Are You Ready? Personal Prep for Season

[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.

[Mark T. DeNucci, Sr.]

Originally Posted by 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.

Oh my dear Welpe.

Meals: Do you and your partners stop for dinner after your game and have a post-game discussion about the game? If you do, that meal if 50% deductible.

Laundry: To to a laundromat and see how much it costs you to keep your officiating uniforms clean. To keep that sharp crease in my officiating and umpiring pants, nothing is better that having them dry cleaned a couple of times a season, especially umpiring pants.

Thanks to cell phones my long distance phone bill is now zero, and my postage is next to nothing because of the internet.

If you and share ownership of your car with a bank (and aren't we all making car payments) the interest on the car loan is deductible (prorated of course based upon your officiating mileage and your total mileage). The IRS agent I officiated with told me about this deduction. The mileage deduction does not cover the interest paid on your car loan.

MTD, Sr.

[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.

[Mark T. DeNucci, Sr.]

Originally Posted by Whistles & Stripes

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.

When I said 2 out of 5 years I meant 3 out of 5 years. I am getting senile in my old age and probably was thinking of a loss 2 years out of every 5 years. And the stamp collector example was the example the IRS agent with whom I was officiating gave, not me.

MTD, Sr.

[jeremy341a]

I don't understand how I could not show a profit. In 2014 I brought in $5725.80 and drove 4300 miles. I think I have $55 to the state and $75 to my association. Uniforms purchases and shoes came out to around $200. What am I missing?

[Camron Rust]

Originally Posted by jeremy341a

I don't understand how I could not show a profit. In 2014 I brought in $5725.80 and drove 4300 miles. I think I have $55 to the state and $75 to my association. Uniforms purchases and shoes came out to around $200. What am I missing?

You either make a lot of money per game (relatively speaking) or your games/meetings/etc. are really close to your home.

[WhistlesAndStripes]

Originally Posted by jeremy341a

I don't understand how I could not show a profit. In 2014 I brought in $5725.80 and drove 4300 miles. I think I have $55 to the state and $75 to my association. Uniforms purchases and shoes came out to around $200. What am I missing?

Originally Posted by Camron Rust

You either make a lot of money per game (relatively speaking) or your games/meetings/etc. are really close to your home.

Close to home? He drove 4300 miles to make $5,700. If I'm not mistaken, that's 133 miles driven for every $100 earned. That doesn't sound like "close to home" to me.

[jeremy341a]

Originally Posted by Camron Rust

You either make a lot of money per game (relatively speaking) or your games/meetings/etc. are really close to your home.

We pretty much do two games every time. 2 jh was $90, jv varsity $100, Var and var $110 plus mileage. I would say average game was 100ish miles round trip. However there is some nights where I would ride with someone else and get no mileage.

[Raymond]

Originally Posted by jeremy341a

We pretty much do two games every time. 2 jh was $90, jv varsity $100, Var and var $110 plus mileage. I would say average game was 100ish miles round trip. However there is some nights where I would ride with someone else and get no mileage.

I go to 3 camps every off-season, one of them is 300 miles away. That will eat into profits.

[Camron Rust]

Originally Posted by jeremy341a

We pretty much do two games every time. 2 jh was $90, jv varsity $100, Var and var $110 plus mileage. I would say average game was 100ish miles round trip. However there is some nights where I would ride with someone else and get no mileage.

And that explains the difference....do 1 game assignments and your income drops but the mileage doesn't and you get into the break-even or loss range if you have a few extra expenses. The only common doubles we do are JH games and we don't get $90 for the pair, more like $65.

I have typically made some money in most years but have lost in a few when I've bought uniform stuff AND gone to camps.

[bob jenkins]

Originally Posted by jeremy341a

I don't understand how I could not show a profit. In 2014 I brought in $5725.80 and drove 4300 miles. I think I have $55 to the state and $75 to my association. Uniforms purchases and shoes came out to around $200. What am I missing?

I'm with you on this. I have shown a pretty good profit every year.

I had revenue of about $21,000 in 2014 and mileage of about 11,000. Took all (I think) the other expenses I was entitled to. I don't go making stuff up just to increase my expenses.