Slashdot Mirror
Tax Write-Offs For Free (As In Speech) Work?
deuist writes "Several years ago I wrote a book called The Not So Short Introduction to Getting Into Medical School (PDF) and released it online under a Creative Commons license. I have been asked several times to publish the text so that I can make money off of it. The book has become quite famous among pre-med students and is now available from the Princeton Review as a free CD that is given to pre-medical interest groups. My question to the Slashdot community involves claiming this work as volunteering for tax purposes. Have any of you had any success with releasing free software and then writing off your time when April 15 rolls around?"
I've written off thousands of dollars every year to OSS, and continue to do so. I have a stellar CPA who was able to find all of the legal places where I can write off money. Here are some of them:
My first suggestion would be to interview and find a top-notch CPA, and book an appointment with him to pour over your finances to see where things can be deducted. They can also retroactively go back years and reclaim funds you did not claim the first time around, if you miss critical deductions.
to get a tax write off, you need to donate money (or materials, which cost money at some point). Your time has no value for tax purposes.
Do you even lift?
These aren't the 'roids you're looking for.
In Soviet Russia, ALL work gets paid (useless or not) ...not that your work is useless. If people are looking at it and using it and telling you to publish, you should probably do it if you want the money. If your writing was utter trash and you tried to publish it (or it actaully got published) then you wouldn't get paid for poor quality work.
The idea that you get a tax rebates for voluntarily working on something is interesting, but do taxpayers want to pay for this kind of work?
I would like to know what others think about this as I just graduated (today, in fact) form school with a CS degree. I was pondering doing some OSS work to get some experience in some form of team-ish software development. It would be nice if I could make money from the gov't for that.
I'd looked into this for another charity (Boy/Girl Scouts) I help out with a lot and found that I can't deduct value for my time. In order to take a tax deduction I have to donate things like: cash with a receipt, goods (fair market value), or mileage documented in a diary or expense report.
In short, your time is worth nothing to the IRS unless you first convert it into cash, thereby establishing it's fair market value. Then you donate the cash.
If you'd like some kudo's, there is always the Presidential Service Awards. They have a section for Computers and Technology. When you hit your bronze/silver/gold levels you can get it vetted and send your $6 to get a certificate. You'll probably also get letters from your local politicians who are plugged into the recognition process.
From Tax Publication 526, under the heading "Not Deductable As Charitable Contributions" : "Value of your time or services". Many out of pocket expenses you incur while serving as a volunteer are deductible, though.
My question to the Slashdot community involves claiming this work as volunteering for tax purposes. Have any of you had any success with releasing free software and then writing off your time when April 15 rolls around?"
How exactly do you propose writing off your time? As a charitable deduction? On Schedule C (Sole Propietorhip Income & Loss)? No matter...I don't think the IRS will let you deduct this either way.
Generally, self-provided services are not eligible for charitable deduction, ditto Schedule C. It makes sense if you think about it. When you take a deduction on Schedule C, someone else must pick up income. If you were the creator of the labor "sold", you created both the income and deduction. If the IRS were to allow you to take a labor deduction for your own services on Schedule C, it logically would figure that you'd also have to include the income that resulted from such deduction, either also on Schedule C, or on Form 1040, Line 7 (the W-2 line).
Then again, what do I know?
From my understanding, volunteer work is not tax deductible. Tangible assets and money given (like miles driven, money and items donated) may be deductible in certain situations.
In other words - you need receipts for things you used in the service of making your work for non-profits. And, technically speaking, you're going to need a 503(c) charity status as well.
If you want to run a 503(c) and give it away, you can certainly do that. But the only money you would be able to deduct is the money you would spend on the creation and operation of the charity organization.
Disclaimer: You milage may vary, offer not valid in the state of California, I'm not a lawyer and you're likely to end up in Gitmo following my advice, married with 16 children, and bald. Some people experience adverse reactions to this advice, such as lucid dreaming, extended erections, overgrown toe and nose hair, and quite possibly death by shotgun in the night. Drink responsibly.
I said no... but I missed and it came out yes.
If you charge for something, and have purchases, then isn't any copy of that thing that you give away a business loss?
How is this different than MS writing Vista, which they sell, then taking a tax write-off for the full value of Vista when they give 100,000 copies to schools?
You're not writing off your time; you're writing off the value of the goods you gave away.
I am not a lawyer or an accountant. I'm just asking the question :-)
what you can do for your country, ask what the IRS Code, Section 12, paragraph 14 can do for you.
When you aren't making money from an endeavor, especially if you can't point out how it may lead to making money in the future, it's not a job to the I.R.S., but a hobby. And you can't write off expenses of a hobby. The earlier poster who says his stellar C.P.A. who found lots of write-offs has likely yet to survive an I.R.S. audit over them. You may not be so lucky.
