Winnings and taxes?

[G-reg]

Does anyone know the tax laws for money won in races?  Specifically WI & Federal tax laws..  Is it exempt below a certain amount? (I'm guessing its not, but wishing it was!)  And if it does have to be reported, will I get a W-2 or some sort of form like that?

[Suzy]

Go to the main IRS site and they should have the answers there.

http://www.irs.gov/

[tstruyk]

you can win money racing?!?!?

 ;D


You are talking cash payouts and not certs correct?  I would think that it would be taxed similar to income (some guys do it for a living).  1099 type return

Good question!

I poked around a bit and here's what I found...

Hobby income. Income you receive from an activity that is not considered a for-profit business is reported as "other income" on Line 21 of Form 1040. Expenses you incurred in generating this income are deductible as miscellaneous itemized deductions on Schedule A....

Prizes and awards. If you win a prize in a contest, drawing, or raffle, you must report it on Line 21 of Form 1040. If the prize takes the form of a car, merchandise, a gift certificate, or free services, the fair market value of the item is the value that you must report.

There is a very narrow exception for prizes in recognition of past accomplishments (such as a Nobel, Pulitzer, literary prize, citizen-of-the-year award, etc.). You don't have to include the award as income if you were selected without any action on your part to enter the contest, you don't have to perform future services, and you transfer the award directly to a tax-exempt charitable organization or government unit...

Am I reading this right?  under the hobby section.. that if I have income from a hobby I can deduct the expenses I incurred generating that income?  Call me creative but I think I just found a way to write off racing!  ;D

timmay




info cut from http://taxguide.completetax.com/text/Q04_3000.asp

[spyderchick]

Does anyone know the tax laws for money won in races?  Specifically WI & Federal tax laws..  Is it exempt below a certain amount? (I'm guessing its not, but wishing it was!)  And if it does have to be reported, will I get a W-2 or some sort of form like that?

Talk to a tax attorney or an accountant. It all depends on whether you write off your racing as a business, and in some cases that's advisable, in others...not so much.

You will get a form 1099 if you received winnings in excess of $600 from any one source. These must be claimed on your taxes. A lot of other stuff falls into a grey area, which is why it is most advisable to talk to a professional.

Good luck!

[Jeff]

As long as you're under $600 in winnings you won't get a 1099, so you should be fine.

If you get a 1099, report it.  If you don't want to pay taxes on that 1099, you need to do some type of business loss to offset it.  Call me if you want.  

[G-reg]

You are talking cash payouts and not certs correct?

Yeah..  certs I wouldn't worry about, but they cut you checks in UL GP and I know they have my SS# so I'm guessing it could come back and bite me if I just said I forgot and blamed it on a concussion from a crash ;D


I did remember to keep the check stubs at least.. guess I'll just fire it in a folder and ask the tax man..  I know I'm right around that $600 mark, hopefully I'll slide in right below it..

[tstruyk]

while were on the topic... let say "hypothetically" I own a small business, and/or I am in a commissioned sales position that allows me to write off expenses for self funded advertising.

Could costs incurred racing that are supported by either the small company or as an advertsing expense for the sales position  be written off?  

Sponsors... if you where to sponsor your own racing could you dedcut the income?

i just cant help but think there has to be a way to set this up to be advantageous tax wise... even if just a portion...thoughts?  

[extrakt0r]

As Jeff said...

The rule goes...If you don't get a 1099, you do not have to report anything...That goes for winning, side jobs you may do...Anything...

Having a Business is the best thing one person can do...  ;)

[tstruyk]

Having a Business is the best thing one person can do...  ;)

so is that a yes  ???

[extrakt0r]

so is that a yes  ???

Sorry, is that a "yes" to what? I think I missed the question...  ???

[Super Dave]

while were on the topic... let say "hypothetically" I own a small business, and/or I am in a commissioned sales position that allows me to write off expenses for self funded advertising.

Could costs incurred racing that are supported by either the small company or as an advertsing expense for the sales position  be written off?  

Sponsors... if you where to sponsor your own racing could you dedcut the income?

i just cant help but think there has to be a way to set this up to be advantageous tax wise... even if just a portion...thoughts?  

Yeah, you can do anything, but at some point the government might ask you what you're doing.  Be prepared to justify it.  Again, ask your accountant for specifics.  Some will wait until their expenses rise to a certain level to write off expenses as usually one only gets "five years" to write something off as a hobby.

[Mongo]

Basically - yes, you have to pay taxes on ALL income you receive.  How much you report if under $600 cash from any given company is up to you but the law says you pay on all of it.

Now if you'd like to offset that income with expenses you need to find a good knowledgeable accountant.