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World & National Champion
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Just got my check from the IBO and it comes with the reminder that I will be getting a 1099 form at the end of the year. Last year this really cut my tax return down a good bit. What all can I write off to try to help offset this? I think it's pretty crappy that I can spend thousands of dollars all year and then have one good shoot and pretty much break even for the year but then have to pay taxes on it. Just doesn't seem right to me. Thanks for any help.
 

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60X

I know several write entire exspenses for travel and everthing. If your shooting pro division your tax man should explain it to you as buisness.
 

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if your expenses are more than your earnings from the ibo
why would u be concerned about oweing taxes... sounds
like from your post you shelled out more than you made...
you can also apply this loss to future earnings... sounds
like nothing to worry about to me....
 

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Last year I owed the taxman money. But my accountant asked me what the 2000 dollar 1099 was for, and I told him it was from a money winnings at national archery shoots. He told me to go home and itemize all my expense. From ariplane tickets, to gas , food, you only get something like $35 a day for food, to the bows that I used to win the money, the targets I bought, to fletching and glue. Since there is money coming in (winning) it is considered a business. But eventually you have to show a profit, from what he said. It may be worth your while to talk to a accountant. I believe you can right your equipment off over 7 years or something like that. I am not a accountant I am just going off what mine said. Oh by the way after the righ offs I didn't owe money any more.:)
 

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I'm a woodworker and I checked into this a while back to see if I could deduct some of my tools. If you don't show a profit after a certain period of time, I think it was about 5 years, it is considered a hobby business. Also I thnk there might be a stipulation as to how much time you have to work at the business. Equipment used for hobby business is not deductable as you are considered to be doing it for fun and not for profit. I would think the same law would apply here.YMMV
 

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The key

Is show a profit in 7 yrs. This is true in all buisness.

Many a rancher and farms do it here.
 

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3 of 5 years

Actually you must show a profit 3 out of 5 years to be considered a business. That is what Sally was told by our tax firm when she did her Pro tax forms last year. Ken
 

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# of Years

It is either a profit within 3yrs or 3 of 5yrs, can't remember which, but it is definitely not profit within 5yrs.

Don't forget to include the registration fees as an expense.
 
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Boy! I'm about 8 years passed 5 from showing a profit?????I need to practice;)


what?? is there 10 people that really made a profit in shooting a bow this year

Lets name them...and from shooting! not shows and seminar.

Kelly ward
Chance
Hopkins
Colin Booth
OBT;)
Tom Crowe
Landa Owen
Joseph Goza
WOW, All 3d'ers

how much do you think it would take to show a profit?15 grand?? I would think and I only hit a third of the shoots, But I think there is 26 national shoots that pay anything,, so if a top pro hit 26 shoots and spent $750.00 (I'm sure that's a low number) at each that would mean they would have to earn 19,500 to break even,,ok,,One Vegas win would cover that!

Hack, I made enough money this year to pay for my hunting license:D and I got 5 checks, archery don't pay to play

I heard Mathews is putting up 20grand this year at vegas. Holt That!

well help me with this list of money makers...

and without Mathews, NO BODY WOULD SHOW A PROFIT!!!

The Hood
 

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Business vs. Hobby

You guys have brought up a subject, other than politics, that is near and dear to my heart. I am an attorney and CPA specializing in tax law. I'll try to summarize the tax laws regarding businesses and hobbies.

First, any time you win more than $600 from one person/sanctioning body, you will be issued (should be issued) a Form 1099, indicating non-employee compensation. This money is obviously reported to the IRS, and therefor should be reported on your tax return.

Now, to offset this income, you can deduct your expenses related to shooting: travel (airline tickets, hotels, mileage, etc.), equipment, shooting (practice) fees, training (instructor fees), membership fees if appropriate. Now - keep in mind, milage to local shoots, national shoots, etc., can be deducted at the standard milage rate of .39 per mile (for 2003). Milage is usually a very large deduction because your actually gas expense is a lot less, but the standard milage rate factors in depreciation, car maintenance, etc.

