PR Sample Product as Income

[kw09]

I receive a monthly paycheck (and 1099) as a contributing writer for a news site. I cover industry news and often write reviews about products. In order to cover the products, I receive sample items from external PR teams hoping to receive honest coverage of their product. If the PR team does not want the item to be sent back and I end up keeping the product, do I need to report that as income? 

[DianeW777]

No, you should report only the income (and expenses) you receive for performing this service.  

Any income received for services or goods is taxable.  You have to decide if it's a hobby or a business for tax purposes. Review this page from IRS:

• Business or Hobby?

Key elements:

1. A hobby requires you to report the income you received and under the current tax law, Tax Cuts and Jobs Act (TCJA), no expenses are allowed to be used to reduce the money collected even if you itemize deductions.
2. A business allows you to deduct the costs necessary to obtain the income.  The law explains that 'you must be engaged in the activity to produce a profit'.  The test under IRS is that you must show a profit three out of every five consecutive year. 

It's important to understand a couple of things.  One, the expenses that can be deducted start from the time it was open for business.  Any expenses to research, analyze and legally begin the business are called 'start up expenses'.  You have a choice on how you want to handle those. Likewise you can take advantage of the de minimis safe harbor for small business if you purchased any equipment to use in your real estate business.

1. Start up costs - if you had any expenses before you actually opened for business services such as legal fees, market study or organization fees
   • The IRS allows you to deduct $5,000 in business startup costs and $5,000 in organizational costs, but only if your total startup costs are $50,000 or less.
2. Any equipment that was placed in service and has more than a one year estimated life such as a lawn mower must be listed individually with the date of purchase and the cost including any sales tax paid.  The will be listed under assets and each asset must be entered by itself in this section.
   • If you have assets that cost less than $2,500, it's just easier and faster to enter their total cost under the miscellaneous costs. This is a special rule. The de minimis safe harbor is simply an administrative convenience that generally allows you to elect to deduct small-dollar expenditures for the acquisition or production of property that otherwise must be capitalized under the general rules.

All of this information is entered on Schedule C which requires TurboTax Online Self-employed or TurboTax CD/Download Home & Business.

• Where do I enter Schedule C

[jem1997]

As far as I know, anything you receive, unsolicited you may keep and do not have to record as income