Racing Moto Amateur Level - Expenses Small Business Write Off

lumpy790
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lumpy790 1/27/2022 4:46pm
1/27/2022 4:46pm
JBlain619 wrote:
This thread seems to pop up every year on here. The best thing you can do is contact a CPA. The advice I have heard from...
This thread seems to pop up every year on here. The best thing you can do is contact a CPA. The advice I have heard from my wife(tax accountant) to friends, track people is if it's for amateur racing, the IRS views that as a "hobby" and expenses are not tax deductible. Especially if you are "sponsoring" yourself or a member of you immediate family. It's risk vs reward because it is a red flag for the IRS. Is it worth it to potentially face audit and have to spend more than what you are deducting to fight the IRS in court?
You hit the nail on the head! Talk to a Tax account.

We went to a tax accountant a year ago and found out the accountant we had used for years had been filing incorrectly costing us a lot of $$$$$ so 3 years were refilled correctly.
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profeshenal125 1/27/2022 4:52pm
1/27/2022 4:52pm
crpilot wrote:
I've actually been directly involved in setting up sponsorship contracts that are recorded as marketing expenses. The key if you want to write off the expense...
I've actually been directly involved in setting up sponsorship contracts that are recorded as marketing expenses. The key if you want to write off the expense is to set up a contract that defines the performance obligation, the compensation, and a finite time period for said performance obligation. The payment to an individual can be based on displaying custom graphics, being a brand ambassador (verbally promoting your brand when at races), reimbursing for expenses as incurred (race fees, parts, and travel), etc. Its the exact same as as Redbull paying someone to where there helmet, Mercury Marine paying a fisherman to run a Mercury outboard, or HD paying an A-List Hollywood Actor to ride there bike. Accounting rules do not differentiate between a $10B company or a $100k company.

With that said, your documentation and contract should be tight if you are paying yourself for being a brand ambassador for your business......
Yes we’ll put. You should write the contract from your buisness to another buisness your racing name. Not to a persons name like your own. Do it correctly and you write everything off. Start a LLC buisness not an S Corp. if you race 50 expert it pays cash too bad not more than 12 race it. Otherwise you could come close to even. No rule against putting up 1,500 cash for your own class. The promoter local track would Love it. Hey did you here 50 expert paid 1,500 plus 80%. Bob says what co dropped the cash. Robby Lee Robby says Global 532
Llc. Who won Global 532 ,s rider again , on that 04 cr125.
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ACBraap
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ACBraap 1/27/2022 5:09pm
1/27/2022 5:09pm
crpilot wrote:
I've actually been directly involved in setting up sponsorship contracts that are recorded as marketing expenses. The key if you want to write off the expense...
I've actually been directly involved in setting up sponsorship contracts that are recorded as marketing expenses. The key if you want to write off the expense is to set up a contract that defines the performance obligation, the compensation, and a finite time period for said performance obligation. The payment to an individual can be based on displaying custom graphics, being a brand ambassador (verbally promoting your brand when at races), reimbursing for expenses as incurred (race fees, parts, and travel), etc. Its the exact same as as Redbull paying someone to where there helmet, Mercury Marine paying a fisherman to run a Mercury outboard, or HD paying an A-List Hollywood Actor to ride there bike. Accounting rules do not differentiate between a $10B company or a $100k company.

With that said, your documentation and contract should be tight if you are paying yourself for being a brand ambassador for your business......
There's a big difference between a third party paying for advertising and a persons own business paying themselves to do a hobby.
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crpilot
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crpilot 1/27/2022 5:45pm
1/27/2022 5:45pm
crpilot wrote:
I've actually been directly involved in setting up sponsorship contracts that are recorded as marketing expenses. The key if you want to write off the expense...
I've actually been directly involved in setting up sponsorship contracts that are recorded as marketing expenses. The key if you want to write off the expense is to set up a contract that defines the performance obligation, the compensation, and a finite time period for said performance obligation. The payment to an individual can be based on displaying custom graphics, being a brand ambassador (verbally promoting your brand when at races), reimbursing for expenses as incurred (race fees, parts, and travel), etc. Its the exact same as as Redbull paying someone to where there helmet, Mercury Marine paying a fisherman to run a Mercury outboard, or HD paying an A-List Hollywood Actor to ride there bike. Accounting rules do not differentiate between a $10B company or a $100k company.

