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Tax Write-Offs For Free (As In Speech) Work?

Posted by kdawson on from the time-is-money-isn't-it dept.

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?"

9 of 198 comments (clear)

  1. I write off thousands every year to OSS by hacker · · Score: 5, Informative

    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:

    1. My vehicle gas/travel to and from our monthly LUG meetings
    2. The telephone line into my home, where my DSL is connected (write code at home, upload to server using that connection)
    3. A portion of the monthly power bill, used to keep that DSL, servers and equipment running which is dedicated to the pursuit of writing OSS
    4. The cost of my laptops (running Linux) which is used to write, test and maintain OSS software
    5. The cost of my VMware Workstation license, used exclusively to test code in operating systems I do not run natively
    6. A portion of the taxes on my home, which is dedicated office space, used to write/maintain OSS software
    7. All of the costs from my upstream provider's hosting ($150/month) which is used to host my own projects, as well as those from other FLOSS developers
    8. All of the donations given to me/our projects via PayPal (it's "income", not a "gift", so treated accordingly)
    9. Commission from the Google and LinkXL banner ads run on some sites (used to pay for the hosting and power of said sites)
    10. ..and so on.

    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.

    1. Re:I write off thousands every year to OSS by MSTCrow5429 · · Score: 5, Insightful

      I'm not against tax write-offs, and avoiding taxes any way possible, but I'm not aware of any component of the tax code that authorizes individual write-offs for voluntary, non-profit activities. Also, the fact that you are using a CPA for tax prep, and suggesting that others do so as well, scares me. CPAs are not for tax preparation. You have a question about the tax code, you ask a tax lawyer, not a CPA. CPAs are accountants.

      --
      Slashdot: Playing Favorites Since 1997
    2. Re:I write off thousands every year to OSS by the+eric+conspiracy · · Score: 5, Informative

      Expenses that you pay out of pocket as part of volunteer activities to a not profit organization are generally deductible. The actual time is not.

      www.irs.gov/pub/irs-pdf/p535.pdf

      http://www.irs.gov/publications/p526/ar02.html#d0e867

    3. Re:I write off thousands every year to OSS by Anonymous Coward · · Score: 5, Funny

      If he truly understands the tax code inside and out, he's the only one in the country who does.

    4. Re:I write off thousands every year to OSS by alphad0g · · Score: 5, Interesting

      You can write off un-reimbursed business expenses and charitable contributions. Working on OSS projects does not qualify as either one unless your company is paying you to do this from home - then you can write off your router/internet/etc. as long as they are for business only. Driving to LUG - how does that fit? LUG is not a recognized charity, nor is 99.999% of OSS. Taxes on your home should be deducted as part of one of your normal itemized deductions; if you are taking another part of them for this OSS work, you are double dipping. Ask your CPA if he will pay the fines when you get audited? You may want to be ready with an alibi when IRS comes knocking - tell them you have a wireless router that has no encryption and someone was parked outside, posting to slashdot. Also, I would find a reputable CPA, as this one is giving you some bogus info.

    5. Re:I write off thousands every year to OSS by Arroyodude · · Score: 5, Informative

      ...the fact that you are using a CPA for tax prep, and suggesting that others do so as well, scares me. CPAs are not for tax preparation. You have a question about the tax code, you ask a tax lawyer, not a CPA. CPAs are accountants.

      Wow! Where do I start, except to say that I'm an Enrolled Agent, meaning that I'm authorized ("licensed" as it were) by the IRS to represent taxpayers before all levels of the Internal Revenue Service." In other words, I'm a tax professional with a certification that goes back well over 100 years. Attorneys have had that right for less time and CPAs for a lot less than that. I'm also the tax manager in a small but nationally recognized CPA firm. Most CPAs (including all of the final 4) do lots and lots of tax work, much of it referred by tax attorneys who, for the most part, handle tax controversy matters and answer questions a lot harder than KDawson's. And they do so somewhere north of $300-$400 an hour if they're even half-good. I'll leave it to others to respond to the original poster's query, but will confirm that, no, you cannot write off your time. The tax rules can be complicated (and just because your accountant/lawyer/taxguy says it's so doesn't mean it will be upheld on audit unless the facts support it). Find a good CPA who knows your industry, or better yet, an Enrolled Agent. Or get a referral from a tax attorney.

  2. NO by larry+bagina · · Score: 5, Informative

    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.

  3. Ask the IRS... by Yosemite_Mark · · Score: 5, Informative

    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.

  4. double dipping by jdh3.1415 · · Score: 5, Interesting

    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.