Dr. Susan Biali, MD wrote a piece in the March 9, 2012 edition of Psychology Today’s blog “Prescriptions For Life” suggesting that even if we can’t quit the job that pays the bills, it may be good for our mental well being to also participate in making a go at doing something we love as a business.
Many clients in my practice have asked me what they can do to save on taxes and strengthen their finances. One of my favorite recommendations has been to turn their hobbies into a business. There are IRS concerns you should look to regarding this action, basically you must be trying to make a profit. My favorite glib saying is actually a quote from an IRS auditor years ago when I first started representing clients in audits. He told me that the IRS doesn’t require you be a GOOD business person, just that you act like one – This means obtaining licenses, DBAs, business cards, keeping track of inventory, changing things up if you’re not making a profit so they can see you are trying, educating yourself, keeping books, spending enough time in the venture to show you are serious.
Once you turn your business into a hobby, there are many more legitimate expenses that can be written off your taxes. Be sure to consult with us or your tax accountant before jumping into this venture, however.
Now, what does it mean to turn your hobby into a business in line with the IRS parameters: Here is where you can really get creative. Remember that human beings are the sum of many, many parts. Capitalize on all of them, or as many as are reasonable. For instance, a client of mine likes to quilt. She also likes to travel, socialize, gossip, etc… She expressed concern that selling quilts, given the time and expense, was not going to make enough money to do much with. My suggestion to her would be to perhaps start a traveling knitting circle. Capitalize on her love of socializing and traveling to meet new people, perhaps write an e-book or photo book about the shops she finds throughout her travels or the unique quilts she finds. Perhaps start an association of traveling knitters. Maybe, she could start her own YouTube channel interviewing different knitters around the country that she visits. She can capitalize on association fees, advertising fees, start a small eBay store to help sell inspirational quilts she finds during her travels, lead tours of other would be quilters from novice to expert. The possibilities are limited only by our imagination.
Perhaps you are bound by a job or school schedule that takes up so much of your time that you never see daylight. A girlfriend of mine loves to play Bridge online. Perhaps she could set up a membership forum debating moves, partner selection, competing games, reviewing tournaments, organizing tournaments. A membership site with an active forum could run itself for brief periods without too much trouble, while giving her the opportunity to grow her group of Bridge buddies and playing opportunities as well as make a few bucks.
From there you can bridge into e-books, picture books, social group gatherings/associations, product reviews, video workshops… the opportunities are only limited by your passion and imagination.
For a consultation on how to legitimately turn your hobby into a business please call us for a phone consultation appointment.
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