With that said, your documentation and contract should be tight if you are paying yourself for being a brand ambassador for your business......
ACBraap wrote:
There's a big difference between a third party paying for advertising and a persons own business paying themselves to do a hobby.
You missed the whole point. You are paying for a service which is promoting your company. Not expensing your personal hobby. Perspective is everything. Claiming expenses for marketing is well within the accounting guidelines as long as the performance contract is met. Who performs the work is not a criteria.
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profeshenal125 1/27/2022 5:50pm
1/27/2022 5:50pm
Ok pay attention a record label can sponsor a racing team. You start a record label - buisness and you promote your record label. Any buisness can b the record label. I write songs all the time. Ha I just gave myself an idea.
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ACBraap
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ACBraap 1/27/2022 5:53pm
1/27/2022 5:53pm
crpilot wrote:
I've actually been directly involved in setting up sponsorship contracts that are recorded as marketing expenses. The key if you want to write off the expense...
I've actually been directly involved in setting up sponsorship contracts that are recorded as marketing expenses. The key if you want to write off the expense is to set up a contract that defines the performance obligation, the compensation, and a finite time period for said performance obligation. The payment to an individual can be based on displaying custom graphics, being a brand ambassador (verbally promoting your brand when at races), reimbursing for expenses as incurred (race fees, parts, and travel), etc. Its the exact same as as Redbull paying someone to where there helmet, Mercury Marine paying a fisherman to run a Mercury outboard, or HD paying an A-List Hollywood Actor to ride there bike. Accounting rules do not differentiate between a $10B company or a $100k company.

With that said, your documentation and contract should be tight if you are paying yourself for being a brand ambassador for your business......
ACBraap wrote:
There's a big difference between a third party paying for advertising and a persons own business paying themselves to do a hobby.
crpilot wrote:
You missed the whole point. You are paying for a service which is promoting your company. Not expensing your personal hobby. Perspective is everything. Claiming expenses...
You missed the whole point. You are paying for a service which is promoting your company. Not expensing your personal hobby. Perspective is everything. Claiming expenses for marketing is well within the accounting guidelines as long as the performance contract is met. Who performs the work is not a criteria.
I didn't miss any point. You're correct that who performs a service isn't an issue. The question is whether a service is being performed, vs doing your hobby that you would have done anyway, but now with your company logo on it. That's the difference between a red bull sponsorship, where they analyze and put a value on the sponsorship they offer vs sponsoring yourself for a tax deduction.
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Radical
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Radical 1/27/2022 6:17pm
1/27/2022 6:17pm
Talisker wrote:
The problem with this question is, if you ask 10 different accountants, you will get 10 different answers. It depends on the accountant. I’ve had ones...
The problem with this question is, if you ask 10 different accountants, you will get 10 different answers.
It depends on the accountant. I’ve had ones that do things strictly by the books, and I’ve had ones that know how to play ball.
The bigger problem is that if you ask 10 different IRS agents, you'll get 10 different answers, and unless you get their advice in writing, the IRS will not take responsibility for the answers being correct. If you ask for it in writing, the IRS agent will tell you they don't do that.
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profeshenal125 1/27/2022 6:58pm
1/27/2022 6:58pm
The irs hired thousands of new agents they work from home. They r not tax experts there revenue makers. Learn the tax codes there all on line. If you miss a couple steps of correctly setting it up no biggy. No need to panic. The irs tried to hit me last yr. threatening letters raising there voice on the phone. She didn’t even know the tax codes but tried to add penalties , interest etc. I shot that dragon lady down and proved that she was wrong. worst case scenario you get your 40k tax bill reduced to 20k and go on a payment plan of 200 a month.
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allna6
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allna6 1/27/2022 7:26pm
1/27/2022 7:26pm
Having discussion about taxes on vital. I have seen it all now!

All kidding aside you have more than a couple issues with using your bike, parts and etc as a write off. To be clear this is a very aggressive position and is not one I would advise given the high likelihood it would not pass IRS inspection and the risk/reward is not there.