You will receive lots of suggestions here. Mine is, and I've worked as a consultant and had write-offs, that you need to show how all these efforts are leading towards profits in the future. It's not a crime to lose money in your business, however, after a certain point (IIRC 3 years, but talk to a professional about this) the I.R.S. will no longer consider your efforts a business.
One suggestion: Chalk all this up to generating resume cred for future jobs that do pay.
"It's the height of ridiculousness to say for those 9 lines you get hundreds of millions."
You can't write off volunteer time. That would be double dipping. The good news is you don't have to pay taxes on the money you didn't earn while working on your book.
Imagine your time is worth $50.00 / hr. You could donate 100 hours of time by working for 100 hours for $5000. Then, you could donate the money back to the charity and deduct the $5000. Or, you could work for free for 100 hours and forgo the deduction. Both scenarios would put you in the same place tax wise.
On the otherhand, if you worked for free and took a deduction, you would essentially be taking the deduction twice. The IRS doesn't take kindly to this.
is a CPA or tax lawyer
and I think it may even be good advice. What is it worth to you though?
I was going to give it at no cost, but then I checked the license on your book and it has the NC clause in it.
So, Use BY-SA or BY instead and drop the NC and I will give the advice gratis. Or let me know if you are interested in paying for some advice.
I know this may sound snarky, but it is not meant in that way.
all the best,
drew
FreeMusicPush If you want to see more Free Music made, listen to Free
My wife, a computer scientist, did tax preparation during the 80s. The tax code is code - is was written to do things, and it's buggy and badly documented, but it's code. At the time she started, most of the tax code generally made some sense - it was full of special interest giveaways, obfuscation, ill-advised attempts at social policy, etc., but she had the impression that the people writing it generally knew what they were trying to accomplish with most sections - but the Reagan "tax cut" years added 30-50% more tax code, and she got the impression from watching the changes that the Congress was losing track of what it was trying to accomplish. There'd be things that got put in one year and patched the next (e.g. they were trying to do a favor for one Indian-run casino in South Dakota, the patch corrected the unintended favor that they'd also done for a casino in New Jersey, etc.)
The basics about deductability of things you've performed for charity probably haven't changed much since I last looked at it 20 years ago. If they paid you $X for your labor and you donated $X to them, you'd break even. That's not different if you're charging them $0. On the other hand, if you're donating materials in kind, you might be able to donate the costs of those materials - your CPA can tell you, and some kinds of deductions like costs of home offices are so often abused that you need to be very careful if you want to even try.
However, if you own a profit-making business, it's easier to have things you're doing be done by the business and therefore be expenses of the business. That's still not going to let you get paid for your labor, but costs like your computers, power, etc. are easier to put there, reducing the profit your business makes and therefore reducing your business's taxes. But if your business loses money more than X years out of Y, the IRS says it's not a business, it's a hobby, and you can't deduct the costs.
Bill Stewart
New Fast-Compression-only CPR http://preview.tinyurl.com/dy575ks
If you could write off the value of your time, all you'd have to do is work 40 hours/week, volunteer 40 hours/week and not pay any taxes ever.
Good luck.
For tax purposes your labor is worth exactly zero and thus your work to produce the book is worth exactly zero and that's how much you can legally deduct. Yeah, the laws are rigged against you but that's how the game is played. Any actual out-of-pocket expenses - cash you spend or credit on your cards - are deductible, however. But you either have to be donating the cost to a charity or taking it as a business loss by declaring it a side business.
I'm presuming you want something legally defensible if the IRS audits you. If you don't care about whether it will withstand an audit and expect your chance of audit is low, you can try it but if you get caught, if your tax goes up there will be interest and if the difference is big enough, penalties. If it can look like a simple misreading of the tax laws then that's all you might have to worry about. If the IRS thinks it was intentional tax evasion then it gets very sticky. So we probably want a better solution if one is available.
So the short answer is no, you can't deduct your labor, but, if it can be determined the book has some sort of value then you might be able to donate that to a charity; some authors have donated their personal papers and gotten estimates of their value, and could donate that and deduct that, legitimately.
But that's not where the story ends, which is why tax accountants and lawyers make big bucks. I don't know if either of the following is legal, it was just right off the top of my head, but, then again, I'm not a lawyer nor a tax accountant. So you'd have to ask one and if these aren't fully legal as is, you might still be able to use the ideas from one or both of them or some variant. Or an attorney might know a legal way to do it.
Again, I don't know if either of these will withstand scrutiny either, but a good tax accountant or tax lawyer might be able to figure a scheme that does work.
If you learn how things work it isn't that hard to do them. I have a corporation which I'm not using right now, it only costs $25 a year to renew its charter, so I do, and every year I file state and federal returns showing income and expenses as zero. Since it doesn't get paid anything and basically spends no money except for what I have it do, it requires very little trouble. Since I don't need the deductions right now, I don't use all of the rules that are allowed, but if I do I have the tools to do so.
You could set up your own non-profit corporation (will
The lessons of history teach us - if they teach us anything - that nobody learns the lessons that history teaches us.