|Racing as 2nd Business...Tax Write off? Help me with this.||funknuggets|
Oct 10, 2003 9:09 AM
|Okay you racers.... how much did you spend in travel expenses, lodging, and entry fees last year? Jaw dropping? What about for assorted bike parts and expenditures? Insanity.
The reason I ask is that my buddy is an avid fisherman. He is a member of two clubs/associations and goes to several tournaments a year, where the main prizes are cash or equipment. He went to a tax advisor, if Im not mistaken, a HR Block person, or ex HR Block person working out of house... and they said to call it a 2nd Profession. Now, that sounds pretty freaking nice if you ask me. But the thing is that he is just a fisherman, nothing more or less and just likes to fish and gets to write off mileage and everything.... including depreciation on his BOAT, even though he claims the boat as a personal property and pays the tax. Bizarre.
Do any of you do this or even remotely suggest this? Is there any tax implications, and MAN, just think about DougSloan... and his insane shop in his garage... could you charge yourself rent or write it off as business space? That is crazy. I just want to know how this works or would it work. Has anyone tried it?
My friend... the fisherman... actually has done it for the past five years... lost money, lost money, made money (like $400, lost money, and is losing money this year. So, how does the IRS view this and how do we prove it...
Thanks in advance.
|The key is making money,||TJeanloz|
Oct 10, 2003 9:15 AM
|An actual CPA is sure to correct me here, but to pull this off, you need to make money one year out of every five (or maybe three), or else the IRS classifies it as a hobby, rather than a business. I think it would be pretty tough for a bike racer to show a profit.
But I did live with a pro bike racer when I was in college, and he wrote off everything - including food - as a business expense. Perfectly legit (and he was audited because of the food).
Wouldn't work for most amatuer racers.
|You must have a reasonable expectation of earning income...||Spunout|
Oct 10, 2003 10:01 AM
|so, after a few years of writing off $20K in expenses without breaking even, you'll be sending the auditors a big red flag.
Also, some pro athletes (golfers) will create a corporation in their name. Winnings, sponsors, expenses all come out of the corporation's accounts. Then again, you have to win something, or have a hope in hell of earning income.
Michael CMA (Canada)
|So what are you trying to say....||funknuggets|
Oct 10, 2003 10:10 AM
|With the Prems these days... sheeshe, hard to win enough boxes of GU or Cliff Bars to justify...unless you just decide to not report certain expenses in that year. You know? Would be nice to at least write off some expenses for a couple of years.|
|I've tried it..||spluti|
Oct 10, 2003 10:23 AM
|Different forms of hobby business. The problem is dividing assets between personal use, business, home, etc.
For instance, Your garage is your business place and you claim 100%. That means (to the letter of the law) your wife can't park her car there. Same with your PC. You claim it for business? The kids can't be playing games on it. This seems trivial but it's exactly the kind of thing that triggers an audit. My opinion? It's usually not worth it.
|you know, you can deduct hobby expences too nm||cyclopathic|
Oct 10, 2003 10:33 AM
|Educate us, oh wise one....(nm)||funknuggets|
Oct 10, 2003 10:35 AM
|Mixing pleasure with business.||Crank-a-Roo|
Oct 10, 2003 10:15 AM
|I am an owner of a small (1 person) Business Consulting firm and I just brought up this issue with an accountant friend of mine.
According to him, as long as I am promoting my business while I am racing, I should be able to write off some of the expenses from Racing. Possibliy as much as half of them. But I choose to SPONSOR a team, a thrid party, I can write off more.
I am just starting to work with him on this issue, hopefully, I can get a team going in the next couple of months.
As long as you can justify the expense is legitimate as an advertising expense, the tax man may not have a problem with it. even without winning any races.
|I never made a dime||DougSloan|
Oct 10, 2003 10:37 AM
|As noted above, if you don't make money, this won't work. If you are doing well enough to take advantage of this, you'll probably be on salary -- but you'll still have personally paid business expenses, I'm sure.
I'm certain there must be some IRS publications on this. I'll check.
|man, doug... you are everywhere||funknuggets|
Oct 10, 2003 10:51 AM
|Helping me here, helping me there... sheeshe, you might as well add some form to send you payments via MC or Visa for all the advice you delve out on this board. Ha Ha.
Yah, it would be hilarious...
1 prem Box of Clif Bars: $20
1 prem Box of Gu: $20
1 $25 cash prize: $25
1 $100 cash prize: $100
1 T shirt for 5th place: $15
Couldn't I just eat all my expenses in year three or whatever and claim a $180 profit for a given year???
Oct 10, 2003 11:38 AM
|Sometimes I'm here more than others.
I can't see that there's enough here to mess with. You may be able to at least offset winnings with deductions, though. However, I was thinking that business expenses are only deductible to the extent they exceed 2% of AGI. Could be wrong, though, as I'm certainly no tax lawyer.
|hobby losses||wily in pacifica|
Oct 10, 2003 1:34 PM
|Losses incurred that are attributable to an activity not engaged in for profit - so-called hobby losess - are generally deductible only to the extent of income produced by the activity.
An activity is presumed not to be a hobby if profits result in any three of five consecutive tax years, unless (and here is the kicker) the IRS proves otherwise.
There should be a IRS publication on their web site better explaining hobby losses.
You would be filing out a Schedule C so the 2% AGI rule would not apply. The Schedule C is for business income and expenses.
Willy in Pacifica