Claiming race expenses on taxes?????

[redonkulousruntsracing]

Any one claim their racing expenses on their income taxes?

My brother in law and 2 sons race modified dirt track race cars and have for years, and he has been claiming his race expenses, gas, parts, camper, race gear, truck to haul camper, entry fees, food ..... for years, that's how he basically funds the upcoming seasons. He says he has been audited twice and all has been well.

So this season I kept a log of every race and all of our reciepts. I have a couple of local sponsors that gave me cash to help pay for last season. But it was cash, so they dont have any way to prove to their tax people that they paid me, because there aren't any returned checks or something like that to prove they gave me the money.

My problem, I think, is I dont have a 1099 from anyone showing they gave me money for sponsorship, I didn't and dont know if I need the 1099 or not. I am told I need it to proove that there IS a race team. I sure hope I can file with out it because I have over $12,000 in reciepts alone to claim. If cant, this next race season isn't looking too bright.

This is only our second year racing and I just learned that I could possibly claim our racing expenses, there is a race team name , it is on all of our shirts and vehicles, but I dont have an account at a local shop with that name on it or anything like that, so I don't know if I'm screwed or not. Anyone have any advice?

[fastrnrik]

I would think to do that, you would need to set up your race team as some sort of business to be able to write off any expenses. I would talk to an accountant and/or tax attorney if I were you. A good one, not an H&R Block place.
Just make sure everything is legit before ya tangle with the IRS.
Trust me on that! LOL
Just my $.02

[duke416ex]

Yea, you have to be earning an income doing it. Either getting payback from winnings, or selling parts or just somethign to show and income.

[ToddL]

we have a race team set up that is a business.
Sponsors are the income, and the expenses are everything we spend. It is a separate bank account that everything goes through. My accountant says everything is done properly and we have not had problems in 5 years. You just pay out everything you take in. No profit or loss. Just a break even.
We have a business certificate and are registered with the county. It's not very hard to do.
Talk to your accountant about setting it up.
Might not help with last season though if you didn't already
do it that way. hard to say. Good luck.

[redonkulousruntsracing]

Right, I asked my brother in law if I needed to set up a DBA or some how register the race team as a business, and I was told that I didn't need to that, as long as I have something proving I an getting some sort of income, that is how I could claim it.
A 1099 from my sponsors would do that, but no one is able to give me one. As far as payback and winnings, we are talking about a 6 year old racing a mini quad, lucky if he gets a trophy or a free t-shirt.

[Ryko racing]

If you dont have a 1099 it is not claimable. Trust me, dont screw with the irs it will cost way more to fix it if they catch you.

The IRS is getting wise to the racing thing.

you need a business registered for that tax year and you need to earn money racing or selling products. You cannot just race AND KEEP THE RECIEPTS AND WRITE IT OFF UNLESS YOU ARE A BUSINESS.

ACTUALLY I BELIEVE YOU CAN ONLY SHOW A LOSS FOR A SHORT TIME, EVENTUALLY YOU MUST LOOK LIKE YOU ARE MAKING SOME TYPE OF PROGRESS TOWARD PROFITABILITY.

BE CAREFUL

[redonkulousruntsracing]

I think I may have been lead astray, from what I understand now, that I could only claim the amount that I received as income, not the whole amount I spent. So for instance if I recieved $1000 for sponsorship and could prove it, then I could claim that $1000, If I spent $10,000, that's on me, unless I could prove that much income from racing, which is not the case here.

[redonkulousruntsracing]

Now I'm even more confused, I just talked to my brother in law and he said it's not the sponsors income. That I am thinking about it wrong, he said I can claim it because it is a hobby and everthing I spend is helping other businesses, and I am not making a profit off of it. I do have the sponsor income, if I have a 1099 to calim it as income, but because our racing is a hobby and not a business, that is why I can claim the expenses.
Does that sound crazy or what, I really dont know what to believe now.:confused:

[EthansDad]

first things first, you need some sort of business formation. an LLC sole proprietorship allows the profit/loss to come straight to your personal bottom line. That is good if you paid more than what you spent in personal taxes, you might get some of it back through the losses of the business. If you did not have the business formed by Dec 31, 2009, then I don't think you have hope of claiming those expenses for 2009. I'd pay $$ to ask that question directly to an accountant (rather than us wrench monkeys) before you went further. Maybe you can start the business now, and post date 2009 expenses somehow??

