Are You Ready? Personal Prep for Season

[Altor]

Originally Posted by Kansas Ref

4. get a folder for all the reciepts from gas, food, uniform items so that my deductions for taxes are organized and documented.

I don't believe food is a deductible expense unless it is "necessary for you to stop for substantial sleep or rest to properly perform your duties" or it is business-related entertainment.

Originally Posted by Altor

business-related entertainment.

Does going to the "business-related entertainment" club after the game count??

[jpgc99]

Kansas Ref is about to get audited.

[Rich]

I'm amazed at how many officials in my area are bothered when they are asked to fill out a W9....or worse, when they are paid by Direct Deposit.

My response is always of the nature of....."Why does it matter since all offciiating income is taxable?" I smile when I say this, since I know the only reason people care is cause they feel that this alone means they have to pay taxes.

[jpgc99]

Originally Posted by Rich

I'm amazed at how many officials in my area are bothered when they are asked to fill out a W9....or worse, when they are paid by Direct Deposit.

My response is always of the nature of....."Why does it matter since all offciiating income is taxable?" I smile when I say this, since I know the only reason people care is cause they feel that this alone means they have to pay taxes.

I think you're generally correct, but I know of a few people that are uncomfortable putting their social security number on multiple forms and leaving them in pile in a coaches office...

[BatteryPowered]

Are there still rules about a "business" having to show a profit once every few years or the activity being considered a hobby? I am not a CPA...my son is...but have not asked.

Most of the officials I know only declare income reported to them on a 1099. Around here, schools and/or districts pay directly to the individual and with the high number of school districts and private schools in the area (a large metropolitan area) virtually nobody is paid enough by a single entity to reach the 1099 mark.

Years ago I got a tax ID and tracked all the income and expenses for two years. The first year I finished in the red by about $100...the second year I finished in the black by less than that. That is when I stopped tracking everything.

[JRutledge]

Originally Posted by BatteryPowered

Are there still rules about a "business" having to show a profit once every few years or the activity being considered a hobby? I am not a CPA...my son is...but have not asked.

Most of the officials I know only declare income reported to them on a 1099. Around here, schools and/or districts pay directly to the individual and with the high number of school districts and private schools in the area (a large metropolitan area) virtually nobody is paid enough by a single entity to reach the 1099 mark.

Years ago I got a tax ID and tracked all the income and expenses for two years. The first year I finished in the red by about $100...the second year I finished in the black by less than that. That is when I stopped tracking everything.

I have a very good friend who is a lawyer that deals in these kinds of things and he says you can lose money and still be OK. Again, that might apply to my state and surrounding states, your state might be different.

Peace

[Mark T. DeNucci, Sr.]

Originally Posted by BatteryPowered

Are there still rules about a "business" having to show a profit once every few years or the activity being considered a hobby? I am not a CPA...my son is...but have not asked.

Most of the officials I know only declare income reported to them on a 1099. Around here, schools and/or districts pay directly to the individual and with the high number of school districts and private schools in the area (a large metropolitan area) virtually nobody is paid enough by a single entity to reach the 1099 mark.

Years ago I got a tax ID and tracked all the income and expenses for two years. The first year I finished in the red by about $100...the second year I finished in the black by less than that. That is when I stopped tracking everything.

The rules state that your business is to have a profit 2 out of every 5 years.

BUT!! In 1996 at the ABL officials tryout camp in Atlanta, I officiated 4 games with a fellow college official who was also an IRS agent from Washington, DC. I asked him about that rule. He said not to worry about it.

Before invoking that rule, the IRS looks at the type of business and his expenses, and the amount of gross revenue that it generates. His example was a person who is a stamp collector and who buys and sell stamps as a "hobby". If this person, on his Schedule C shows $15,000 in expenses (airplane travel expenses rather than automobile expenses) and only $500 in gross revenue every year, he will be subject to the requirement of a profit 2 out of every 5 years. But someone who officiates H.S. and small college athletics whose travel expenses are almost 100% automobile mileage deductions will get a pass if they lose money year after year because it is acknowledged that the mileage can easily wipe out actual gross revenue or come very close to wiping it out.

I can't remember the last time I had a taxable profit from officiating and umpiring, and I declare every penny I make (including game fees that are paid in cash) and only take legal deductions. If you don't have a taxable loss every year, you are not trying, .

And while I still have a taxable loss I still have a non-taxable profit, just like the multi-national corporations. Isn't America great!

MTD, Sr.

[Welpe]

I seem to run a small profit every year. I'm only deducting the basics such as registration fees, clinic fees, mileage, tolls, uniforms and equipment. I don't mess with meals, laundry, portions of my cell phone bill, internet, etc. I figure if I only do the basics I'm less likely to get audited and a few hundred dollars profit doesn't have much, if any, impact on my final tax bill.

[WhistlesAndStripes]

Originally Posted by Mark T. DeNucci, Sr.

The rules state that your business is to have a profit 2 out of every 5 years.

