The IRS And You
 

Bad News:

The posts recently are a bunch of hooey. The IRS will hand you and your org your asshat in a heartbeat.

Good news:

Thgey leave us alone b/c we are a service to the public. Peese off the wrong park rep, attorney or Mommy and they can change their minds in a humminbird's wingflap.

As stupid as this thread has started, maybe I can redirect into something sufficiant.

A local league in CT did get audited for paying in cash. The league took care of the accountants that ended up telling which umpires made over 600 over the past year, which ended up having to be filed with the IRS.

600 is the maximum that independent contractors can make in a year without having to pay taxes for that income to the IRS.

We all make sure that we stay under the 600 dollar threshold for that league every year.

Still, most leagues in the area pay cash and no questions are asked...

I'm not sure that's the way the rules are written and perhaps someone here can correct me, but...

As I understand the IRS rules, $600 is the max you can make from an organization before they have to issue a form 1099 and report their payments to you to the IRS. In theory, you as the taxpayer are supposed to report your earnings with or without a 1099 regardless of the amount (I know - stop laughing). If you work for 10 organizations and earn $590 from each one, the individual organization would not have to file 1099s because you were below the $600 threshold requiring them to do so. The IRS would expect you (at least in theory) to report your earnings of $5900 on your 1040 with or without the 1099s. If you got audited and the IRS learned (through bank records or otherwise) that you made that money and didn't report it, I think you'd be subject to some back taxes, interest, and penalties.

Delaware is correct.

It is all taxable. The question is whether it is required to be reported on form 1099, and the $600 threshhold applies to the reporting requirements of the paying organization.

You are correct, Delaware Blue. Whether or not somebody has to report paying you, you still have to declare every cent you make. That $20 you made playing poker with your friends, for example. And if you agree to paint your dentist neighbor's house if he fixes your teeth, you both "made" the fair-market value of those services and must report such as income. And any idea that the IRS gives umpires a pass because they perform a public service (?) is incorrect. It's simply not worth the effort for them to try to trace relatively small cash payments, which most umpires know not to put in the bank anyway. Keep in mind also that in many cash games, the people paying the umpires don't even know their names. Still, I know a few umpires who have been audited and had to cough up money.

In New Jersey, townships (i.e., the government) often gladly circumvent the need for 1099s by making out checks to any names the umpires' association specifies. Yes, local government recreation directors colluding with umpires to keep everybody under $600 is probably the number one corruption issue in the Garden State.

Thirty years ago, when I owned a retail store, one of the top law enforcement officials in New Jersey, after agreeing to a large purchase, asked me to make the invoice to his cousin's address in Pennsylvania so he could avoid paying the NJ sales tax.

In New Jersey, when you fill out your tax return, you are supposed to 'fess up and pay "use" tax. For example, if while vacationing in New Hampshire (where there is no sales tax), you purchase a $300 camera, you must note that fact on your return and send the state $21—the tax you would have paid had you purchased the camera in New Jersey. Same when you order a DVD from amazon.com. If you buy something in a state where the sales tax is 5%, you still owe 2% to NJ. It is believed that some people fail to report such transactions.

Really? :D

I attended a meeting last night for one of my associations. It was mentioned that any of the officials who worked games in certain districts either have or will be receiving W-9 forms, regardless of the number of games worked. The state knows the money is being paid to officials and they have a pretty good idea of the total paid to all officials - now they're just trying to figure out who to collect the taxes from.

Delaware - you are correct.

My point was that if there is no 10-99 (i.e. under 600 bucks) then nobody knows but me and that league.

If you get a W-9, you're saying that the state will automatically know even if you never get a 10-99?

Screw the irs, most of the money i make goes to pay off my federal student loan.

To expand on Delaware Blue's answer. By not reporting the $5900 you would have committed a crime. It's called income tax evasion. That is more serious that doing some creative accounting on deductions. The law says that you need to report your income. For this crime you could go to jail.

Well hopefully the IRS doesn't screw you. I don't think they're going to care where that money goes, only that they didn't get their piece of the pie.

well if i have to report my income from baseball and basketball, I can deduct clinic cost, mileage, equipment and all that great stuff cant we?

Sure. That's what schedule C is for. You should still have all the income on Scheduel C.

Sure...if you don't get a 1099 (because you only made $590) you can go ahead and not report it and you'll be fine...unless you're randomly selected for an audit...or your association is...then you'll be in trouble. The odds of being randomly selected for an audit are low...but why risk it? Especially when you CAN claim deductions, etc. for your "business".

Yes, I report EVERY dollar I make every year. I keep a log listing every game I contract to work, whether I actually worked the game and how much I was paid. Likewise, I also keep track of my expenses (read: receipts).

I'm not a TAX attorney, but, failure to report income is a crime than CAN and DOES result in jail time...in addition to fines, high interest rates on amounts owed, etc.

If you don't believe me...ask some NBA refs from the beginning of the decade.

Frankly, a sports officials' honesty should be beyond question. Failing to report income is dishonest behavior. I'm not surprised that many fail to report income they earn from officiating...but despite my lack of surprise it still saddens me.

I do the same. I report all my game fees (including those paid in cash). I keep records for mileage (mileage is a tricky deduction), out of pocket expenses, and receipts for uniforms, equipment, supplies, dues (including NASO and ABUA), clinic fees, and dry cleaning and alteration expenses. I depreciate the cost of equipment over several years (depending on the equipment) and deduct the rest (as much as I believe I legally can) as business expenses. If I'm ever audited, I believe good records will go a long way in showing the auditor that I made a good faith effort to completely report my income and expenses. To me, it's not worth screwing around with the IRS over the relatively little money I make umpiring.

As I tell my son, integrity is what you do when no one is looking.

My CPA, a former IRS field agent, has a saying: "Nobody goes to jail for over reporting deductions; they go to jail for under reporting income."