Can Any Small Biz Owners Explain Why I Should Retire if I Can Write Off So Much?

[Texas Proud]

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...

 

[kramer]

Seinfeld and Kramer on business write-offs (very funny):

Seinfeld and Kramer about write-off - YouTube

 

[nwsteve]

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