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Old 10-21-2012, 10:58 PM   #41
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But Rickt,

I am not talking here about running a hotel or working the cubicle of a megacorp or slaving away in the salt mines, I am talking about keeping the biz I love doing running minimally enough to create videos that help charities and also because it will keep me sharp and active physically. I will still consider myself "semi" retired at 62 since it will be much easier and slower than what I do now commercially. I don't think the non-small biz owners realize this is a 60 hour a week endeavor, running your own show.

I am one of the few that are blessed to do something that I love so to me it's not really going to work, it's just that at 62 I know I can't keep up this pace so I want to go from commercial (difficult) to non-profit (easier), which I will consider "semi" retirement, yet need to have the write offs (deductions) to not take a loss.

Yes, I survived an audit, no problems. Records and receipts are what counts. I can tell many respondents have not run a small service business and then started to slow it down in a glide path into retirement...Seems all the non-small business owners think deductions are just a tax scam?

What I was hoping to receive here is advice from others like myself as to how to transition to a soft or semi-retirement doing "break even" charity work, yet keep the write offs so it doesn't end up becoming a loss. I would assume that when one winds down the business but keeps it going enough to do a few projects for non-profits, the idea is not to lose money, correct? Yet I'd like to use my skills to help worthy causes. This site seems to be about growing the nest egg, not losing money, correct? Has no one asked this question before? Perhaps this is the wrong site to ask advice about keeping the biz up after 62 since everyone here has folded their tent and are just managing their investments?

So I repeat: Please respond only if you have throttled down a small service business in retirement, yet kept it open to the point where you could function servicing charities (yet not lose money), and have the write offs to make sure you break even. Or if you're a CPA I'd love your advice. So, if you haven't done that, meaning run your own service business like I have for 33 years, your advice isn't helpful. And as I said, this week I will run the options by my accountant and report back.

Many thanks
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Old 10-21-2012, 11:21 PM   #42
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This may be a question for the CPA?
Yes, that's correct.
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Old 10-21-2012, 11:21 PM   #43
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Cheesehead, Your question is a good one and perhaps some others will weigh in or your CPA can give you advice. As it is I ran this by my husband who is a CPA . But of course we do not have all of your specifics.

I think you have most of your answer, which is you need enough revenue to be able to write off your expenses without taking a loss (since you said you didn't want to take a loss and since the IRS may not allow after a certain number of years).

What that means to you is your decision. Meaning, how much revenue and how many commercial jobs that may mean to achieve that and/or is that acceptable to you in your scale back mode.

It will be interesting to know if your CPA, since he knows your business more intimately, has other advice or recommendations.

No...I have not scaled down a business. We (my siblings and I) are still running it. We have 60 employees so not the type of small business you are talking about, but a small business none the less.
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Old 10-21-2012, 11:24 PM   #44
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Thanks sheehs1. Now that's a meaningful response. Appreciate it.
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Old 10-22-2012, 05:40 AM   #45
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Please respond only if . . .
Good luck with that.
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Old 10-22-2012, 07:49 AM   #46
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Yes Gumby I agree, this is a different type of site...
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Old 10-22-2012, 09:24 AM   #47
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You can throttle down.... you'll just need to carefully manage your revenues so as to show a slight profit occasionally to avoid the risk of the IRS trying to characterize your business as a hobby rather than a business. An easy way would be the charge the non-profits that you do work for so that over the course of a year your business generates a small profit. If you did that you would essentially be charging them your costs and providing your "labor" for free. Or you could do an occasional commercial project and have the profit from those commercial projects offset the losses on the non-profit projects. You have a lot of flexibility as to how to design it, as long as the business occasionally generates a profit.
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Old 10-22-2012, 09:31 AM   #48
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Thanks pb4uski,

I usually donate my labor and equipment and just charge them my true hard costs such as, Fed Ex, freelance crew members (who usually give a charity discount), etc. The really large national non-profits only expect a discount but I prefer to help small charities where my effort is meaningful. The large ones with budgets in the tens of millions, my efforts don't even move the needle. However, the local small charities are very appreciative but usually need the whole project for free.

Maybe the whole thing is a pipe dream, will find out soon from the accountant. There is no shortage of non-profits calling me though, I just have to space them out.