A couple high level points: you would need to allocate the expenses between business and personal use similar to personal use of a business owned auto. This would not be easy.

You would need to demonstrate the expenses were ordinary and necessary in the furtherance of your business. This is a stretch if you are racing the bike.

A couple ways dirt bike related expense might be deductible: writing a check to another individual or team for sponsorship or building and putting a bike solely on display with your logos. If you want to get into more advanced strategies about setting up a entity there are ways but would require an investment.

I am a CPA and Certified Tax Coach for what it’s worth.
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profeshenal125 1/27/2022 8:19pm
1/27/2022 8:19pm
allna6 wrote:
Having discussion about taxes on vital. I have seen it all now! All kidding aside you have more than a couple issues with using your bike...
Having discussion about taxes on vital. I have seen it all now!

All kidding aside you have more than a couple issues with using your bike, parts and etc as a write off. To be clear this is a very aggressive position and is not one I would advise given the high likelihood it would not pass IRS inspection and the risk/reward is not there.

A couple high level points: you would need to allocate the expenses between business and personal use similar to personal use of a business owned auto. This would not be easy.

You would need to demonstrate the expenses were ordinary and necessary in the furtherance of your business. This is a stretch if you are racing the bike.

A couple ways dirt bike related expense might be deductible: writing a check to another individual or team for sponsorship or building and putting a bike solely on display with your logos. If you want to get into more advanced strategies about setting up a entity there are ways but would require an investment.

I am a CPA and Certified Tax Coach for what it’s worth.
Having buisness then starting another buisness that is the race team that promotes the 1 st buisness. Checks r cut buisness to buisness. That is legal correct ? Set up a bonus win program. Merch and video profits r kept in the racing account. The profeshenals write everything off . Like a special bed for there bad back just like trucker. Fuel getting to a race will b the biggest expense. That would also b a write off.
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Sandusky26
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Sandusky26 1/28/2022 2:06am
1/28/2022 2:06am
Fuck taxes
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GeorgiePorgie 1/28/2022 3:06am
1/28/2022 3:06am Edited Date/Time 1/28/2022 3:09am
allna6 wrote:
Having discussion about taxes on vital. I have seen it all now! All kidding aside you have more than a couple issues with using your bike...
Having discussion about taxes on vital. I have seen it all now!

All kidding aside you have more than a couple issues with using your bike, parts and etc as a write off. To be clear this is a very aggressive position and is not one I would advise given the high likelihood it would not pass IRS inspection and the risk/reward is not there.

A couple high level points: you would need to allocate the expenses between business and personal use similar to personal use of a business owned auto. This would not be easy.

You would need to demonstrate the expenses were ordinary and necessary in the furtherance of your business. This is a stretch if you are racing the bike.

A couple ways dirt bike related expense might be deductible: writing a check to another individual or team for sponsorship or building and putting a bike solely on display with your logos. If you want to get into more advanced strategies about setting up a entity there are ways but would require an investment.

I am a CPA and Certified Tax Coach for what it’s worth.
So an engine builder or a shop that engages in the sales of dirtbikes….could easily justify something like this, but probably not the average worker who does moto as a hobby ?

IRS audited me for a education tax credit one year. I went back and forth. Was a nightmare. They said I owed $2000. I showed them documents. They come back oh ok, you only owe $1200. Showed them receipts. They come back oh you only owe $300. I’m like no, here’s the receipts. They came back and said no you owe $300. I was done with it and paid it. I’m not sure I owed them the $300 but I just wanted them off my back. It was miserable.
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Sandusky26
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Sandusky26 1/28/2022 3:08am
1/28/2022 3:08am
Sandusky26 wrote:
Im a self employed trim carpenter and I don't know a whole lot about tax write offs. Can I get away with using my MX expenses...
Im a self employed trim carpenter and I don't know a whole lot about tax write offs. Can I get away with using my MX expenses as write offs?
APLMAN99 wrote:
Yes, no worries on even keeping receipts. Just estimate how much you've spent and write it off each year.......

What's the worst that can happen?!?!?!?!?!
I’ll make a bunch of babies and collect from the IRS I reckon?
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ns503
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ns503 1/28/2022 3:47am
1/28/2022 3:47am
allna6 wrote:
Having discussion about taxes on vital. I have seen it all now! All kidding aside you have more than a couple issues with using your bike...
Having discussion about taxes on vital. I have seen it all now!

