Starting an LLC for tax purposes/ writing off the moto

3strokemx wrote:

Observing several naysayers here that state they have worked for large accounting firms: Isn't that similar to getting culinary advice from McDonalds? The large firm would want their...

Observing several naysayers here that state they have worked for large accounting firms:

 Isn't that similar to getting culinary advice from McDonalds? 

The large firm would want their employees to take the most conventional path with the least amount of risk to the firm.

Wouldn't you want to work with an accountant that is focused on maximizing the benefit to the client?





 

Jeremy Macduff wrote:

The only motocross racers who can legally claim expenses related to their racing activities are professionals who are earning a 1099 income.Any attempt at “sponsoring” your...

The only motocross racers who can legally claim expenses related to their racing activities are professionals who are earning a 1099 income.

Any attempt at “sponsoring” your own child’s amateur racing interests and trying to write that off as a business expense is about as foolish as it gets.

It would be as foolish as trying to claim your family vacation as a business expense because you talked about business for five minutes on the trip.

The IRS, and tax code, are not this stupid.

3strokemx wrote:

Observing several naysayers here that state they have worked for large accounting firms: Isn't that similar to getting culinary advice from McDonalds? The large firm would want their...

Observing several naysayers here that state they have worked for large accounting firms:

 Isn't that similar to getting culinary advice from McDonalds? 

The large firm would want their employees to take the most conventional path with the least amount of risk to the firm.

Wouldn't you want to work with an accountant that is focused on maximizing the benefit to the client?





 

JBlain619 wrote:

Large firms typically yield large clientele.  You want Mike down the street to do your taxes because he is local and does your baby sisters cousin...

Large firms typically yield large clientele.  You want Mike down the street to do your taxes because he is local and does your baby sisters cousin Tracey's taxes?  Or would you want someone that routinely has conversations with the Jeff Bezos's of the world, as well as the IRS? Those returns in a larger firm are reviewed multiple times, reviewed with the clients, and approved before they are signed and filed.  Also, you have a company that has a full legal and audit department in the event there is an issue.

 

You get what you pay for.

3strokemx wrote:

Observing several naysayers here that state they have worked for large accounting firms: Isn't that similar to getting culinary advice from McDonalds? The large firm would want their...

Observing several naysayers here that state they have worked for large accounting firms:

 Isn't that similar to getting culinary advice from McDonalds? 

The large firm would want their employees to take the most conventional path with the least amount of risk to the firm.

Wouldn't you want to work with an accountant that is focused on maximizing the benefit to the client?





 

3strokemx wrote:

Observing several naysayers here that state they have worked for large accounting firms: Isn't that similar to getting culinary advice from McDonalds? The large firm would want their...

Observing several naysayers here that state they have worked for large accounting firms:

 Isn't that similar to getting culinary advice from McDonalds? 

The large firm would want their employees to take the most conventional path with the least amount of risk to the firm.

Wouldn't you want to work with an accountant that is focused on maximizing the benefit to the client?





 

JBlain619 wrote:

Large firms typically yield large clientele.  You want Mike down the street to do your taxes because he is local and does your baby sisters cousin...

Large firms typically yield large clientele.  You want Mike down the street to do your taxes because he is local and does your baby sisters cousin Tracey's taxes?  Or would you want someone that routinely has conversations with the Jeff Bezos's of the world, as well as the IRS? Those returns in a larger firm are reviewed multiple times, reviewed with the clients, and approved before they are signed and filed.  Also, you have a company that has a full legal and audit department in the event there is an issue.

 

You get what you pay for.

blaster99 wrote:

Using someone small and local doesn't mean it's a family member or friend. It also doesn't mean they aren't extremely well educated and know exactly how...

Using someone small and local doesn't mean it's a family member or friend. It also doesn't mean they aren't extremely well educated and know exactly how to file for you. I agree, a large firm does come with advantages. But with all things in life, it's a balance of pros and cons.

With that being said, letting your family or friend file your taxes based on your relationship alone is a terrible idea. Might as well file yourself lol.

My accountant runs out of a modular home in a suburb of one of the largest cities in New England. From the curb, you might think that he has no business doing your taxes or giving financial advice. Don't judge a book by it's cover, but definitely don't blindly trust a book by it's cover, either. Do the research, and you can find a way to make it happen within the confinds of the law.

UpTiTe wrote:

If you own a parent company with a few smaller  supporting companies that in all do 100 million a year, you’re not going to Acme CPA...

If you own a parent company with a few smaller  supporting companies that in all do 100 million a year, you’re not going to Acme CPA around the corner. 

UpTiTe wrote:

If you own a parent company with a few smaller  supporting companies that in all do 100 million a year, you’re not going to Acme CPA...

If you own a parent company with a few smaller  supporting companies that in all do 100 million a year, you’re not going to Acme CPA around the corner. 

3strokemx wrote:

You're implying there are no other options between a part time local CPA and the big 4?  

