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Thought of turning professional, tax ramification?

Discussion in 'Shooting Related Threads' started by senior smoke, Mar 11, 2011.

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  1. senior smoke

    senior smoke Well-Known Member

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    Hello:
    I was at the local club and a few shooters were discussing the possibility of becoming professional trap shooters someday when they retire. One guy said none of us are good enough to make a living out of it, but maybe we could deduct our shooting expenses? One guy said it probably can't be done, or everyone would be doing it.

    Anyone know is it possible to turn professional once your retired, and be able to claim any winnings, and deduct expenses on your taxes?
    Steve Balistreri
     
  2. Ken Brandt

    Ken Brandt Active Member

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    Sorry Steve; There are no professional trapshooters. Just some shooter's who are better than the rest of us. Why do we keep worrying about someone who does not exist.

    Ken
     
  3. 221

    221 Banned User Banned TS Supporters

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    You will find that you can be self employed at anything you wish, even prostitution.....now just because you claim to be a pro doesn't register with the irs.......what you earn vs legitimate expenses does.

    Being self employed does not give you carte blanche to deduct anything you wish. Not paying taxes on things for personal use is also frowned upon, business or not.
     
  4. cafowler

    cafowler Member

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    I believer if you win over $500 in a shoot, you will get a W4 at the end of the year. You won't get your winnings check until they have your SSN on file. I think you can write off your expense to the extent of your winnings in any year. Expenses being shoot entry fee's, travel costs, etc.

    I think it's more like winnings from Gambling, than like running a business. I was "unfortunate" enough to win about $4k a few years ago shooting. Tax guy said give me all your receipts from shooting tournaments that year. Haven't been "unfortunate" enough to have taxable winnings like that since, so no off-sets of winnings on my part. For any small business the IRS expects to see a profit shown for any 3 out of 5 rolling years. If you don't, it's a trigger for an audit I'm told. It's allowed to do, but you should also expect and audit, and have to justify why you're still in business after loosing money every year. I don't think the IRS will accept, "I'm a bad businessman".

    I think if you were to give lessons, that would qualify as a small business, and allow someone to write-off expenses involved with "running" that business. But most guys who give lessons do so on a cash basis, not reportable income.

    I like the idea of figuring a way to write off your shooting habit in retirement though. Sounds like a good retirement plan.
     
  5. grntitan

    grntitan Well-Known Member

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    cafowler--I believe it's $600 from any one club or venue in winnings amassed in a year and its a 1099. Does not have to be one win of excess of $600. If the year end total winnings at any one particular club or venue equals or exceeds $600 a 1099 is required. At least this is my understanding. Somebody correct me if i'm wrong. Have been wrong once before.....once
     
  6. 221

    221 Banned User Banned TS Supporters

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    <EM>"But most guys who give lessons do so on a cash basis, not reportable income"</EM>

    Alot of people actually believe that. Ain't no such thing as "not reportable income".
     
  7. dhip

    dhip Active Member

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    Above posts are correct.I know several Bass fisherman that once they win over $500,they make sure they get receipts for tax write offs to oofset what they have earned fishing.

    Doug H.
     
  8. senior smoke

    senior smoke Well-Known Member

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    After seeing the responses, I believe if these shooters decided to turn pro in order to have tax advantages, they would be living out their remaining days at the Waupun state prison.
    Steve
     
  9. halfmile

    halfmile Well-Known Member

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    In shooting as in gambling you can only deduct expenses in the extent of your earnings.

    So if you win 3 thousand you can only take off 3K in expenses, which makes it a zero sum game and not worth the effort. However, if you get a 1099 some receipts to offset it is a good idea.


    HM
     
  10. dmarbell

    dmarbell Active Member

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    Read from the source. Hobby loss rules merely place the burden of proof.

    Danny
     
  11. Twinbirds

    Twinbirds TS Member

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    half mile is correct!
     
