Post by seriespromoter on Mar 26, 2013 9:20:01 GMT -5
As you know, the Elite Series is a registered Pro Series in the state of Pa. We are by law required to issue 1099M to anyone of legal age that wins $600.00 or more.
Now initially that sounds like the government is digging into our pockets once again, and rightfully so or not, they are. But the good thing about this is you have options in regards to countering this tax.
Racers who have their income reported on a 1099-MISC are considered paid professionals by the IRS, and are responsible for paying their own taxes. To put it most simply, none of their taxes are withheld during the year.
This can be a double-edged sword for many Racers. For those with adequate tax knowledge, or access to a qualified tax professional, receiving a 1099 can actually be a good thing. But for those who are new to an occupation that reports income via the 1099, or believe they are a turbo tax expert, receiving a 1099-Misc can be a disaster at tax time.
In most circumstances, an employee's (someone who receives a W2 by January 31) net wages have already had federal, state and payroll taxes withheld. Employee's are not totally responsible for their own taxes, but an independent paid racer is.
The most crucial part of being a Paid racer is tracking your racing expenses during the year. Racers who receive 1099's are allowed to deduct their expenses from racers activities just like a business owner can, in fact, some racers and independent contractors use the same form to report their income, a Schedule C.
The most important expense for racer to keep track of are their auto expenses-namely business miles driven. The IRS allows taxpayers to deduct 55 cents for every business mile driven during 2013, the standard mileage rate cannot be taken in addition to actual vehicle expenses like gas, repairs, depreciation, and insurance. Racers must decide whether or not they want to use actual expenses, or the standard mileage rate.
Something else that an racer must take in to consideration in regards to mileage is the definition of business miles, not all miles driven are considered business miles. Miles driven from home to your place of employment are considered commuting miles, not business miles. Miles driven from the home to the race track are considered business miles. And obviously miles that your drive while not at work are considered personal miles and cannot be deducted.
For those who decide to use the actual expenses method, your deduction can be figured by totaling up your auto expenses and multiplying that number by the ratio of business miles driven. For example, if you drove 30,000 miles for the year, and half of them were business miles, then you could take half of your auto expense for the year as a deduction.
Other expenses that can be deducted from income for the racers include:
• Advertising expenses
• Tire Bills
• Tire Prep cost
• Pit pass cost
• Registration cost
• Cost of uniforms/safety gear
• Utilities in shop
• Insurance,
• Legal/professional services
• Meals and Entertainment Expenses
• Lodging expenses
One last topic that racers need to consider is the home garage deduction. If you use a portion of your home garage for racing purposes, you can take the deduction. This will enable you to not only deduct a portion of your living expenses, including rent/mortgage interest, insurance, taxes and utilities. The home garage deduction will also allow you to turn some of your commuting miles in to business miles.
You can include commuting miles as business miles if you are a small business owner or self-employed person, and you have two offices or work locations: one outside the home, and one inside the home. You will need to fill out form 8832 in addition to a schedule C to correctly file the home office deduction.
The best way for racer and independent contractors to save money at tax time is to understand what they are allowed to deduct. An expense and deduction using an excel spreadsheet or QuickBooks is a good way to get started.
Article Source: IRS
Now initially that sounds like the government is digging into our pockets once again, and rightfully so or not, they are. But the good thing about this is you have options in regards to countering this tax.
Racers who have their income reported on a 1099-MISC are considered paid professionals by the IRS, and are responsible for paying their own taxes. To put it most simply, none of their taxes are withheld during the year.
This can be a double-edged sword for many Racers. For those with adequate tax knowledge, or access to a qualified tax professional, receiving a 1099 can actually be a good thing. But for those who are new to an occupation that reports income via the 1099, or believe they are a turbo tax expert, receiving a 1099-Misc can be a disaster at tax time.
In most circumstances, an employee's (someone who receives a W2 by January 31) net wages have already had federal, state and payroll taxes withheld. Employee's are not totally responsible for their own taxes, but an independent paid racer is.
The most crucial part of being a Paid racer is tracking your racing expenses during the year. Racers who receive 1099's are allowed to deduct their expenses from racers activities just like a business owner can, in fact, some racers and independent contractors use the same form to report their income, a Schedule C.
The most important expense for racer to keep track of are their auto expenses-namely business miles driven. The IRS allows taxpayers to deduct 55 cents for every business mile driven during 2013, the standard mileage rate cannot be taken in addition to actual vehicle expenses like gas, repairs, depreciation, and insurance. Racers must decide whether or not they want to use actual expenses, or the standard mileage rate.
Something else that an racer must take in to consideration in regards to mileage is the definition of business miles, not all miles driven are considered business miles. Miles driven from home to your place of employment are considered commuting miles, not business miles. Miles driven from the home to the race track are considered business miles. And obviously miles that your drive while not at work are considered personal miles and cannot be deducted.
For those who decide to use the actual expenses method, your deduction can be figured by totaling up your auto expenses and multiplying that number by the ratio of business miles driven. For example, if you drove 30,000 miles for the year, and half of them were business miles, then you could take half of your auto expense for the year as a deduction.
Other expenses that can be deducted from income for the racers include:
• Advertising expenses
• Tire Bills
• Tire Prep cost
• Pit pass cost
• Registration cost
• Cost of uniforms/safety gear
• Utilities in shop
• Insurance,
• Legal/professional services
• Meals and Entertainment Expenses
• Lodging expenses
One last topic that racers need to consider is the home garage deduction. If you use a portion of your home garage for racing purposes, you can take the deduction. This will enable you to not only deduct a portion of your living expenses, including rent/mortgage interest, insurance, taxes and utilities. The home garage deduction will also allow you to turn some of your commuting miles in to business miles.
You can include commuting miles as business miles if you are a small business owner or self-employed person, and you have two offices or work locations: one outside the home, and one inside the home. You will need to fill out form 8832 in addition to a schedule C to correctly file the home office deduction.
The best way for racer and independent contractors to save money at tax time is to understand what they are allowed to deduct. An expense and deduction using an excel spreadsheet or QuickBooks is a good way to get started.
Article Source: IRS
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