BUT!! In 1996 at the ABL officials tryout camp in Atlanta, I officiated 4 games with a fellow college official who was also an IRS agent from Washington, DC. I asked him about that rule. He said not to worry about it.

Before invoking that rule, the IRS looks at the type of business and his expenses, and the amount of gross revenue that it generates. His example was a person who is a stamp collector and who buys and sell stamps as a "hobby". If this person, on his Schedule C shows $15,000 in expenses (airplane travel expenses rather than automobile expenses) and only $500 in gross revenue every year, he will be subject to the requirement of a profit 2 out of every 5 years. But someone who officiates H.S. and small college athletics whose travel expenses are almost 100% automobile mileage deductions will get a pass if they lose money year after year because it is acknowledged that the mileage can easily wipe out actual gross revenue or come very close to wiping it out.

I can't remember the last time I had a taxable profit from officiating and umpiring, and I declare every penny I make (including game fees that are paid in cash) and only take legal deductions. If you don't have a taxable loss every year, you are not trying, .

And while I still have a taxable loss I still have a non-taxable profit, just like the multi-national corporations. Isn't America great!

MTD, Sr.

Per my previous post, it is actually 3 out of 5 years, not 2. Maybe it was 2 way back in 1996. Who knows.

I also don't like your stamp collecting example, as items such as stamps, coins, etc. are subject to capital gains rules and are reported in Schedule D, not E.

I also take issue with your statement that "The rules state that your business is to have a profit 2 out of every 5 years." The IRS can't tell you how often you HAVE To have a profit. All they can tell you is how often you have to have a profit IN ORDER TO BE ALLOWED TO DEDUCT YOUR LOSSES. Maybe I'm splitting hairs here and that is what you meant. And again I point out, the current rule is 3 out of 5 years.

[ODog]

Originally Posted by BatteryPowered

Most of the officials I know only declare income reported to them on a 1099 ... virtually nobody is paid enough by a single entity to reach the 1099 mark ...

Sounds like we know some of the same people.

[WhistlesAndStripes]

Originally Posted by BatteryPowered

Are there still rules about a "business" having to show a profit once every few years or the activity being considered a hobby? I am not a CPA...my son is...but have not asked.

Most of the officials I know only declare income reported to them on a 1099. Around here, schools and/or districts pay directly to the individual and with the high number of school districts and private schools in the area (a large metropolitan area) virtually nobody is paid enough by a single entity to reach the 1099 mark.

Years ago I got a tax ID and tracked all the income and expenses for two years. The first year I finished in the red by about $100...the second year I finished in the black by less than that. That is when I stopped tracking everything.

Here is the answer to your question. This is from the 2014 version of Publication 535:

"Presumption of profit. An activity is presumed carried on for profit if it produced a profit in at least 3 of the last 5 tax years, including the current year. The activity must be substantially the same for each year within this period. You have a profit when the gross income from an activity exceeds the deductions.

"If a taxpayer dies before the end of the 5-year period, the "test" period ends on the date of the taxpayer's death.

"If your business passes this 3-years of profit test, the IRS will presume it is carried on for profit. This means the limits discussed here will not apply. You can take all your business deductions from the activity, even for the years that you have a loss. You can rely on this presumption unless the IRS later shows it to be invalid."

So, basically, if you pass this test, then in years when you show a loss, you can take that loss against other income. Otherwise, your deductions are limited to the amount of income you produce.

I should also point out, as have others in this thread, that ALL INCOME is taxable, NOT JUST THAT WHICH IS REPORTED TO YOU ON A 1099.

I think Battery Powered is due for an audit.

[JRutledge]

Originally Posted by Rich

I'm amazed at how many officials in my area are bothered when they are asked to fill out a W9....or worse, when they are paid by Direct Deposit.

My response is always of the nature of....."Why does it matter since all officiating income is taxable?" I smile when I say this, since I know the only reason people care is cause they feel that this alone means they have to pay taxes.

I have an issue with some of this because it delays the process to get paid. I do not care that I have to fill out paperwork, but we us Arbiter which already has all that information they basically need but a signature. I really do not care about filling out paperwork, but it seems that many schools do not review it.

I have had schools not only not pay attention to the information I filled out on a voucher, they sent to the wrong address or call me to find out what was the right address. Again, everything we have is on Arbiter. And in the case of an IHSA official, all our address information is also on their website.

Last year just to get paid at one of the schools, we had to fill out an online voucher that did not get processed properly. And mostly, who is reviewing this information? I am giving you my social security number and I have no idea who sees or can review the information. Because when we sign this information, we are not giving it to the people in the business office. We are giving the information to some "host" who may or may not be a teacher or even administrator and they could do a lot with that information and we would not know.

Peace

[JRutledge]

Originally Posted by Altor

I don't believe food is a deductible expense unless it is "necessary for you to stop for substantial sleep or rest to properly perform your duties" or it is business-related entertainment.

I was told it OK if it was on the way or part of what you normally do as apart of that job. Again, this might be something you really need to check with your CPA or Tax professional. They usually can clarify how you do many of these deductions.

Peace