All kidding aside you have more than a couple issues with using your bike, parts and etc as a write off. To be clear this is a very aggressive position and is not one I would advise given the high likelihood it would not pass IRS inspection and the risk/reward is not there.

A couple high level points: you would need to allocate the expenses between business and personal use similar to personal use of a business owned auto. This would not be easy.

You would need to demonstrate the expenses were ordinary and necessary in the furtherance of your business. This is a stretch if you are racing the bike.

A couple ways dirt bike related expense might be deductible: writing a check to another individual or team for sponsorship or building and putting a bike solely on display with your logos. If you want to get into more advanced strategies about setting up a entity there are ways but would require an investment.

I am a CPA and Certified Tax Coach for what it’s worth.
GeorgiePorgie wrote:
So an engine builder or a shop that engages in the sales of dirtbikes….could easily justify something like this, but probably not the average worker who...
So an engine builder or a shop that engages in the sales of dirtbikes….could easily justify something like this, but probably not the average worker who does moto as a hobby ?

IRS audited me for a education tax credit one year. I went back and forth. Was a nightmare. They said I owed $2000. I showed them documents. They come back oh ok, you only owe $1200. Showed them receipts. They come back oh you only owe $300. I’m like no, here’s the receipts. They came back and said no you owe $300. I was done with it and paid it. I’m not sure I owed them the $300 but I just wanted them off my back. It was miserable.
That's why I wouldn't bother. How much tax savings are we talking here in all this anyway?

Anything that would unnecessarily attract their scrutiny, I would stay away from. Sure you might be able to defend yourself. But just dealing with the scrutinizing BS has huge PITA cost. And once they are in there, they will not let up until they find something to ding you for. Like big old leeches. My biggest worry as a business owner is getting told I'm being audited by the feds. Not that I'm trying to cheat them and think I would get caught - but the thoughts of having them camp out here for a week totally disrupting absolutely everything just turns my stomach.

Shit now I got myself going - serenity now!
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profeshenal125 1/28/2022 4:04am
1/28/2022 4:04am
allna6 wrote:
Having discussion about taxes on vital. I have seen it all now! All kidding aside you have more than a couple issues with using your bike...
Having discussion about taxes on vital. I have seen it all now!

All kidding aside you have more than a couple issues with using your bike, parts and etc as a write off. To be clear this is a very aggressive position and is not one I would advise given the high likelihood it would not pass IRS inspection and the risk/reward is not there.

A couple high level points: you would need to allocate the expenses between business and personal use similar to personal use of a business owned auto. This would not be easy.

You would need to demonstrate the expenses were ordinary and necessary in the furtherance of your business. This is a stretch if you are racing the bike.

A couple ways dirt bike related expense might be deductible: writing a check to another individual or team for sponsorship or building and putting a bike solely on display with your logos. If you want to get into more advanced strategies about setting up a entity there are ways but would require an investment.

I am a CPA and Certified Tax Coach for what it’s worth.
GeorgiePorgie wrote:
So an engine builder or a shop that engages in the sales of dirtbikes….could easily justify something like this, but probably not the average worker who...
So an engine builder or a shop that engages in the sales of dirtbikes….could easily justify something like this, but probably not the average worker who does moto as a hobby ?

IRS audited me for a education tax credit one year. I went back and forth. Was a nightmare. They said I owed $2000. I showed them documents. They come back oh ok, you only owe $1200. Showed them receipts. They come back oh you only owe $300. I’m like no, here’s the receipts. They came back and said no you owe $300. I was done with it and paid it. I’m not sure I owed them the $300 but I just wanted them off my back. It was miserable.
Yeah there blood thirsty for that money. I know of o/o truckers that haven’t paid taxes in 24 yrs. but there smart about. If they hv a good yr. they buy land a dozer. Irs says what about this dozer ? I need that to grade the potholes, write off. Let’s not forget the profits from the racing buisness. Ovr 50 ira or a Roth ira 6,500, 401 k 26,500 tax deferred and there’s more. stroker crank for the cr125. That expensive health insurance.
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allna6
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allna6 1/28/2022 5:16am
1/28/2022 5:16am
profeshenal125 wrote:
Having buisness then starting another buisness that is the race team that promotes the 1 st buisness. Checks r cut buisness to buisness. That is legal...
Having buisness then starting another buisness that is the race team that promotes the 1 st buisness. Checks r cut buisness to buisness. That is legal correct ? Set up a bonus win program. Merch and video profits r kept in the racing account. The profeshenals write everything off . Like a special bed for there bad back just like trucker. Fuel getting to a race will b the biggest expense. That would also b a write off.
It’s sounds shady but if the race team had a true profit motive. Not actual profit but the intent it would pass (given they follow a bunch of other rules as well).

