Taxes?

[filknz]

Is there anyway to get "around" the Self-employement tax? I received $2850 from my officials association and I think I have a $400+ "Self-employment tax".

Any help would be greatly appreciated.

[Brian Watson]

There is, and as a bonus the feds give you a free vacation to a resort of their choice...

Try tracking your expenses and milage, this will reduce it.

[STEVED21]

Get yourself a good professional tax preparer. There are many expenses you can take against this income. Things like mileage, uniforms, supplies, phone calls to schools and fellow officials, dues, meetings are deductible if they apply to that income. Since the SS tax is 15% and most people are in the 28% bracket, you can save a lot if you do it right.

[Steve M]

I agree, get yourself a professional tax preparer. I did that once, saw how they did it and now use some software & do it myself. Part of the key is keeping really good records - maybe even the biggest part.

Steve M

[dlangdon]

Before you pay the total self employment taxes on that amount. Deduct your expenses. Millage to each game, and to meetings, meals before a game or after if outside of your normal area for your regular job, any equipment you have purchased and any dues you have paid for local boards dues subscriptions. I also deduct 4.00 per night for washing my gear and shining my shoes for the next game. The gov. allowes you to deduct .34 per mile for travel.

[zebraman55]

i have been including this avoccation on my taxes for years. And, as suggested above, have ended up with a business loss. besides the aforementioned expenses, all excellent, i also track my publication fees (referee magazine, rule books and study guides), clinic fees and mileage, a portion of my utility bills (since I literally run my business out of my house), highway tolls (IN Illinois, the price we have to pay to sit in traffic!), parking fees for attending association meetings, mileage to association meetings, postage for video tape mailings with schools, video tape envelopes, mailings to crew mates with notes or schedules et al.

You would be surprised! Even in the Chicago metro area, i average approximately 2000 - 2500 miles for just football alone (games, meetings).

It is a pain, but worthwhile!

zeb

[Skahtboi]

Also, since you use the internet for communication purposes and for "educational" materials such as this board, you can deduct the cost of your monthly ISP bill as a business expense. In that sense, your computer can also be deducted as a business expense, but only once. I deduct all my utility bills for the same reason that zeb already mentioned, since I run my business out of my house. I also deduct the "dedicated line" that I have for the computer as a business expense. There are many tricks that a really good tax preparer can teach you. Last year, my business was in the hole by the time the tax guy was finished with it, meaning his $75.00 fee was the only thing deducted from my earnings. That was worth it to me!

[JJ]

My tax guy says that I have to show a profit every third year (or 3 out of every 5 years, or something like that). If I don't, the g-men consider umping a "hobby", and I won't be able to write ANYTHING off. That would mean declaring it ALL as income with no write-offs. And yes, I do show a profit three out of every five years, albeit a marginal one. Everything the previous eriters have listed is great - and don't forget your insurance costs on your gear, and hotel bills for overnight stays, etc....

[Mark T. DeNucci, Sr.]

JJ: I have been submitting a Schedule C since the 1982 tax year. And while your accountant is legally correct about the IRS rules requiring a taxable profit at least two out of the last five years, the IRS does not follow its own rules to the letter of the "law."

For all of the Schedule C's that I have submitted, I have had only seven taxable profits. And yet to be audited over it. In 1996 at the ABL officiating tryouts, in Atlanta, I officiated with an IRS agent, and I asked him about the IRS rule you are talking about.

He told me that the IRS looks at the following items:

type of business (some businesses are travel intensive and generate large mileage deductions, such as sports officiating)

total gross receipts

If someone is generating only $500 in gross receipts and $5,000 in losses, that is a red flag. But if you are generating $15,000 in gross receipts and have a losses totaling $17,000 (including large mileage deductions and other travel deductions) every year, then you will not be bothered. They want to see a legitimate business not a sham business.

[Skahtboi]

Glad to know that Mark. Because in the last seven years I have yet to show a profit, though the numbers are always mighty close. Guess that is why they have left me alone.

Scott

[STEVED21]

JJ,
You would always be able to deduct you're expenses against the income whether or not it's a "hobby". The only question is if you can deduct a loss. Meeting the three out of five rule only precludes the IRS from disallowing a loss as a hobby. The facts and circumstances of your officiating business could allow for losses if the expectation or motive of profit, which of course there is.

[Mark Padgett]

I have an advantage since my wife operates a home business (she is a medical transcriptionist and also brokers work to other transcriptionists) so a few years ago we incorporated into an S-Corp. My accountant handled all the paperwork and it really wasn't very expensive at all. I run all my referee income through the corporation and am an employee of the corporation, so I draw a salary. The main advantage is the ability to receive stock dividends from the corporation instead of taking the income in salary. Dividends are taxed at a different rate. Of course, we have some expenses we would not have if we weren't set up this way, such as a payroll service. But over the years, we have saved a ton in taxes.

See your tax advisor to determine if this would be worthwhile for you.

BTW - it's fun working for a new rec league and, when they ask for my Social Security number, I give them my Federal Tax I.D. instead.

[STEVED21]

Mark,
Be careful with the s-corporation. Unless you are making your assignments under the corporate name, you can't use the Federal ID#. Doing that is in effect using an incorrect SS# and an assignment of your income to the corporation. This is not legal. We all have some kind of contract with the schools we officiate for, whether individual or through our association. This is controlling as to whose income it belongs to. Be careful with this technique.

[Mark Padgett]

Originally posted by STEVED21
Mark,
Be careful with the s-corporation. Unless you are making your assignments under the corporate name, you can't use the Federal ID#. Doing that is in effect using an incorrect SS# and an assignment of your income to the corporation. This is not legal. We all have some kind of contract with the schools we officiate for, whether individual or through our association. This is controlling as to whose income it belongs to. Be careful with this technique.

Yes, I know this. My accountant was very clear on how I need to act. I fill out all W-9 forms, etc., with my corporate information and all the venues I contract with understand they are hiring my company to provide officials. I also provide officials to tournaments and fund-raisers and the venues pay my corporation, then I pay the officials as independent contractors.