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#1781513 - 12/04/07 08:51 AM tax on tournament winnings and deductions
Tim Cook Offline
Extreme Angler

Registered: 07/17/03
Posts: 1458
Loc: San Marcos,Texas, USA
I know this is a question for my CPA, but am interested in your input. I will receive a 1099 from BassChamps this year and expect to pay about $1000 in taxes on that money. What have your CPA's suggested you deduct to offset that tax burden. I have plenty of gas receipts or I can come up with a milage log and use that. Hotel receipts might work as well. As a small business owner, I use deductions to the fullest extent allowable, but I do not want to raise a red flag and get audited over a few tournament $$$$.


Edited by Tim Cook (12/04/07 08:52 AM)
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State Conservation Director
Texas B.A.S.S. Nation
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#1781519 - 12/04/07 08:54 AM Re: tax on tournament winnings and deductions [Re: Tim Cook]
Anglers Lodge Offline
TFF Team Angler

Registered: 12/01/06
Posts: 3195
When ya get here, I will show you the fuel deduction sheet I have. Being in the business, you can write this stuff off.

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#1781524 - 12/04/07 08:56 AM Re: tax on tournament winnings and deductions [Re: mrouse]
SkeeterRonnie Online   content
Pot stirrer

Registered: 02/25/03
Posts: 50739
Loc: Rowlett, TX
they will audit you.. i did that route in 2005 with writing off as a business type venture... I went thru and audit last year and was quesitoned very extensively on "fishing".... I passed thier rules, but had lots of reciepts and all my tournament entries, on the road expenses... more headache than good!
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#1781551 - 12/04/07 09:05 AM Re: tax on tournament winnings and deductions [Re: SkeeterRonnie]
Anglers Lodge Offline
TFF Team Angler

Registered: 12/01/06
Posts: 3195
Hehe, that is what a good CPA is for.

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#1781580 - 12/04/07 09:16 AM Re: tax on tournament winnings and deductions [Re: Anglers Lodge]
DYOLLP Offline
Extreme Angler

Registered: 07/29/05
Posts: 2041
Loc: Phoenix
Be careful. For most tournament anglers, your deductions are hobby deductions, not business deductions. There is a big difference.
To play it safe, you may want to only write off your expenses for the tournaments where you won money.
You are right though; you need to talk to a CPA. This would be challenging to do on your own with Turbo Tax or one of the other programs. Everyone's situation is going to be different. Like I said though, in most cases, tournaments are considered a hobby, not a business.

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#1781587 - 12/04/07 09:19 AM Re: tax on tournament winnings and deductions [Re: DYOLLP]
SkeeterRonnie Online   content
Pot stirrer

Registered: 02/25/03
Posts: 50739
Loc: Rowlett, TX
TurboTax will make your life painful... thats what I used.. and the tax auditor said several of the audits were because of self-prepared electronic tax software... I am now incorporated, and have a CPA- and keep fishing as a "hobby"...
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#1781589 - 12/04/07 09:19 AM Re: tax on tournament winnings and deductions [Re: DYOLLP]
txbazzman Offline
Extreme Angler

Registered: 01/07/06
Posts: 1941
Loc: San Angelo, TX
What if you declare yourself as a business?

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#1781597 - 12/04/07 09:21 AM Re: tax on tournament winnings and deductions [Re: txbazzman]
SkeeterRonnie Online   content
Pot stirrer

Registered: 02/25/03
Posts: 50739
Loc: Rowlett, TX
i did declare myself as a business, and still had several flags. Like stated above... anything having to do with fishing as a business now gets a big flag.
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#1781598 - 12/04/07 09:22 AM Re: tax on tournament winnings and deductions [Re: DYOLLP]
Anglers Lodge Offline
TFF Team Angler

Registered: 12/01/06
Posts: 3195
Tim, do you advertise your business when fishing T's ? Such as a tournament shirt with your company logo or a wrap job boat wise with your business name. Business name on vehicle ? Might work if you did any of these, but again, Mr. CPA knows better than me.

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#1781605 - 12/04/07 09:24 AM Re: tax on tournament winnings and deductions [Re: txbazzman]
DYOLLP Offline
Extreme Angler

Registered: 07/29/05
Posts: 2041
Loc: Phoenix
I think these are all the requirements for considering an activity a business:
* The manner in which the taxpayer carries on the activity, e.g., maintaining accurate books and records;
* The expertise of the taxpayer or the taxpayer’s advisors;
* The time and effort expended by the taxpayer in operating the activity;
* The expectation that assets used in the activity may appreciate in value;
* The history of success of the taxpayer in other activities;
* The history of income and losses in this activity;
* The amount of occasional profits, if any, that are earned;
The financial status of the taxpayer—that is, if this activity is the taxpayer’s only source of income, the IRS is more inclined to consider the activity a business—and
* The elements of personal pleasure or recreation involved.