UpTiTe wrote:

I would guess that big corps don’t even use a big accounting firm, I’d guess they have people on staff and a large law firm.    The...

I would guess that big corps don’t even use a big accounting firm, I’d guess they have people on staff and a large law firm. 

   The firm I use is a partnership that has 30-40 employees. They have people that specialize in business, tax, real estate tax, trust, and personal finance and possibly more. Maybe you’re including firms like this as an example? Then I agree with you. But a small corner shop won’t be able to properly service multiple companies that need those services and stay small very long.  

UpTiTe wrote:

I would guess that big corps don’t even use a big accounting firm, I’d guess they have people on staff and a large law firm.    The...

I would guess that big corps don’t even use a big accounting firm, I’d guess they have people on staff and a large law firm. 

   The firm I use is a partnership that has 30-40 employees. They have people that specialize in business, tax, real estate tax, trust, and personal finance and possibly more. Maybe you’re including firms like this as an example? Then I agree with you. But a small corner shop won’t be able to properly service multiple companies that need those services and stay small very long.  

Jeremy Macduff wrote:

The only motocross racers who can legally claim expenses related to their racing activities are professionals who are earning a 1099 income.Any attempt at “sponsoring” your...

The only motocross racers who can legally claim expenses related to their racing activities are professionals who are earning a 1099 income.

Any attempt at “sponsoring” your own child’s amateur racing interests and trying to write that off as a business expense is about as foolish as it gets.

It would be as foolish as trying to claim your family vacation as a business expense because you talked about business for five minutes on the trip.

The IRS, and tax code, are not this stupid.

UpTiTe wrote:

I’ve done both of those two successfully with zero problems. 

aeffertz wrote:

It amazes me how many people have no idea how tax "write-offs" (deductibles) work. Secondly, LLC is not a tax designation; it is a legal one...

It amazes me how many people have no idea how tax "write-offs" (deductibles) work. Secondly, LLC is not a tax designation; it is a legal one. It has nothing to do with taxes at all. There's nothing you can deduct by having an LLC compared to not having one. Lastly, your business has to have a profit motive to deduct expenses or claim a loss. Meaning you better have the paperwork to show your business is legit, not a fake company used to  write-off your hobby's expenses, when you get audited.

aeffertz wrote:

It amazes me how many people have no idea how tax "write-offs" (deductibles) work. Secondly, LLC is not a tax designation; it is a legal one...

It amazes me how many people have no idea how tax "write-offs" (deductibles) work. Secondly, LLC is not a tax designation; it is a legal one. It has nothing to do with taxes at all. There's nothing you can deduct by having an LLC compared to not having one. Lastly, your business has to have a profit motive to deduct expenses or claim a loss. Meaning you better have the paperwork to show your business is legit, not a fake company used to  write-off your hobby's expenses, when you get audited.

RightHookNoCandy wrote:

Thank god you got here before me lol. I am an Accountant (work in Corporate though), hearing people talk about "writing off" expenses as it it...

Thank god you got here before me lol. I am an Accountant (work in Corporate though), hearing people talk about "writing off" expenses as it it makes it free somehow aggravates the shit out of me. 

Also, in this case I really don't even understand the purpose of what OP is trying to accomplish. Unless you already have a business that is performing EXTREMELY well that is somehow adjacent to moto in someway, writing off expenses for motocross really does nothing at all for you. The decrease in your TI for these expenses isn't really going to make much of a difference unless your business is killing it or you are spending $50k+ a year to go racing, in which case, would be a clear red flag for the IRS immediately that these are not business expenses in 99% of people lol. 

UpTiTe wrote:

Short answer, yes you can, and I’ve done it. But it has to be a viable business with income/loss statements, otherwise they won’t consider it a real...

Short answer, yes you can, and I’ve done it. 

But it has to be a viable business with income/loss statements, otherwise they won’t consider it a real business and won’t consider it tax deductible. My buddy did this with a lawn care business for 15 years. He mowed just enough lawns, and doctored up just enough invoices to make it look legit. 

Also, you just can’t go into a shop and buy parts with the company credit card and write it off, it has to be a necessity, a motorcycle, gear, and parts aren’t a necessity for that company. I learned this the hard way. 

You have to pay an amount for sponsorship, that’s considered advertising. At the beginning of the year, you give the rider an amount of money to put your logo on his jersey and trailer, what he does with the money is up to them. If you think your son’s expenses will be 10k, you write a check for 10k. 

If you do start an LLC, or an S corp, buy a truck/trailer through the corp not only will they be expensed over time, all the repairs and gas for them is tax deductible. 
 

But the funny thing about tax deductions, you need to have the money to spend in order to get the deduction. If you have 10k of deductions, you’re only getting back 3k, it’s not free money, this is what people don’t understand. 

Vanders wrote:

I'm a CPA and can confirm this is 100% legal. You can sponsor a motocross rider or a go kart racer and call it an advertising...

