At 10:54 AM 12/11/2012, Jed Rothwell wrote:
OrionWorks - Steven V Johnson
<<mailto:svj.orionwo...@gmail.com>svj.orionwo...@gmail.com> wrote:
I gather "chan.fusion" is accusing Mr. Rothwell of using the lenr-canr
website specifically for the purposes of a tax dodge.
I missed that. This would be the world's worst tax dodge, since it
costs me a lot more than I can reduce in taxes in the best case.
This would make about as much sense as the facetious "two for one"
lottery, where every $2 ticket automatically wins $1.
As it happens, the IRS audited me years ago. A nice woman there
explained what records I need to keep, and so on. The IRS does not
care about the nature of a business. I expect you could actually run
a business evaluating massage parlors. As long as you record
expenses correctly and people pay you for the information, it is a business.
The only problem I face is when I make no income at all. The IRS
says that is a hobby.
I think that editing papers and maintaining a web site would be the
world's most boring hobby.
Jed, it's nonprofit, that's rather obvious. You may be a *writer* for
profit. And your web site might be considered part of that business,
so it's not impossible.
You can make no profit at all, for extended times. I posted a link to
a page that examines the real rules in detail. Some businesses never
make a profit, but if it can be shown that the goal is the
*possibility* of profit, it can still be a business. That there is no
profit in three years out of five, if that's the default standard,
merely establishes a kind of presumption. It's not a fixed rule.
Yes. There are businesses that evaluate other businesses, they send
testers. People love these jobs! They go to restaurants and order
meals and then report how they were treated. They stay in hotels,
ditto. In theory, a massage parlor might hire them; or they could,
also, do this completely independently and write reports, and, say,
sell advertising on a web site with the reports.
The key is conducting yourself as a business, as mentioned. Read the
link I gave, it does explain more of how the IRS will judge a
business that does not show a profit, because some don't.
For example, Blacklight Power has probably never shown a profit, so
far, but I'm quite sure it's considered a business. R&D business is
specifically considered in the standards for judging. Such business
is highly speculative and might *usually* fail to find profit. And
still be a great business idea. Start a hundred of these businesses
and do it right, you might get very rich indeed. Better have deep
pockets, though!
The 3/5 rule is an easy default test that is easily judged from tax
returns. It is by no means conclusive. Basically, if you *do* make a
profit three out of five years, you *are* a business, unless it were
shown that the books were being cooked in some way to artificially
create this impression, and the IRS will rarely look that closely.
Jed, I'd look at your activity as an editor. Are you paid? Even if
you were paid something small, this could establish your writing as a
business activity, and then you could deduct expenses, such as
travelling to conferences. A writer in a field might engage in some
otherwise nonprofit activity as a correlate with the business, or for
publicity, for example.
Because lenr-canr.org is clearly a nonprofit activity in itself -- it
could be incorporated and operated as a 501(c)(3) nonprofit
organization, qualified to receive tax-deductible donations -- that
might be kept separate from your "editing business." I don't know
enough about your specifics to go beyond this.
