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Author Topic:   Tax time, any tips on doing a schedule C
Mikey14
Member
posted January 05, 2004 03:17 PM
I didn't know where else to put this post so here it is. Any tips on deducting racing as a loss? I'm planning on submitting a schedule C and wondered if anyone else has any "do's" and "don'ts" to share. Doing quick math, I should be able to save myself about $1500 in taxes so far. I take off mileage, supplies (parts, oil, etc) Travel expenses entry fee's and licenses cost. I count sponsorships and winnings as income.

Just curious what you all do.


Gene
Member
posted January 06, 2004 03:28 AM
You can lose money racing for 3 years. Then you will be in big $ trouble with the IRS. This is a pet-peeve of mine, because the cost of IRS paperwork is even a bigger drain on the $ for racing. I've never had a IRS problem, but I know several people who have, and the IRS will get what $ THEY feel they should have.


2nd2none
Member
posted January 06, 2004 08:28 AM
lose money for 3 years then the 4th year you have to show a profit? or on the 3rd year you need a profit?


20bmw
Member
posted January 06, 2004 09:25 AM
Steve Smith Autosports has a book no this it is called "The new Racer`s Tax Guide"

How to LEGALLY subtract your racing costs from your income tax by running your operation as a business.It has step-by-step how to do everything correctly.. ($19.95)
www.stevesmithautosports.com


Wildside17
Member
posted January 06, 2004 09:42 AM
i might be mistaken but I think it is worded that 3 out of 5 years you can show a loss.


Chad
Member
posted January 06, 2004 10:50 AM
All prior posts are correct. You don't want to show a consistent loss. You may need to manipulate your expenses one year to show a slight profit. Also, something that hasn't been mentioned is that you don't want to designate your business on the Schedule C as "racing" or "motorsports". It's best to designate the business as transportation or another SIC/NIACC business code. The "racing" or "motorsports" designation has a high probability of triggering an audit. Lastly, don't get greedy. Small losses in the $2,000-$5,000 range are explanable. If you try and claim a $30,000 loss and only make $25,000, you're asking for trouble. You may get away with it one year, but the audit may be coming in the future.


Mikey14
Member
posted January 07, 2004 12:42 PM
Thanks Guys,

I think I'll buy the book from steve. This year I had a ton of expense with the purchase of a new car and kart. I'm thinking of offering my sponsors a 2-1 return on money to receipts. Meaning if they give me $200 I give them a receipt for $400. Might be an incentive to give me more cash.

I'll have enough expense to cover the income but want to show myself closer to breaking even or profitable. I guess I could just win some races too! That would help the income!

NJantz
Member
posted January 07, 2004 01:52 PM
Doesn't sound like you're very well versed in accounting. You need to understand that you won't be able to write off the total cost of your new car, you'll need to depreciate it over a determined useful life (# of years). You should seek professional advice before you get yourself in trouble. Pay to have your taxes done the first year, then use that as a guide for future years to do it yourself.


dirtrace
unregistered
posted January 07, 2004 07:17 PM           
wow,

If you get steve smiths book which I have youll learn a lot.

1. if your going to claim to race for a living, since we do race for money.

you have to be able to show on paper a good plan to profit.

FOR MYSELF WHEN I CONSIDERED DOING THIS, I HAD WON 68 PERCENT OF THE RACES ENTERED, I PAID 35 TO ENTER AND GOT 250 TO START, TIRES WERE 120 A SET. SO IF I STARTED I COULD MAKE A LITTLE PROFIT, OR BREAK EVEN. IF I WON 1000, 2ND 750, 3RD 500 4TH 350, REST ON DOWN 250. I PROFFITED FOR SURE.

so I could easily show a possibility to make money.

BUT the pt wasnt to pay taxes, which is what I would have done in 2000,2001 for sure. I had cash sponsors of 7500 plus both years. and like mentioned above everything is depreciated over time, a car say 5 years, engine 3 etc.

when you really get into the book it says if your racing for a living would you go to a race that costs you 1000 to run and only pays 1000 to the winner? well if its a business you cant go then.

Another interesting note is none of my sponsors 500-2500 cash wanted to ever deduct their sponsorship. Also several guys I raced with owning very large businesses spending over 100,000 in a season to race said they would never ever consider messing with racing as part of their taxes. Of course they paid tax guys real money, and had real money to lose if they got caught maybe thats the whole issue?

BE CAREFULL DONT READ STEVE SMITHS TAX BOOK TOO MANY TIMES, OR LET YOUR WIFE EVER SEE IT BECAUSE YOULL QUIT RACING FOR SURE!!!!!!!!!!

Mikey14
Member
posted January 10, 2004 10:23 PM
Thanks for the help, I will be using an accountant any years I file racing as a business. I agree I don't know much about accounting, never claimed to. Thats why I plan to use the accountant who is a friend of the family and a race fan too. He actually suggested the schedule C and is a good accountant for small business but a terrible mechanic!! Between the two of us he gets his car's worked on and I get my taxes looked at.

I don't make a living racing, I would think that most of us dont win 68% of our races or are close to breaking even by any chance. I would think that probably close to 100% of racers have tax deductable expenses though.

You can reduce your tax burden by deducting your expenses, thats basicly what I plan to do. I'll have to claim my winnings after a certain ammount ( think its $500) so its only right to deduct my expenses. I will follow the guidelines, I believe you can only claim a loss for so long before its no longer considered a business and thats basicly what I'm going to use it for.

stockcar5
Member
posted January 11, 2004 09:04 AM
another thing to remember is dont let an audit scare you. i talked to 2 different CPAs and they both told me the same thing....worse thing that will happen is that the IRS decides its a hobby and no longer a business. you wont get your deductions for the year and it future years. its not like the IRS is going to take everything you own....

luke

2nd2none
Member
posted January 12, 2004 05:40 AM
correct me if I'm wrong, but I believe the most you can write off as a "loss" is $20,000 per year.....atleast thats what my taxman told me and is all I've been allowed to write off these last 3 years.


Mikey14
Member
posted January 14, 2004 08:57 AM
I don't know about the $20k rule, I've got significantly less than that to take off so no issue for me there.

I'd trust your taxman's knowledge on the 20k rule but dont know for sure.

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