Thanks
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Old 10-22-2012, 09:39 AM   #49
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You can throttle down.... you'll just need to carefully manage your revenues so as to show a slight profit occasionally to avoid the risk of the IRS trying to characterize your business as a hobby rather than a business. An easy way would be the charge the non-profits that you do work for so that over the course of a year your business generates a small profit. If you did that you would essentially be charging them your costs and providing your "labor" for free. Or you could do an occasional commercial project and have the profit from those commercial projects offset the losses on the non-profit projects. You have a lot of flexibility as to how to design it, as long as the business occasionally generates a profit.

+1


Cheesehead... I think you know the answer.... you have basically put it down yourself... I do not see any other answer than what has been given to you.... if it is a legit business, there is a profit motive.... lacking that it is not a business...


IF you want to do this for charities and not run a business that makes a profit (which is implied in your posts), then just write off the expenses as a charitable donation.... if you are keeping good records it should not be a problem (except for the home write-off)...
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Old 10-22-2012, 09:42 AM   #50
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Yeah you're right. Making videos (the high quality variety) is such an expensive endeavor there's really no way to have the IRS consider it a biz if it runs at such a loss, which it will unless I keep at lot of the commercial clients, in which case I'm not really retired am I?.

I know what my CPA will say. But perhaps he will have an idea...
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Old 10-22-2012, 11:56 AM   #51
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Yeah you're right. Making videos (the high quality variety) is such an expensive endeavor there's really no way to have the IRS consider it a biz if it runs at such a loss, which it will unless I keep at lot of the commercial clients, in which case I'm not really retired am I?.

I know what my CPA will say. But perhaps he will have an idea...

That is the reason I gave the example of guy who spent millions on his business... his was considered a hobby... he was not able to take a loss....

BUT, I think here is what you might want to hear.... you CAN take all your expenses against income to zero out that income.... IOW, you can charge the charities some fee and take expenses to make that income non-taxable... you can not take the rest as a loss, but you are not stuck paying taxes either...

If, however, you plans are to not charge anything, or very little, then as mentioned before, you are not in business to make a profit... so, no loss from the business on the tax return...
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Old 10-23-2012, 12:33 AM   #52
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Seinfeld and Kramer on business write-offs (very funny):

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Old 10-23-2012, 12:24 PM   #53
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OP here,

Yes I see how I caused some confusion, poorly written at first. I wrote (wistfully) about losing write offs but I didn't put in why I'd lose them...Let me re-start:

I imagined myself in two years at 62 throttling down the commercial clients, mainly Fortune 500s. They require a lot of time, create cash flow problems, need intense hand holding and cause stress although are profitable. I fantasized I could do just worthy projects to improve the world (this is not to be confused with one of the posters Meals On Wheels volunteerism). The videos I do take about a week of time and require a lot of expenses. So it would be running the business at hopefully break even and and try to avoid a loss.

So my question to those that have throttled down their small service business: If I have expenses exceeding revenue from doing mainly non-profit work, then I can't even take the write offs correct? The IRS wouldn't even consider it a business, or is that after 7 years of no profit? This may be a question for the CPA? He has never allowed me to write off charity work. For me to even possess, insure and update all the equipment I need requires me to be able to write off.

Or perhaps I've answered my own question: If I want to continue past 62 I will need to generate revenue exceeding the expenses, which can't happen if I am doing mostly charity work. Therefore the IRS would not consider me a profitable business. So I guess I am looking at semi-retirement not a true FIRE situation because I will still need to maintain enough commercial biz to offset the non-profit projects. Or I can just fold up the tent...
Cheesehead
Your situation sounds a bit similar to what I have done with my consulting practice. My client base was mostly small to mid-size corporations using a product that they purchased periodically to help manage workforce selection and retention. At about your age, I started trying to figure out an exit stategy. In my case, I was able to go to a former employee who was on the cusp of having all her children in school and interested in getting back in the business. We worked out an understanding for her to work at a '[discount" rate as a contractor to handle the day to day administration of the business while I focused on the part I liked which is the direct client interaction. It was understood that when I hit Medicare eligibility I would transfer that portion of the business to her that had the routine admin while I would refocus on consulting with select clients.
Because I have a C corp, I can control the expenses including my salary that gets charged against the revenue so I be sure to report a profit, even it is modest. The corp incurs the expenses associated with all the business and I only draw a salary when there is enough revenue to leave some profit.
We just completed the transfer and so far so good. Actually started a couple of new clients this month doing just the part I like.
Feel free to PM me if you want more details.
Nwsteve
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