I recently started a (for profit) S.P. licensed to provide custom software development and technical support services in the state of Alaska. I would like to make some extra money by uploading all my FOSS projects to the Web and allowing people to make online donations out of gratitude or to support the projects. I've seen sites like Mozilla addons allow the programmers to request donations, so presumably it must be legal for others to do this. My working plan is to use PayPal payment services and to have the payments made out to the business name.

But naturally I'm trying to figure out what the tax implications are. Should that just considered normal "business income" to add to my SCHEDULE C? (Although no actual "services" or "goods" are being transferred?) Or is there some other special way it should be reported? Are there any special implications if a donation exceeds a certain dollar amount? I would appreciate any insight from experience or otherwise.

To save a lot of redundant caveats: No responses to this thread will be or should be construed as actual tax advice or actual legal advice, professional or otherwise.

GIVEN AND USING YOUR CAVEATS:

It's income to you, and a donation (NOT NECESSARILY TAX DEDUCTIBLE) as in a free-will gift (but not tax deductible unless the recipient qualifies) for the donor.

Look at it this way, you give your neighborhood bum five bucks because he did something nice and now you want to reinforce it. Gift to him? Sure. Income to him? Yes. Deductible to you? No.