Let’s say I was the tax accountant for a professional TV cooking show like Rachel Ray. All of the ingredients that she uses on camera to prepare the dish of the day are unambiguously considered work related expenses and could uncontroversially be written off as tax exempt, right?
Now, say I’m Joe and I created a YouTube cooking channel that saw the same kind of success, it doesn’t matter if it’s on TV or the internet, I form an LLC and I can apply the same tax rules, right?
Now say Joe already owns a one man plumbing business that is generating $100K a year in taxable income that is reported to the IRS. The next year, Joe decides to expand the business into Joe’s Plumbing and Instructional Cooking. Every night, he produces a video where he shows people how to cook whatever he’s eating that night and so Joe claims that the ingredients were bought as a necessary expense to create the video.
That year, he declares taxes where he generates $300K of revenue and $200K of business expenses from the plumbing side of his business and 15c of revenue and 10K of expenses from the instructional cooking side of his business (of course, to the IRS, things aren’t labeled so cleanly and everything is jumbled together), meaning he now has $90,000.15 of taxable income.
What is the IRS going to have to say about this? Joe claims influencer life is hard and any new business venture is going to require an initial investment before generating returns. Sure, all of his videos are sloppily put together and he spends no effort trying to market them but it’s not a crime to be incompetent at business, right?
What if Joe, instead of being a plumber, was already an existing profitable YouTube creator making Let’s Play videos and starts adding a section at the end of their 8 hour long Let’s Play videos that goes over how they made their dinner that day. Now, how is the IRS going to argue that these are not legitimate business expenses?
What other lines of content creation business could Joe expand into and still be OK with the IRS? As I understand it, you can’t review durable goods like televisions and expense the entire thing just because you reviewed it once, you can only claim the proportion of wear and tear done as a part of the review. But could he create a restaurant review channel and claim that the only reason he’s eating at a restaurant is for the purposes of content creation? Could he start reviewing airplane seats so the cost of a plane ticket would count as an expense?
The reason I ask is because I follow a few amateur YouTube cooking channels that seem to cook an excessive amount of food on camera, eg: They’ll teach people how to make a steak by cooking 4 giant 3 inch T-bones and then just take a dainty little bite out of one of them for the camera. All of the channels seem to be receiving legitimate income from their food content creation so they’re on the right side of the law on this but I wonder if the reason they are cooking that much food is because as soon as the food is shown on camera, it can be written off as a business expense? It made me wonder just how far you could push it and still be on the right side of the IRS?