In some cases these requirements are subjective. The differences between business and hobby deal mostly with how losses are handled and where you recognize expenses etc.

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#1781612 - 12/04/07 09:27 AM Re: tax on tournament winnings and deductions [Re: txbazzman]
Ranger-188-2007 Online   content
TFF Team Angler

Registered: 01/03/04
Posts: 3008
Loc: Nacogdoches Tx. USA
I'm self employed so I have 1 business. I deduct all of my tourmanent expenses within reason. I made money couple of years ago, but have lossed more the last couple of years. My tax man said as long as 1 business is showing a profit it doesn't matter how many adventures you have to deduct. I keep entry fee's,milage, gas on truck and boat,tackle,insurance,maintence,log it in a ledger. It helps to keep good records.
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#1781613 - 12/04/07 09:27 AM Re: tax on tournament winnings and deductions [Re: DYOLLP]
Anglers Lodge Offline
TFF Team Angler

Registered: 12/01/06
Posts: 3195
Good points.

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#1781619 - 12/04/07 09:28 AM Re: tax on tournament winnings and deductions [Re: DYOLLP]
SkeeterRonnie Online   content
Pot stirrer

Registered: 02/25/03
Posts: 50739
Loc: Rowlett, TX
to set it up as a business, I would think the best thing would be to set up an "LLC" under your fishing business name. then create a website, and keep record of expenses and profit. Advertising, promotions, sponsorships, etc. all have to be accounted for in a numerical fashion. YOu have to keep track of monetary influx, such as where the entry fees come from...

then you get thier questions about how often the boat is used for pleasure, as opposed to "business"... taking your kids out for a day on the lake becomes thier "putty" into squeezing every cent out of you.

I have always been taught to keep business and personal seperate, in case the business faulters.. it protects your personal from anybody/anyone.


Edited by SkeeterRonnie (12/04/07 09:30 AM)
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#1781623 - 12/04/07 09:32 AM Re: tax on tournament winnings and deductions [Re: SkeeterRonnie]
DYOLLP Offline
Extreme Angler

Registered: 07/29/05
Posts: 2041
Loc: Phoenix
In most cases, it probably is not worth the headache to try and squeeze out a few dollars in tax savings. If it is somewhat questionable, it is probably better to play it safe and call it a hobby.
Also, trying to declare tackle and boat expenses can be the biggest red flag.

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#1781627 - 12/04/07 09:34 AM Re: tax on tournament winnings and deductions [Re: txbazzman]
SkeeterDon Offline
TFF Team Angler

Registered: 05/18/05
Posts: 3711
Loc: Pflugerville, TX
I had my own guide business and also fished tourneys back in the mid 90's. I was a little skeptical at first. So I did my return with and without. I elected to rollover the difference into the next year. I did take it the next year. The big thing for me was the boat and the depreciation. I selected the wrong one. They did drill me. I did have receipts for everything. The really had nothing on me. One thing you have to remember is that when you are called upon, they do get measured by what they find. I was there for 3 hours and it came down to mileage and I kept point diretly to the rules, because I thought they were going to disallow my mileage, ALL OF IT. I kept askig questions. She left and came back in about 15 minutes, go figure and pointed out another rule, that was the 100 mile rule. Was my business place at my house or at the lake. It was first determine that it was at the lake, hence why I thought I was going to lose all my mileage. Then she finally spoke up and said only those trips that were under 100. I counted them up and saw that there were only5 trips and they were 98 and 99 miles each. They were not going to allow that. Once I knew that and made the silent count of how many, I agreed and we settle for $175. I went to the same lake all the time, but these five times I went a different way because I met them at an agreed location.

I took the money the following year and shut it down.

I read somewhere, and it made good sense, to do it for two years and not the third, then do it the 4th and 5th and not the 6th. I don't know about that. But they did not audit me the following year.

Keep good records thought that is important. Even when I filled up with gas. Instead of getting 2 receipts, I made sure that I wrote on it what was truck gas, because that is usually what got filled up first.

They do consider it a hobby, and you must prove an income one of the three years that you are doing it. I am not sure about the years after that though.

I am sure there is a CPA in here that will chime in. But for what its worth, get a CPA. Small price to pay. Just keep good records.
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