Oh, and here's a really good link for "Home based businesses" and some of its rules.

http://www.irs.gov/faqs/faq-kw82.html

How do you distinguish between a business and a hobby?




Since hobby expenses are deductible only to the extent of hobby income, it is important to distinguish hobby expenses from expenses incurred in an activity engaged in for profit. In making this distinction, all facts and circumstances with respect to the activity are taken into account and no one factor alone is decisive. Among the factors which should normally be taken into account are the following:
  1. Whether you carry on the activity in a businesslike manner
  2. Whether the time and effort you put into the activity indicate you intend to make it profitable
  3. Whether you depend on income from the activity for your livelihood
  4. Whether your losses are due to circumstances beyond your control (or are normal in the startup phase of your type of business)
  5. Whether you change your methods of operation in an attempt to improve profitability
  6. Whether you, or your advisors, have the knowledge needed to carry on the activity as a successful business
  7. Whether you were successful in making a profit in similar activities in the past
  8. Whether the activity makes a profit in some years, and how much profit it makes
  9. Whether you can expect to make a future profit from the appreciation of the assets used in the activity