but basically I claim every direct and indirect expense I can that includes new laptop, cost of ISP, new camera, percentage of rent/mortgage running expenses if you have a dedicated office, hosting fees, any direct expenses such as subscriptions to services for online marketing, any books on related topics etc.
Being a non-resident alien, I can write off only business expenses, and I do
But you as a citizen can write off much more. Things like medical, education, interest, etc. Unless you prefer to fund wars in Iraq and Afghanistan, I would write off as much as I can
I took a Federal Taxation class a few semesters ago. Your tax guy doesn't sound nearly as conservative as my professor....
She had heard stories of people getting audited for claiming computers. Basically, you'd have to be able to prove that you only use your computer for your affiliate "business" and nothing else. It's pretty stringent. I'd tread carefully, but I'd be interested to hear what other folks on here do.
I've been told by a few people that products that you purchase, if you review them, you can write them off. I'm not sure if that's right or not. I was also told gas to drive somewhere if doing business, cell phone (I have a data phone that accesses the internet, which I've used on many occasions for online work), hotel fees, food, etc.
Lissie, thanks for the help. I knew hosting fees, laptops and computers, and things like that count. What about when you purchase domains, servers, etc. I assume that counts as well. I bought a few domains last year, and plan to buy a server this year.
Girly_girl, he's trying to help me with write offs so that I don't owe as much. I've never used an actual tax guy before. My mom's always done it, and she won't write off anything, but this year, I made more than she feels comfortable when doing my taxes. My boyfriend's friend and his mom are tax people, and he's doing what he can to help me out because on pure estimation alone, I owe a lot. ha
Misha, what doe you mean when you say as a citizen I can write off more. What type of things qualify? Products and items purchased, if I have reviews on them? I have many books I've purchased for research, and I have some I've purchased and wrote reviews on. The question posed to my tax guy, can I write off expenses with my dogs and other pets since I write a lot about animal health care? All he could give me was, bring everything and I'll see what I can do.
If I can write off as much as I hope, I wish I knew sooner, because I would've went and wrote more about things that costed me a good bit in 2009.
And, it comes to the question, what is the line? Vet bills? Dog leg amputation surgery from cancer (I wrote a handful of hubs on dog cancer because of my experiences with my dog)? Dog food? Reptile supplies? Tortoises? Tortoise vet bills? I've written about tortoises, can I write off when I purchased them, their vet bills, and care supplies?
I'm worried if I write off too much, I will get audited. I don't have anything to hide, but still...
I was told with internet money making in terms of freelance and contract work, I don't need a business license. Is this true? In that case, how can one proof that the write offs were related?
So many questions... I know... :-/
Hi Whitney. I’m not a professional tax guy but I have always prepared my own tax returns. If I was a pro, I might be tempted to charge you for my comments. However, my advice is free and, in the end, it may be worth exactly what you’re paying for it. If I thought I was facing a very large tax bill then I would certainly hire an expert to minimize it.
The short answer is that you are permitted to deduct as business expenses all goods and services used or consumed in the process of earning income. Any portion used or consumed personally may not qualify. Gas and auto expenses, including depreciation, for business trips are also deductible subject to IRS rules. The business use of telephones and Internet access also qualifies. Always keep good records and logs for those items that might have both business and personal use. The cost of equipment, like computers, with a usable life greater that one year may have to be depreciated over the life of the asset. Hotels, transportation, and half the cost of meals on business trips further from your home than the IRS prescribed distance may also qualify as a legitimate business deduction. Again keep good records of the purpose and activities of each trip. In short, any expense used 100% for business is fully deductible.
The IRS may not look kindly on expenses for your personal pets. You always must be extra careful when dealing with items that may be used for both personal and business. Make sure you can document all deductions were necessary to complete a specific project.
Items you report on your tax return will never hurt you as much as mistakes of omission. It you claim deductions that are later disallowed in an audit you will have to pay the additional taxes and interest but there will be no penalties. Omit something that you should have reported and there is usually penalties added to your tax bill.
Good documentation always helps. Another good idea is to have a checking account and credit card that are used exclusively for business expenses. This makes it easier to provide documentation and, at the same time, eliminates having to reveal your personal spending habits to a tax auditor.
quilligrapher, documentation of receipts is fine, but do I print out the online work that I did in relation to that receipt? That's what I mean in terms of proof.
I was told personal counts as a percent.
Animals as research for articles, vet experience used in articles, and books on the animals as research I have written all. Hubs and blogs on each of the three. Same with products that I've purchased and have stuff about. Or places I've been, movies I've seen and have reviews about. It just all confuses me. Part of me says, I'd rather just pay in full...
And yes, I'm trying to minimize as much as I can bc I was quoted at just an estimated salary and estimated online earnings at owing around $3000. I have it, but I'd rather not let up on all of it if I don't have to.
Whitney, I heard from several people that things like medical expenses, education (at least kids education), mortgage interest and several other personal expenses can be deducted by citizens, in addition to direct business expense - which Quilligrapher covered in detail. Yet it does not refer to me personally, so I am not a right person to give you an advice on it.
I just wonder why you second guess a tax professional? At the end s/he signs your return too, and is responsible for its accuracy to some extent.
Currently I've only been deducting things like subscription fees to freelance sites, project fees, Paypal fees, etc. but I have wondered about other things...since I write reviews on nearly every movie I watch, does that mean Netflix could be a business deduction? What about library fines? I agree that the proof would probably be the difficult part. Also, does anyone know what the rules might be concerning claiming software and computer-related equipment (i.e. headphones, keyboard, etc.) as business expenses?
As for a percentage off of the mortgage, rent, utilities and such...I know the big thing on that is that you have to have a separate, completely dedicated room for an office to be able to claim it. I live in a 2-bedroom apartment so my office is still a corner of the living room, so much for that .
You can deduct part of your computer and computer related equipment as business expenses. If you only use your computer for publishing, you can deduct the full amount, but it has to be over the life of the computer.
If you also use it for emails and school, you need to determine the percentage you use for business and calculate the deductible expenses.
If publishing is your only job and you buy your own insurance, you can deduct the insurance on a different Form and it is subjected to the percentage off from your income.
You should careful about meals and travel expenses if they are just for reviewing movies. I don't think you can deduct the pets' expenses because you did not get them for the business in the first place.
In another word, if you want fully benefit from business expenses, you should have a professional to do it. It will cost between $130.00 and $300.00 (It may be more, depending on where you live). I hope these will help you to decide.
I'll have to look into this a bit closer...my computer is only used for business, though I hadn't planned to claim it anyway because I paid $300 for it from a college kid that built it and then needed cash really fast and sold it at cost, and because my husband checks his E-mail on it twice a week, which is non-business, and I do a couple of non-business things here and there...like post on this message board.
The equipment, though, I'll have to check on...my speakers, headphones, printer, and several software programs were all purchased exclusively for business uses, as were my office chair and ergonomic keyboard (my husband doesn't even use the keyboard because it's shaped weird ). I figured the software would be easy enough to claim, a couple of them are very specific to their uses, but not sure about the external stuff just because I was worried about proving business use for it.
I want to make sure you understand the tax code on deducting personal property such as your computer. You can only claim the remaining depreciable portion based on the CLADR tables at the IRS. A computer is a 5 year property, so, if you started using it this year for business, but bought it over 5 years ago for personal use, you can not deduct or depreciate the computer because for tax purposes it is already worth zero. Hope this helps.
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