The safe-harbor rules the IRS has established is that a business must be profitable 3 out of 5 years in order to be considered a business. This means that, normally, if you have shown a profit in 3 out of 5 years, you will be considered to have a business, and your losses in those other 2 years will be allowed to be taken against other income.

What if you are not making a profit in 3 out of 5 years? Well, then other guidelines and rules come into play. You can still have a business if you lose money every year. Here is what the IRS looks at to determine if you have a business: is this your only source of income (probably not for most of you), do you dedicate a sufficient amount of time to the "business" (probably yes if you ask some of the wives out there), do you consult professionals with regard to the advancement and improvement of your business, do you treat it as a business (separate checking account for income/expenses from your personal accounts), etc. If enough of these factors are met, you can still be determined to have a business, and not a hobby.

What if you have a hobby? If you fail to meet enough of the factors to be determined to have a business, than you an still avoid having your winnings taxed. You still need to keep track of your expenses: equipment, shooting fees, training, travel expenses, etc. These can be used to offset the income made from archery. The difference is your expenses claimed on your tax return can not exceed you income. So if you made $2,000, you can only claim $2,000 in expenses.

Bottom line is that, for most of you, archery is going to be a hobby, not a business. However, an aggressive stance may be to claim the losses for a couple of years, then drop it. My husband and I did this for two years when he travelled a coupel of years to a dozen shoots a year. When he stopped traveling when we had kids, we stopped claiming archery as a business. Just be warned, that the IRS can always come in and review the expenses related to these losses (at least for the 3 year statute of limitations).

Key: keep receipts, a written log for milage, and good records of what you are doing. Sounds like a pain, but worth it if the IRS ever decides to audit.

Disclaimer (sorry, I have to): this is not intended to be, and should not be, construed as legal advice. Please consult your tax advisor for proper treatment income and expenses related to archery.
 

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not the only ones!!

Those Pros weren't the only ones to turn a profit. I did, shooting the Semi-pro class this year shooting all the ASA events. It may not have been as much as those pros but a profit is still a profit in my eyes. Oh yeah I am a 3'der also, but you will see me on the line in Vegas!:D
 

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Business vs. Hobby

You guys have brought up a subject, other than politics, that is near and dear to my heart. I am an attorney and CPA specializing in tax law. I'll try to summarize the tax laws regarding businesses and hobbies.

First, any time you win more than $600 from one person/sanctioning body, you will be issued (should be issued) a Form 1099, indicating non-employee compensation. This money is obviously reported to the IRS, and therefor should be reported on your tax return.

Now, to offset this income, you can deduct your expenses related to shooting: travel (airline tickets, hotels, mileage, etc.), equipment, shooting (practice) fees, training (instructor fees), membership fees if appropriate. Now - keep in mind, milage to local shoots, national shoots, etc., can be deducted at the standard milage rate of .39 per mile (for 2003). Milage is usually a very large deduction because your actually gas expense is a lot less, but the standard milage rate factors in depreciation, car maintenance, etc.

The safe-harbor rules the IRS has established is that a business must be profitable 3 out of 5 years in order to be considered a business. This means that, normally, if you have shown a profit in 3 out of 5 years, you will be considered to have a business, and your losses in those other 2 years will be allowed to be taken against other income.

What if you are not making a profit in 3 out of 5 years? Well, then other guidelines and rules come into play. You can still have a business if you lose money every year. Here is what the IRS looks at to determine if you have a business: is this your only source of income (probably not for most of you), do you dedicate a sufficient amount of time to the "business" (probably yes if you ask some of the wives out there), do you consult professionals with regard to the advancement and improvement of your business, do you treat it as a business (separate checking account for income/expenses from your personal accounts), etc. If enough of these factors are met, you can still be determined to have a business, and not a hobby.

