|
|
Posts: 291
Location: Madison, WI | Recently won a motor in a musky tournament and had to fill out some paperwork when i took ownership and they said it was for tax purposes and they kept the copy. Are they supposed to send something out like a W-2 as that could be considered income or so I just have to declare it as income. Thanks. |
|
| |
|
Posts: 2015
| Talk to a good accountant - But if you have to claim it as income, I'd be sure you deduct all expenses, tournament entry, gas, lodging, rods, boat, truck, lures..on and on....you should be able to wipe it out pretty easy 
Edited by IAJustin 2/5/2013 3:26 PM
|
|
| |
|
Posts: 1220
| First, it's not the W-2 you get for wages, it's a Form 1099 that you get from other sources of income. Second, the easy way to know if one is coming is whether or not you were asked to provide a social security number. The PMTT, for example, asks for it, many other events do not. Now, like the above post says, if you have income to report, (and I suggest that you do report your income) it is highly likely that your trounament related expenses will FAR exceed your earnings and you will owe no tax. Reporting that income and your expenses will even provide a track record that, in some years, will allow you to write off more than you earn. It's all part of establishing that you are a "real" business--not just a hobby. |
|
| |
|
Posts: 99
| Typically they will send you a 1099 for winning over $600.00. |
|
| |
|
Posts: 31
| Got to love it! When you win it's income, when you don't it's a hobby. God bless em, they are broke and can't quit spending.
Fish on, I love the hobby. |
|
| |
|
Posts: 291
Location: Madison, WI | Yes, we had to provide SSN's so I will wait till I get the 1099. I hadn't received anything yet and figured I should have by now and wanted to start getting taxes done but will have to wait until that shows up. Thanks for the info.
Good accountant.......(check). |
|
| |
|
Posts: 16632
Location: The desert | PredLuR - 2/6/2013 7:24 AM
Yes, we had to provide SSN's so I will wait till I get the 1099. I hadn't received anything yet and figured I should have by now and wanted to start getting taxes done but will have to wait until that shows up. Thanks for the info.
Good accountant.......(check).
If you haven't seen it yet I don't think you'll be seeing it. I could be wrong but I thought by law all W2s and 1099s and other tax forms needed to be out by 1/31. |
|
| |
|
| that is not the case. The deadline is later. BR |
|
| |
|
Posts: 1405
Location: Detroit River | If the amount was more than $600 (for a one time payment) then you will be issued a form 1099. The deadline to recieve it is February 15, 2013. |
|
| |
|
Posts: 400
Location: North/Central WI | Junkman - 2/5/2013 4:03 PM
First, it's not the W-2 you get for wages, it's a Form 1099 that you get from other sources of income. Second, the easy way to know if one is coming is whether or not you were asked to provide a social security number. The PMTT, for example, asks for it, many other events do not. Now, like the above post says, if you have income to report, (and I suggest that you do report your income) it is highly likely that your trounament related expenses will FAR exceed your earnings and you will owe no tax. Reporting that income and your expenses will even provide a track record that, in some years, will allow you to write off more than you earn. It's all part of establishing that you are a "real" business--not just a hobby.
jadrian1951 - 2/5/2013 5:53 PM
Got to love it! When you win it's income, when you don't it's a hobby. God bless em, they are broke and can't quit spending.
Fish on, I love the hobby.
Marty-
I'm a little confused. My accountant explained it to me exactly how jadrian1951 does. In 2011 when we won lots of money I reported it as income...and wrote off numerous expenses (including a Ranger) to make sure I would not pay any tax on my winnings. In 2012 we caught several fish and placed a few times...but as I'm sure you know winning is everything in musky tournaments. We won very little money but still had the same expenses. My accountant told me I can use my expenses from 2012 against any big wins in 2013...but I can't claim a loss for 2012 and get money back because the IRS says its a hobby. When I read your post it sounds like you are claiming a loss when your expenses are more than your winnings...just wondering if I am understanding you correctly. |
|
| |
|
Posts: 2015
| Its a gray area - I'm not a tournament angler but if I was I'd do it "all out" and make it a business, Fishing doesn't have to be a hobby it "could" be your main source of income - Almost anything where your intent is to make a profit can be considered a business....Here is a little "paragraph" directly from the IRS:
n general, taxpayers may deduct ordinary and necessary expenses for conducting a trade or business. An ordinary expense is an expense that is common and accepted in the taxpayer’s trade or business. A necessary expense is one that is appropriate for the business. Generally, an activity qualifies as a business if it is carried on with the reasonable expectation of earning a profit.
In order to make this determination, taxpayers should consider the following factors:
Does the time and effort put into the activity indicate an intention to make a profit?
Does the taxpayer depend on income from the activity?
If there are losses, are they due to circumstances beyond the taxpayer’s control or did they occur in the start-up phase of the business?
Has the taxpayer changed methods of operation to improve profitability?
Does the taxpayer or his/her advisors have the knowledge needed to carry on the activity as a successful business?