Second, you need, like any business, a hope or chance at profit which will show as income of some form. If you show $12k in losses with $500.00 in income for a couple of years, the IRS will come after you. most businesses reach break even (money in = money out) in about 2 years, or shut their doors. The IRS knows this.

Separate bank accounts, good idea. mile logs, etc all add up. I've never gotten a dime of actual cash from sponsors. maybe I'm doing something wrong.

[EthansDad]

Originally posted by sickairseth
Now I'm even more confused, I just talked to my brother in law and he said it's not the sponsors income. That I am thinking about it wrong, he said I can claim it because it is a hobby and everthing I spend is helping other businesses, and I am not making a profit off of it. I do have the sponsor income, if I have a 1099 to calim it as income, but because our racing is a hobby and not a business, that is why I can claim the expenses.
Does that sound crazy or what, I really dont know what to believe now..

I just read your last post again. is your bro in law an accountant, or just smoking crack?! :eek2:

writing off "hobbies" as personal losses? if that is the case, I just got a whole lot of new hobbies, like eating, drinking, driving and living in my house are all my hobbies.

He might be saying the businesses that GIVE you the money can write it off (good for them, they give you $100, but can write off $50 kind of thing), but you personally would have to show this as PERSONAL income and pay more taxes on it, not deduct it. Again, I'm not an accountant, but that whole hobby angle does not sound like it will fly. If I'm wrong, someone tell me, and name your monthly accounting fees, because I'll pay it.

-EA

[raidernut]

This should shed some light on how to do it and the legalities of it. This is also the premise that we use and others we know do as well. We took the time to get both a business and resale license.

http://www.nolo.com/legal-encyclopedia/article-30000.html

[marsrace2]

I know from experience the Race Car thing is totally different. When I Raced Cars I got a payout at every race I attended and also earned money from a point fund that had a payout based upon where you ended up in points. The difference here is we received 1099's at the end of the year from the Tracks we raced at, Nascar etc.. Now we were only allowed to claim a loss 3 Years in the row otherwise the IRS called it a Hobby and you couldnt write it off like a business.

Now to Mini Quad racing, which by the way is costing me almost as much as the cars did. There is no money winnings so there is no income to claim versus losses. I own my own Business an I write off everything I spend on the Quad Racing as sponsorship and write it off as Advertising for my business. I can do this because my business receives a large income each year.

[redonkulousruntsracing]

I appreciate the info and opinions, I was skeptical when my brother in law told me about it. The reason I even posted this at risk of sounding like a moron, is that maybe it wasn't BS and maybe some of you guys had been doing this for years.
So after posting this and reading some replys, I said screw it and called the IRS and spent 20 minutes on hold and spoke to 4 different people, to find out that indeed I was mis-informed. If it actually a business turning a profit, then yes I could claim our racing expenses.
But I am just a mini-quad Dad spending way too much on a "hobby" for my kid, but hey if I have to sell a kidney, I will do it to keep him out there racing. He abolutley loves it, and nothing is better that the smile on his face when he comes off the race track. I am truly addicted to it and I will make it happen. I have already handed out over 100 of his racing resumes and have about 4 sponsors on board that actually give us money to race if we in turn advertise for them. I feel like a marketing agent. If I can fund our out of state races somehow. then I will be happy.Oh well. I just had 100 more resumes printed so it's time to start pounding the pavement.
Thaks all for listening to an addicts rediculous rants. I'm sure some can relate.

[EthansDad]

cool deal. I'd recommend again you lay down the $100 to talk to an accountant if you have that many receipts. I'm sure the IRS is a bit biased to queries of "should I pay you or should I not". It would be worth it if he could find a away to get you incorporated for 2009 and get some of that back. better odds than vegas is my motto when it come to spending $$ on possible returns!

[erndog99]

new to this year i believe. you can write off any recreational vehicles bought last year. we wrote off our drr we purchased new last year as a rec. vehicle.