I put this post in this forum because it's competition related...

I won $1500 racing this year, and they made me fill out that tax for (G-2 or something like that) when I collected my earnings. They paid me in cash though, and didn't deduct at the time. I can't tell from the IRS website if I'm supposed to claim this, but I think that I am. Does anyone know how and if I have to do this?

Thanks.

Next year I need to make racing more than a hooby so I can claim my losses too!

 

Don't know the answer...but something like Turbo Tax probably would. You might try such software.

 

Yes, you should claim it, but you will also get to deduct all expenses associated with the sport (up to what you won).

Thus you one $1500, but probably spent well over that on tires, auto service, entry fees, etc. So deduct up to $1500 of those expenses and you suddenly break even.

It's just like gambling, you can deduct losses to offset gains (not that most of us have any gambling earnings...)

Scott

 

If you filled out the forms and they sent you a W-2 (the end of year earnings report that employers are required to send) then you will have to claim the $1500 as income. But, as noted, you may be able to deduct some or all of it.

 

Isn't there something about not being able to deduct losses if its a hobby or something like that? I may have to give turbo tax a try.

 

** Warning - I am not a tax accountant **

Given what you have provided, there is likely enough of a paper trail that, were you to not report the income, you could get spanked. On the other hand, by demostrating that you can earn income with your racing, you have enough ammunition to consider racing a business rather than a hobby. Unless something has changed significantly in the last 15 years - which is possible - you are NOT expected to make a profit from your business every year (see dot.com events of the past five years as an example!) but rather, some portion thereof. Like 2 of 5 years, I think? Anyway, you may actually deduct all annual expenses directly related to your efforts to earn that $1500 - even if it cost ten times that - thereby lowering your total tax obligation.

You need to establish depreciation schedules for equipment purchases (you can't just deduct the cost of the trailer in one year), keep records (you might want to start a business checking account and start a QuickBooks system on the computer), and should consider forming a corporate entity to protect your personal assets from liability. This has added advantages, in that you can personally loan the corporation money and can elect to pay yourself a salary or not, as you see fit. It really isn't that hard to do all of this correctly but you are probably going to set yourself up for increased IRS scrutiny if you do make your racing a business.

There is actually a "Taxes for Racers" book out there somewhere, though it may not be completely up-to-date. You REALLY should contact an accountant familiar with small business practices - it does NOT matter that your enterprise is a race team rather than a Hallmark shop or a latte stand. The principles and rules are identical.

Kirk

 

If "this year" is 2002, you should expect to see a "1099" form next January from them, W-2 are for employees.

I agree with Kirk on the deductions (not a tax accountant, nor do I play one on TV).

 

It was last year. I'm calling to have them send me the 1099 form now. So its probably too late to deduct much now. I was hoping I could deduct at least the expenses of winning that money (hotel room, entry fee, anything I have recipts for).