Has the taxpayer made a profit in similar activities in the past?
Does the activity make a profit in some years?
Can the taxpayer expect to make a profit in the future from the appreciation of assets used in the activity?
*Edit, so if you made a profit the previous year and took it as income, I'd definitely claim the same expense/loss the next year....hell there are plenty of businesses that lose money for a decade... Some accountants are more aggressive than others, only two cents is keep good records.
Edited by IAJustin 2/7/2013 3:51 PM
|
|
| |
|
Posts: 1220
| OK Nate, what you could have said first is, "What the hell do you care anyway, the last time you won a tournament, Herbert Hoover was President!" But, you didn't, so thanks for that
Now, as to the tax man, you are going to have to be very careful not to get into the gunsight of the IRS. If you do, and get audited, it's only going to be the first of several audits and you will not enjoy the process. A guy like me is NEVER going to even try this, it's not a business for me-everybody knows I stink at this. The only thing I would do is keep enough check stubs and receipts so that when I do win, I won't have to pay taxes.
What I was talking about above, is that if you do this all the time and (Let's Say unlike me) you make regular money at it and pay your taxes for four or five years in a row....well you could likely claim the expenses in the sixth and (Maybe?) seventh year against income you didn't have and get away with a loss. I would not bet on getting away with it past that.
I think the best advice is that the IRS watches out for certain "flags" that tells them they might find gold inside your 1040. Stuff like off-shore accounts, excessive entertainment and home office expenses are always near the top of those lists...right along side HOBBY BUSINESS. I believe a big exception would be for those who are full time guides and where tournament fishing is just part of promoting their guide book. |
|
| |
|
Posts: 1405
Location: Detroit River | NateOz - 2/7/2013 10:21 AM Marty- I'm a little confused. My accountant explained it to me exactly how jadrian1951 does. In 2011 when we won lots of money I reported it as income...and wrote off numerous expenses (including a Ranger) to make sure I would not pay any tax on my winnings. In 2012 we caught several fish and placed a few times...but as I'm sure you know winning is everything in musky tournaments. We won very little money but still had the same expenses. My accountant told me I can use my expenses from 2012 against any big wins in 2013...but I can't claim a loss for 2012 and get money back because the IRS says its a hobby. When I read your post it sounds like you are claiming a loss when your expenses are more than your winnings...just wondering if I am understanding you correctly. Did you register as a business? If not then you need to get a new accountant. Even if you did create a business you should still get a new accountant because you can only claim expenses in the tax year that they occurred unless those expenses were for depreciable assets. Expenses for gas, food, hotel etc. that were purchased in 2012 CANNOT be used against earnings from 2013.
Home office expenses and Hobby income are 2 things that set off red flags at the IRS.
YOU CANNOT WRITE-OFF EXPENSES AGAINST HOBBY INCOME!!!!!!!!!!!! In the case of the tourney winnings only the entry fee can be offset from the winnings.
|
|
| |
|
Posts: 267
| Something also to consider, though, is there is a big difference when it comes to insuring your boat depending upon whether you are going to be using it for recreational purposes only or as part of a business. |
|
| |
|
Posts: 400
Location: North/Central WI | Zib - 2/7/2013 4:06 PM
NateOz - 2/7/2013 10:21 AM Marty- I'm a little confused. My accountant explained it to me exactly how jadrian1951 does. In 2011 when we won lots of money I reported it as income...and wrote off numerous expenses (including a Ranger) to make sure I would not pay any tax on my winnings. In 2012 we caught several fish and placed a few times...but as I'm sure you know winning is everything in musky tournaments. We won very little money but still had the same expenses. My accountant told me I can use my expenses from 2012 against any big wins in 2013...but I can't claim a loss for 2012 and get money back because the IRS says its a hobby. When I read your post it sounds like you are claiming a loss when your expenses are more than your winnings...just wondering if I am understanding you correctly. Did you register as a business? If not then you need to get a new accountant. Even if you did create a business you should still get a new accountant because you can only claim expenses in the tax year that they occurred unless those expenses were for depreciable assets. Expenses for gas, food, hotel etc. that were purchased in 2012 CANNOT be used against earnings from 2013.
Home office expenses and Hobby income are 2 things that set off red flags at the IRS.
YOU CANNOT WRITE-OFF EXPENSES AGAINST HOBBY INCOME!!!!!!!!!!!! In the case of the tourney winnings only the entry fee can be offset from the winnings.
I don't think I need a new accountant...I could be misquoting or misinterpreting what was said. I just catch fish and give him my mess of records when it comes to be tax time and let him sort it out... |
|
| |
|
Posts: 2015
|
YOU CANNOT WRITE-OFF EXPENSES AGAINST HOBBY INCOME!!!!!!!!!!!! In the case of the tourney winnings only the entry fee can be offset from the winnings.
Actually you can claim legit expenses on hobby income up to the amount of that income.....you can not claim a loss on hobby income.
Edited by IAJustin 2/7/2013 6:30 PM
|
|
| |
Tournament Winnings