After scrimping a bit for the last month or so (and getting a nice fat refund check from Uncle Sam via direct deposit), I sent off $4000 to my Roth IRA as my 2007 contribution this morning. As far as I can tell, I’m completely done with my 2007 taxes now. Besides having income in both Georgia (while in grad school) and California, I can pretty much say that will be my last “tame” tax year. Income from Filler didn’t start rolling in until January of this year, but things should be pretty interesting this time next year. The IRS wants receipts for everything, but I’m wondering just how much they’ve done to catch up to the digital age. I can certainly prove exactly how much has come in via bank statements and PayPal transfer logs, but tracking digital expenses (for various hosting services, sound effects, etc…) might prove to be another animal altogether.
It’s still a little too soon to start tallying, but I’m going to try to “make” as little money off of games/websites as I possibly can this year. What do I mean? Well, I’m going to do my damndest to re-invest all of the profits back into new ventures such that the balance sheet reads zero. I don’t think I’ll get there, but I’ve got a few tricks up my sleeve:

1. All my various registration fees, hosting fees, PayPal transfer fees, outsourced sound/artwork fees, etc. In other words, the standards “small business deductions.”
2. This one’s still up in the air, but I might actually incorporate all my little side ventures into a legal business–which means I can also deduct incorporation fees.
3. New computer time. Hey, my hobby’s paying off–time for it to reward me. AFAIK, so long as I use the new machine for game/web development, it’s a business expense.
4. RENT! This won’t really be an issue for another month or so, but my girlfriend and I just bought a new house. I’m going to set aside one of the extra bedrooms for use soley as an office, which means the square footage of the room will be another “expense.”
5. Solo-401K. Since all of the game money is essentially play money anyway (my day job certainly pays enough to live on, though don’t we always want more?), I’m going to sock away as much as possible into a Solo-401k plan. The $15,500 contribution limit will eat up a fair share of my taxable profits, and I can stash away another 25% of my net profits as a “profit-sharing” move that’ll also come off as a business expense.

Keeping up with just those few should save me a bundle in the long-run, even if it means I don’t actually get to spend my hard-earned game money on shiny new toys in the short-term (spending it instead when I’m old and fat in Bali). Number 5 on that list is probably the MOST vital, as otherwise I’d probably make too much money to keep contributing to my Roth IRA.

After Uncle Sam takes his chunk out of what’s left, I hope to use whatever’s left over to continue paying down my credit cards, my car, and my student loans. And, okay, maybe finally get that surround system to complement my 50″ DLP, blu ray player (*cough* ps3 *cough*), and a Big Green Egg for the new house. My girlfriend, of course, has other plans–besides the demand for all-things-shiny, she quite sagely things it would be a good time to go ahead and buy a second house back in Atlanta. Besides the market being pretty good for buyers right now (though we may wait for it to get just a little bit worse for our second house), we’d be able to deduct the cost of flying out to check on the property a few times a year (which my parents would love).