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+--- Thread: Advertising expense taxation? (/thread-155595.html)
Advertising expense taxation? - Nate Jackson - 05-12-2014 03:38 PM
Every week I partner with a new charity and design cool apparel for that charity on my website. The charity advertises their partnership with me on their Facebook and twitter. That leads people to my website and I give $7 to the charity for every item I sale.
My question is this. I give $7 for every shirt and I only make 6.75 profit on each shirt. I am not technically losing money because I sale many shirts each week.
Will I get audited if I have 91k in advertising expense and only 87k in profits. By glance will an IRS agent think I am losing money and audit me? I am actually making 87k which is great money.
- tro - 05-12-2014 03:51 PM
to be claimed as business expense it has to have a business purpose
this appears to be a charitable contribution and referring to corporations, they are limited to charitable donations of 10% of their taxable income
your contribution is well above that limitation and does not appear to have a business purpose
- Cathi K - 05-12-2014 04:04 PM
You could be making twice that. Your business model is not rational. You need to make that $7 less. IF you do not make a profit after a while the IRS will declare you a hobby and you can only deduct losses up to earnings. Right now you appear to be running at a loss.
- Judy - 05-12-2014 04:06 PM
The profit is after your expenses, including the advertising expense, are deducted. So what if they audit you? As long as you can show that everything is legit, you're OK.