I've been running my website for over 4 and a half years now. It's gone from a strange idea into one of the most popular climbing websites in the US. As our hosting costs started to rise we enlisted the help of advertisers/sponsors to cover the costs. Eventually we recouped the money that we initially invested (obviously minus time spent) and now I guess you could say we are solvent. In addition at times we have taken donation money through Pay Pal.

There are tons of websites out there that ask for PayPal, whether it is a some tech site or whatever, and a lot have ads in one form or another to cover costs. But I'm sure a lot are making money, and while I have read a lot of tax information, it's really not clear to me what you should do. My interpretation of the tax code is if you are making over 500 in hobby expenses you need to report it. But is that including time you spent doing it? I could spend thousands of hours on my website and come away with $700 in a year and they want me to report that? In my mind my website is a hobby. If it were a business I would be marketing it and trying to make as much money as I could with it, develop a businesss plan, etc. etc. We have done none of that. Most of my sponsors have initiated the conversation.

So what does everyone else do? Do you consider your time involved in figuring out how much money you made and whether you should report it?

"Time invested" doesn't count for IRS purposes, they go strictly by "money invested". You could be a bit shady and pay yourself for your time, but then you'd have to report that as income as well Any income over $500 I believe has to be reported, you can deduct hosting costs, software costs, advertising, etc. tho.