What if you have a hobby? If you fail to meet enough of the factors to be determined to have a business, than you an still avoid having your winnings taxed. You still need to keep track of your expenses: equipment, shooting fees, training, travel expenses, etc. These can be used to offset the income made from archery. The difference is your expenses claimed on your tax return can not exceed you income. So if you made $2,000, you can only claim $2,000 in expenses.

Bottom line is that, for most of you, archery is going to be a hobby, not a business. However, an aggressive stance may be to claim the losses for a couple of years, then drop it. My husband and I did this for two years when he travelled a coupel of years to a dozen shoots a year. When he stopped traveling when we had kids, we stopped claiming archery as a business. Just be warned, that the IRS can always come in and review the expenses related to these losses (at least for the 3 year statute of limitations).

Key: keep receipts, a written log for milage, and good records of what you are doing. Sounds like a pain, but worth it if the IRS ever decides to audit.

Disclaimer (sorry, I have to): this is not intended to be, and should not be, construed as legal advice. Please consult your tax advisor for proper treatment income and expenses related to archery.
 
R

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Mrs. Archer
Thanks, I knew that the whole time,,and Like my good friend OBT has been saying
Archery is a Hobbie.

Now Pnydeer, You Go BRO! That's good to hear that someone really made a buck.

Hood
 

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Mrs. Archer,

You noted that you can still write off expenses < = to the amount won even if you treat things as a hobby. If I may ask, how/where do you record such expenses (and income) if you opt to go this route? I'm assuming there is some way to do this and not have to use Sched. C?

Thanks,

JB >>----->
 

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CHPro said:
... how/where do you record such expenses (and income) if you opt to go this route? I'm assuming there is some way to do this and not have to use Sched. C?
Good question - when I was writing my earlier post, I was thinking about how a hobby would be reported, because I have never actually reported hobby income and expenses. But thinking through some of the forms and schedules, this is how it should be done:

Income should be reported on Form 1040, probably line 21, Other Income. Then expenses would be reported as miscellaneous itemized deductions on Schedule A, Line 22. The unfortunate part of this is that miscellaneous itemized deduction are subject to a 2% floor. Which means you can only deduct the misc. itemized deduction which exceed 2% of your Adjusted Gross Income. Many people do not have misc expenses that exceed this amount, and therefore the deduction does not offset income. Let me give you an example:

W-2 wages: $49,000

Archery income: $1,000

Adjusted Gross Income: $50,000

Archery Expenses: $1,000

2% of Adjusted Gross Income ($50,000 x .02): $1,000

Archery expense allowed: $0

Consequently, the expenses incurred to make the $1,000 of archery income are disallowed.

If your misc. itemized deduction are enough normally (you pay a large amount in union dues or other unreimbursed employee expenses), you best course of action would be to report the income and expenses as I mentioned above.

But if you don't itemize your deduction or do not have enough misc. itemized deduction to offset the income, you are at a disadvantage.

Solution? A slightly aggressive stance to take (consult your tax advisor) is to report the income on Schedule C, take only enough deduction to offset the income or report a slight profit. If you keep the profit under $400, you do not have to pay self employment taxes.

Hope this helps, but let me know if you need more detail.
 

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Mrs Archer is right on with her analysis, Im an accountant as well and I also have a client that has a similiar situtation with the hobby tax rules.
 

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Thank you Mrs. A. Your last paragraph is how I've been doing things the past few years. Unfortunately the income part has been dropping off as of late :D and I had been wondering if there was a different approach I could use to at least make sure I didn't have to pay taxes on the little I did take in (considering the amount being paid out, lol!). May have a little room on that floor considering how much expenses are racked up each year to travel to all the shoots.

Any rules that you are aware of in terms of having filed as a business (Sched C) for several years and then ceasing to do so for a period of time (i.e. Filed using Sched C for over a decade, can I take a few years off and file as hobby, then possibly if/when the income picks up return to filing under Sched C?)?

Greatly appreciated,

>>---------->
 
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