  12. Dickgshot

    Dickgshot Well-Known Member

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    Halfmile is not correct. The rules for gambling are different. The hobby loss
    rules allow you to deduct expenses up to the amount of winnings, but you usually won't get the full benefit of those expenses because they have to be deducted as miscellaneous itemized deductions which is reduced by 2% of your adjusted gross income.

    That's not the same issue as determining whether you're in the business of trapshooting. I'm sure Leo Harrison, Harlan Campbell, Ray Stafford, Kaye Ohye
    all report their income and expenses as a business. There is no number of years that you have to show a profit. You only have to establish that making a profit is a principle purpose of the trapshooting.

    This has been discussed many times on TS.com. Also Steve, you won't go to Waupun State Prison. This is a federal offense, and you will probably go to the federal prison in Oxford, Wisconsin -though I can arrange for you to go to the same prison as Wesley Snipes if you want.
     
  13. shannon391

    shannon391 Active Member

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    Cafower,

    Just because someone recieves cash does not mean it's non reportable income.

    Many places take in cash on a regualar basis, they are also targeted heavily by the IRS. (IRS also has a "lifesyle" claus} if you live higher than your reported income you will pay the difference.

    Is Snipes currently in Stripes?
     
  14. 870

    870 Well-Known Member

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    As is consistently true when this question comes up, dickgtax is the only one with correct info.

    You have to have operate as a business and have a realistic intent to make a profit in order to net your expenses directly againt income. If it's not a business, as in a hobby or gambling, HM is wrong in that it is hardly ever a "zero sum" game for most.

    Now - this is not a requirement, but just to toss it out there... if you were really running trapshooting as a business, (forget about those that do clinics etc), is it a good business decision to even shoot doubles, or probably even singles for that matter, since there is little likelihood you could really profit from these events after considering the cost of travel and everything else?
     
  15. Captain Bud

    Captain Bud TS Member

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    I was once told to obtain a FFL and buy and sell guns (trying to profit) as a sideline to trapshooting.

    You have to go to the places that buyers (trapshooters) would frequent, to sell your wares (trap shotguns).

    This makes the travel expenses a write-off against profit from selling the guns. It also puts you at a range where one might take a break from selling guns to do a little trapshooting.

    Makes you wonder..........

    Check with an acountant........

    Phil
     
  16. halfmile

    halfmile Well-Known Member

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    Try showing a loss for 3 or 4 years in a row and see how fast your IRS auditor determines that your deductions are inadmissible.

    As a racer who spent more than he won, I got on the wrong side of the IRS after 3 years.

    HM
     
  17. shannon391

    shannon391 Active Member

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    HM, You should have tried the "Too big to fail tactic".

    How about GM? they got a bail out..
     
  18. 870

    870 Well-Known Member

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    HM:

    The point is that you probably were actually lucky, I'm assuming they only threw out the expenses in excess of your revenue, leaving you at a break even.

    It happens often in the real world, but that does not change the fact that the actual rule is as dickgtax posted. If it is a hobby, say you won $10,000 and had $15,000 in valid expenses. If you don't itemize you would pay tax on the entire $10,000 with no expenses deducted at all. Sad, but true; you lost $5,000 but pay tax on $10,000.

    Even if you itemize, it is unlikely you get a deduction for all of the allowable $10,000 of expenses. That is what I meant by it's not a "zero sum" game for most. Expenses are allowable only to the extent of revenue, but that does not mean the allowed expenses are going to result in a deduction on your return. More often than not, you have taxable income from the hobby even when you actually lost money.
     
  19. Dickgshot

    Dickgshot Well-Known Member

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    To be honest, what I explained about the tax rules has been explained on this forum before - by 870, who has never posted anything I recall that wasn't completely accurate.

    Let me explain the problem that affects every shooter who has won money and received a 1099 form.
    When the IRS proposes an adjustment to someones's tax return - for instance, not allowing a deduction - it's supposed to issue a notice of proposed adjustment, and after that what's called a statutory notice of deficiency which gives a taxpayer many levels of appeals. In other words, you have an opportunity to argue your case.

    When an error is made on a return, like a math error, the IRS can make that adjustment without allowing all those opportunities to appeal.

