Here’s the way I look at it. When I started, I thought this could be like a little hobby that might bring in a little extra money. Well, when places like CJ, CB etc. asked for a SSN or Tax EIN, I figured that ANYTHING I spend on the business is deductible. So I deduct adwords, hosting, domains, ebooks, software, memberships, autoresponder, etc. I keep a record in a spreadsheet of everything, even if it’s a ten cent ebook.

Here’s where I draw the line. I don’t even consider deducting things like a portion of my home, furniture, or even internet access. These are things I would be paying for anyway in the absence of marketing, and would not be normally deductible, so why get greedy? In the past, I’ve heard these things are big red flags that will invite an audit. With my above deduction policy, I do not fear an audit.

If however you feel the need to deduct things like a portion of your home, furniture, TV, etc., be prepared to prove that you use it EXCLUSIVELY for your business. I prefer it not even come into question, so I don’t consider it.

As for paying a CPA, this is great if you have the money and want to save a lot of time. I did that for about eight years at $300 per year. Then she quit the business and I had to find someone else. That year cost me $475. I thought there must be a better way. So I got a copy of TurboTax for that year and I entered all the info I gave the CPA. Lo and behold, TurboTax spit out the the exact same return I just paid $475 for. Now I’ve used TT two years in a row and I just got my 2007 copy. No more CPAs unless I get rich. Oh, and the cost of TurboTax is deductible.

Scott