Legal Question in Business Law in California

Have you considered writing a book, or an e-book?

Accepting gifts for services may have some pitfalls. First, accepting gifts virtually implies solicitation of gifts (donations), a practice that is subject to some regulation. Next, there is the question of how (and whether) you report the money on your tax return. The donors will not be able to take a charitable deduction, of course, and if they try to, the IRS will be asking you questions as well as the donors. Waitpersons, hairdressers, etc., get tips all the time, and of course there are IRS procedures and rules that semi-legitimize the process for people in those occupations, but the IRS could consider you a ripe target.

For these and other reasons, I think you should acknowledge that providing expert services with an expectation of compensation is in reality a business, and you should set it up as such with a fee structure or a policy of striking an agreement with each client, the keeping of books, and the reporting of income.

Further, you may find it desirable to incorporate or form an LLC. Possibly your field would allow you to form a professional corporation. Also, get liability insurance.

You can call it what you want, but if you are getting paid for your opinion or advice the IRS and the FTB would likely consider it to be income. It does not sound like you are talking about a lot of money and the trouble you will get in from the IRS/FTB - an audit, tax, interest and penalties - expecially if it is determined that you are intentionally not reporting income, will be far worse then the tax you would otherwise have to pay. Be smart - report the income and pay the tax.

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