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| I fish the PMTT and do a little guiding on the side so I guess you you could call me a professional fisherman even though I haven't made much money yet. This is not my main source of income (thank God).
My question is how to tournament anglers and guides report there earnings? How many of you report this as miscellanous income and deduct expenses and how many of you have a sole propietership (sp) and deduct expenses? What are advantages of each one?
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Posts: 335
Location: Orland Park | They don't report all of it....it's a cash business.....I don't know many guides who take credit cards, do you? I imagine many of these guys own their own businesses, making rods, lures.....that is their main source of income as far as the IRS is concerned.
Jerry, these big corporations write everything off. It's a write off!!
Kramer, you don't know what a write off is, do you? Jerry, do you? |
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| The reason I asked the question is waht if I were to win $20,000 in a tournament? Even the most creative accountant won't be able to come up with that much in expensise; therfore I would have to claim it as income. Back to my original question, what are the advantages and disadvantages of being a sole proprietership or just claiming it as misc. income?
P.S. you must have me mistaken for someone else |
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Posts: 335
Location: Orland Park | If you win the 20 grand, to avoid getting clipped, you'd have to start up an LLC with your fishing partner, or a sole-propriety with yourself, and find a way to come up with 20 grand in expenses, it shouldn't be that difficult if you fish a couple times a year....depreciation of your boat, all the money you spent on lures, gear, fuel, lodging, gambling debts up to a couple grand from the Casinos (and in the case of an LLC, you and your partner can combine both of your expenses).....anything to do with your fishing excursions for the year.....that way your expenses will offset your winnings, and bang.....avoid the taxes. If it's listed as miscellaneous income, you'll get wacked. Or claiming it as personal income could throw you up into the higher tax bracket. I'll look into it further, becasue I was thinking of doin that Vermillion tourney.
Edited by Commanche Jim 3/26/2003 11:27 AM
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Posts: 3926
| I think this is a great question, but, one best posed to a professional tax accountant type. So, one way to go might be to contact successful pros and ask them for references for accountants. Then pose your questions to those bean counters.
Again, I think it's a great question, and one I've considered myself, because writing off a boat's depreciation may be the only way I'll upgrade anytime in the near future. Sheeet, I can guide right down there with the worst of them, for sure!
So, who has accountants to recommend? Names and contact info, please. |
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Posts: 62
| If you win money in the PMTT or the FRV Challunge on the Chain, I believe over $500.00 you will get a 1099 in the mail.
My partner and I took 3rd at the 2002 Madison Trail Event and split $2,500.00. My 1099 from the PMTT arrived in January. The 1099 reports the income to the IRS therefore you have to pay taxes on whatever amount you won. In our case $1,250.oo each. I think it is taxed at either 28% or 32% but I am neither an accountant nor tax lawyer.
The best thing is to either put the approiate taxes aside or start a "S" coproration (Cost between $450 and $1000 depending on the Lawyer's set up fee). Something like your initials "XYZ Inc". Open a bank account deposit your money, keep track of your expenses. An "S" corporation allows you to apply the losses to your personal income taxes as a deduction, which is a good thing.
Hope this helps. Talk to your tax accountant or preparer and they can give you more details.
Chris |
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Posts: 492
Location: Lindenhurst, Illinois | Really the key here is documentation. The above posts are correct in the fact that any cost associated with fishing will be a deduction during the year. Even costs associated with non tournament fishing as it is preparation for fishing the tournaments etc. Meals while out of town fishing, gas, lodging, lures, depreciation on boat possibly vehicle depreciation, storage of your boat etc. I don't know that you need to go the S corp. or LLC because the advantage here in most cases is limiting liability (personal not tax) and the IRS' ability to put a lien on your assets etc. A schedule C with all the relevent income and expenses will get you by. The incorporation is a must if you are selling products that have risk of injury involved etc (bucktail breaks while fighting a fish and gets lodged in buyers skull etc.) or guiding if someone falls out of your boat. |
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Posts: 1936
Location: Eau Claire, WI | Most of what has been offerd so far seems to be logical advice.
My suggestions:
If you guide and fish tournaments make sure your insurance covers you under these conditions. Most recreational boating insurance has exclusions for such activities regardless if it is your primary income or not. Trial lawyers could care less either way, if you are negligable in any way they will find a way to sue you. It all depends how much you want to gamble, the insurance business is one of the best poker games in town.
Secondly:
If you intend to claim your expenses as losses as a deduction on your taxes you need to document everything, and I mean everything with an emphasis on accuracy and detail.
Example: You purchase 2,000 worth of new tackle this year. You put 20k total miles on your truck and fish out of your boat 110 days in 2003.
How much of this is honestly related to guiding and tournament activity? Only that portion of the whole is legally deductable. I can tell you that the IRS frowns heavily on people trying to deduct what is truely an expensive hobby whether you put it under a business name or not.
In a hard dollar economy the IRS will be looking a little closer at so called "garage business" a little closer than they normally do, you are almost guaranteed an audit at some time down the road. There is nothing to fear from this as long as you are doing your paperwork under the perameters established by the U.S. and state tax laws.
I have a good friend who guides 4-6 times a year, and fishes a dozen or so tournaments a year and wins money doing so. He documents all of his expenses and only claims 50% of his tackle purchases etc. as actual expenses. In other words he considers 50% of his fishing is done with the intent to profit from his efforts and 50% is done for pleasure.
He has been doing this for many years and so far has not been audited, and feels secure in his methods and honesty.
I suggest you call your own accountant and if you don't have one get one that is reputable and works as an accountant for their living, not someone that does taxes on the side for extra money Jan.-April.
Your other choice is to keep doing what your doing and if you hit pay day at a tournament at that point consider coming up with some deductions for that year.
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Posts: 32959
Location: Rhinelander, Wisconsin | Since I am 'in the business' I keep very clear records of my expenses and mileage, and deduct it all. The only trips not deductable for me are the evening fun trips and my vacation, which I keep recorded carefully to answer any questions if one might come up. |
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Posts: 197
Location: N Illinois | Brian,
I asked an accountent I work with these same questions. For now I keep all records of anything fishing related I buy and all expendatures I incur on the trail. I would claim the winnings under income earned through hobbies. You can deduct all your expenses, up to the amount of your winnings, for that hobby.If anyone has any other ideas, I would love to hear them also..
Mike Quinn |
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