    What has happened is that the IRS has expanded it's "correction of error" definition to include income reported on a 1099 that is omitted on the tax return. The IRS computer matches 1099's filed with the recipient's tax return. If the income isn't reported, the computer adjusts the tax automatically and sends out a bill.
    If you don't pay the bill, the IRS can issue a federal tax lien and levy on your bank account and wages. The only way to get the money back is to file a claim for refund.


    Now it doesn't work that way 100% of the time, but the IRS is expanding the use of 1099's and its " 1099 matching program," as they call it. I wouldn't count on getting away with anything for the 2010 tax returns.
     
  20. W.R.Buchanan

    W.R.Buchanan Member

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    You can make a business out of anything, including trap shooting. You don't have to be a professional tournament shooter, you can be an instructor or a reloader. The overall idea is to spend your money (income) on yourself and your's, rather than giving it to the govt to spend for you. We all know they are very good at it.

    With any business you keep all of your receipts. Virtually everything you spend money on for your business is deductable, including the good independent CPA you get to prepare your taxes every year and advise you on tax strategys. He will also give you a list of things that are deductable, and help you in placing virtually everything you spend money on, onto that list

    H&R Block is NOT who you want doing this!

    You must show a profit($1 is a profit) once every 5 years. If you don't, you disolve that company and start another. You do need to show some positive cashflow or redflags go up if you are just spending money with no return whatsoever. It helps to have a business licence and even a resale card to support legitimacy.

    You do not send in any quartly payments! You are responsible to have 90% of the amount you are going to owe the IRS (including self employment tax SS)in by Dec 31, OR,,, you are subject to interest and penalties on the amount owed. Believe me the interest and penalties is not a big deal. It was $67.00 for me last year. It is not worth my time to send in the quarterlies for that little.

    NEVER send in your IRS return before APR 14. They take a given number of returns from each date prior to Apr 15 and the number is the same thruout the year, however they get way more returns on the last few days so,,,,,.

    If you can't completely wipe out your income with deductions every year there is something wrong and you probably need a different CPA. UNless you win big then you do have to pay. That's when you buy that Motorhome or other big ticket item related to your business, which is deductable. You'll notice Sarah Palin is tooling around Alsaska in a new $ million dollar motorhome? Why is that? could it be a tax dedcution to offset the money from the book business she now has?

    The only thing you can't get out of is Self Employment tax which is your Social Security contribution for the year. Just cuz you're getting SS doesn't mean you don't have to contribute if you make more than the bottom line for taxes. Self Employment tax is essentially a percentage of your Gross income, not your adjusted gross income.

    I have paid nothing but Self Employment Tax for the last 34 years. NO fed or and thank GOD since live in CA, No state either. I was audited once in 1982 for a church deduction that they disallowed, and then reallowed when my church threatened to sue them in Federal Court.

    You can make a business out of ANYTHING. And EVERYBODY needs to understand that these laws were made specifically to be used by business for the betterment of business owners in the US! They are used by everybody who is serious in business, because that's the way our system works. I started my first business to shelter the income from my Day Job in 1978, and have been doing it for 33 years. Or you can give your money to "THEM" like the millions of uninformed people do every year

    Oh and taxes are not about how much of your withholding you get back, it's about how much they keep. If you have a day job you need a side business to shelter your day jobs earnings.

    Last year I watched my roomamte give $45,000 to the IRS because he is too lazy to shelter his $125K + income with a simple business he could run out of a shopping bag! To add insult to injury, He still had to write them a check for another $3800 to boot!

    You need to consult a CPA near you NOW! and get started on this path. You let him tell YOU how to work the system, and don't take my word for it. I'm just telling you what I have done successfully and it is all perfectly legal or I'd be in jail!

    The over all jist of these laws, is if you don't spend your money, then the govt will take it and spend it for you!

    That's a tough choice?

    There is no intelligent agruement against doing this! America is all about being an entrepenuer, so be one!

    Obana knows how to spread your wealth around. Let him spread someone else's wealth around. Get in the game, don't be a sap!

    Randy
     
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