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allna6
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allna6 1/28/2022 5:20am
1/28/2022 5:20am Edited Date/Time 1/28/2022 5:21am
GeorgiePorgie wrote:
So an engine builder or a shop that engages in the sales of dirtbikes….could easily justify something like this, but probably not the average worker who...
So an engine builder or a shop that engages in the sales of dirtbikes….could easily justify something like this, but probably not the average worker who does moto as a hobby ?

IRS audited me for a education tax credit one year. I went back and forth. Was a nightmare. They said I owed $2000. I showed them documents. They come back oh ok, you only owe $1200. Showed them receipts. They come back oh you only owe $300. I’m like no, here’s the receipts. They came back and said no you owe $300. I was done with it and paid it. I’m not sure I owed them the $300 but I just wanted them off my back. It was miserable.
Average joe would be tough to make work without the proper planning.

The engine builder is a much more feasible scenario but would need to be setup correctly

Amazon and Elon Musk’s of the world literally pay millions for this type of stuff (albeit more in depth than I will go into on Vital ha ha).
colintrax
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colintrax 1/28/2022 1:17pm
1/28/2022 1:17pm
vansnxtweek489 wrote:
I posted this on the first page and I love it so much I'll watch it again, hahaha. There are some really creative tax juices flowing...
I posted this on the first page and I love it so much I'll watch it again, hahaha.

There are some really creative tax juices flowing in this thread.
I didn't even notice Grinning guess great minds think alike
ACBraap
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ACBraap 1/28/2022 1:41pm
1/28/2022 1:41pm Edited Date/Time 1/28/2022 1:41pm
Radical wrote:
The bigger problem is that if you ask 10 different IRS agents, you'll get 10 different answers, and unless you get their advice in writing, the...
The bigger problem is that if you ask 10 different IRS agents, you'll get 10 different answers, and unless you get their advice in writing, the IRS will not take responsibility for the answers being correct. If you ask for it in writing, the IRS agent will tell you they don't do that.
The IRS will absolutely give you an answer in writing. It's called a Private Letter Ruling and companies get them all the time. They are then redacted and released to the public (thanks to a FOIA lawsuit). The problem is it is an expensive and slow process, and the ruling is limited to the specific facts stated.
APLMAN99
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APLMAN99 1/28/2022 1:47pm
1/28/2022 1:47pm
Sandusky26 wrote:
Im a self employed trim carpenter and I don't know a whole lot about tax write offs. Can I get away with using my MX expenses...
Im a self employed trim carpenter and I don't know a whole lot about tax write offs. Can I get away with using my MX expenses as write offs?
APLMAN99 wrote:
Yes, no worries on even keeping receipts. Just estimate how much you've spent and write it off each year.......

What's the worst that can happen?!?!?!?!?!
Sandusky26 wrote:
I’ll make a bunch of babies and collect from the IRS I reckon?
I don't think that anyone believes you'd find that many willing partners.......!

Cool
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Sandusky26
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Sandusky26 1/28/2022 1:55pm
1/28/2022 1:55pm
APLMAN99 wrote:
Yes, no worries on even keeping receipts. Just estimate how much you've spent and write it off each year.......

What's the worst that can happen?!?!?!?!?!
Sandusky26 wrote:
I’ll make a bunch of babies and collect from the IRS I reckon?
APLMAN99 wrote:
I don't think that anyone believes you'd find that many willing partners.......!

Cool
I came here for tax advice.
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