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Question on taxes and deductions???

Discussion in 'Uncategorized Threads' started by Dahaub, Jun 11, 2007.

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  1. Dahaub

    Dahaub Active Member

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    I was wondering if we include the purses or parts of purses we win in our income taxes? Also, if we do, then surely we can deduct all those expenses that we have incurred to win said money. Am I totally off base here or what? I know I'd love to be able to deduct the price of components and travel and even gun costs as expenses in comparison to the paltry winnings I get:) What is legal? Does anyone here know? Dan
     
  2. W.P.T.

    W.P.T. TS Member

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    You can deduct up to what you won, so if you won $1,000,000 that how much you can deduct but it also gives Big Brother something to watch so you better keep your receipts ... It may not be worth if if as you say its only a paltry sum of money ... WPT ... (YAC) ...
     
  3. ChairborneRanger

    ChairborneRanger Member

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    Theoretically, winnings would be entered on your 1040 under the "Other Income" category, with miscellaneous deductions being entered under the "Deduction" side, as well. In fact, per IRS guidelines, the deduction "side" of the equation cannot exceed the amount of income declared.
     
  4. Dahaub

    Dahaub Active Member

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    Thanks guys I was pretty sure the advice you have given was coming:( Dern it anyway. Well we can always dream. Dan:)
     
  5. Dutchboy

    Dutchboy TS Member

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    Nope, different rules for hobby and business. Good luck convincing an auditor that trapshooting is your business.

    Some of the option games and such might fall under gambling income, rather than hobby income. JMO, Dutch.
     
  6. Rollin Oswald

    Rollin Oswald Active Member

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    I don't know if it would apply to you but check with your CPA. You might be able to have your shooting declared a business with the "winnings" income, and all shooting expenses merged with your personal income. However, unless you show a profit sometime in the first three years (as I recall), you would then have to stop doing it.

    I did this when after first writing my book and it was "allowed," although I was not audited. I declared all appropriate expenses including a new gun, mileage, reloading costs, membership and range fees and coupled it with book sales.

    Rollin
     
  7. BigM-Perazzi

    BigM-Perazzi Well-Known Member

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    the 1099's state 'prize winning' right or wrong I offset it by gambling losses....
     
  8. Dickgshot

    Dickgshot Well-Known Member

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    All the opinions above not withstanding, here's the problem. Though expenses related to income from a hobby are deductible to the extent of the income derived from the hobby, those expense are deducted in a category of miscellaneous deductions subject to a "floor" of 2% of adjusted gross income.

    What that means is simply this. You probably won't get the full amount of the deduction, and you may not get any of it. There are other limitations that reduce the benefit of those expenses, for example: you can only deduct 50% of your meals on the road. Also, you might lose some of the benefit of your itemized deductions through the "itemized deduction phaseout" if your total income is high enough. Also, those deductions could trigger the Alternative Minimum tax.

    The winnings are reported on form 1099-Misc, not 1099-G which is used for gambling winnings, so that won't work.

    You may get away with it anyway, but this year the IRS is focusing more on losses from hobbies and home-based businesses, so you're more likely to get caught than in the past.

    It's really not a fair rule, but it is the rule.
     
  9. Dutchboy

    Dutchboy TS Member

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    Odin, if my cpa came to me with that reasoning, he would no longer be my cpa. You may win in the end, but two things are going to happen. One, I will end up paying a lawyer or tax accountant $250 an hour, double for audit interviews, to have a chance of winning. Second, it would invite the IRS the look at "other relevant" parts of my business. There's always something they can dig up and turn to make it cost me money.

    Call it a hobby, and you'll end up with the same sum of money in your pocket. The 2% floor is real, but that's only $1,000 on a $50 grand income. Count your travel expenses to one shoot and you're there.

    The only one worse off by calling it a hobby will be your tax attorney, who will have to find another chump to make his Lexus payment this month. JMO, Dutch.
     
  10. 870

    870 Well-Known Member

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    Dutchboy:

    When talking about a hobby, the 2% floor that dickgtax mentioned is a little more real to some than you make it sound. Let's say your shooter with income of $50,000 (including his winnings) only won $1,500. With no other miscellaneouse itemized deductions he will end up paying tax on at least $1,000 of those winnings, regardless of the amount of his shooting expenses.
     
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