I'm a CPA and can confirm this is 100% legal. You can sponsor a motocross rider or a go kart racer and call it an advertising expense. That's totally allowed, but it would be fraud if the rider never actually existed, or you never actually paid the rider. 

He's right that what most people don't understand is you're not getting the $10k as a "write off." You have a $10k expense, so assuming your business is profitable, you reduce your taxable income by $10k so you're saving yourself $2,100 or whatever the corporate tax rate is. In reality after the TCJA of 2017 and the Covid era legislation, most businesses have unlimited loss carryforwards anyway. That's why people are complaining about most businesses not paying any tax right now. And you have depreciation of other assets, most real businesses are running a paper loss right now anyway or carrying forward old losses. So the whole point of doing this sort of pointless unless your business has been consistently profitable for the last 5 years or so. 

Where you get into murky waters is trying to claim the depreciation of "fun" assets as a business expense. For example, I consider my motorhome to be a mobile office for my company. I personally don't choose to write it off against my business because I don't want the headache, but from my understanding, you could use the depreciation expense of your motorhome if you use it as a "home office."

UpTiTe wrote:

I would guess that big corps don’t even use a big accounting firm, I’d guess they have people on staff and a large law firm.    The...

I would guess that big corps don’t even use a big accounting firm, I’d guess they have people on staff and a large law firm. 

   The firm I use is a partnership that has 30-40 employees. They have people that specialize in business, tax, real estate tax, trust, and personal finance and possibly more. Maybe you’re including firms like this as an example? Then I agree with you. But a small corner shop won’t be able to properly service multiple companies that need those services and stay small very long.  

RichieW13 wrote:

Large companies are going to use both.  They will have their own accounting team that handles the day-to-day transactions and internal financial reports, etc.  But they...

Large companies are going to use both.  They will have their own accounting team that handles the day-to-day transactions and internal financial reports, etc.  But they will also hire outside accounting firms to provide independent audits. 

UpTiTe wrote:

I would guess that big corps don’t even use a big accounting firm, I’d guess they have people on staff and a large law firm.    The...

I would guess that big corps don’t even use a big accounting firm, I’d guess they have people on staff and a large law firm. 

   The firm I use is a partnership that has 30-40 employees. They have people that specialize in business, tax, real estate tax, trust, and personal finance and possibly more. Maybe you’re including firms like this as an example? Then I agree with you. But a small corner shop won’t be able to properly service multiple companies that need those services and stay small very long.  

RichieW13 wrote:

Large companies are going to use both.  They will have their own accounting team that handles the day-to-day transactions and internal financial reports, etc.  But they...

Large companies are going to use both.  They will have their own accounting team that handles the day-to-day transactions and internal financial reports, etc.  But they will also hire outside accounting firms to provide independent audits. 

UpTiTe wrote:

Yea, that’s what I said. 

Mike68 wrote:

Google “hobby loss rules” and you will find your answer 

blaster99 wrote:

I'll echo the statments of others reguarding speaking to many accountants. Find the right one, and take your time. A good accountant will protect you and...

I'll echo the statments of others reguarding speaking to many accountants. Find the right one, and take your time. A good accountant will protect you and won't file anything shady. You dont want the IRS poking around with a magnifying glass. Even if you are 100% honest, you just don't want that headache in your life. 

I don't have a moto company, but transitioning my business from sole proprietorship to an S Corp made a big difference in my tax liability. It all depends on the situation. Just take your accountants advice.

Never, NEVER use H&R Block or Turbo Tax/self file for any reason. If you do, you are likely donating some of your hard earned money to the government. Filing your own taxes without proper education is essentially like rebuilding your bottom end in your backyard without the proper tools. Just don't do it.

UpTiTe wrote:

If you own a parent company with a few smaller  supporting companies that in all do 100 million a year, you’re not going to Acme CPA...

If you own a parent company with a few smaller  supporting companies that in all do 100 million a year, you’re not going to Acme CPA around the corner. 

3strokemx wrote:

You're implying there are no other options between a part time local CPA and the big 4?  

UpTiTe wrote:

I would guess that big corps don’t even use a big accounting firm, I’d guess they have people on staff and a large law firm.    The...

I would guess that big corps don’t even use a big accounting firm, I’d guess they have people on staff and a large law firm. 

   The firm I use is a partnership that has 30-40 employees. They have people that specialize in business, tax, real estate tax, trust, and personal finance and possibly more. Maybe you’re including firms like this as an example? Then I agree with you. But a small corner shop won’t be able to properly service multiple companies that need those services and stay small very long.  

RichieW13 wrote:

Large companies are going to use both.  They will have their own accounting team that handles the day-to-day transactions and internal financial reports, etc.  But they...

Large companies are going to use both.  They will have their own accounting team that handles the day-to-day transactions and internal financial reports, etc.  But they will also hire outside accounting firms to provide independent audits. 

UpTiTe wrote:

Yea, that’s what I said. 

RichieW13 wrote:

You said they don't use a big accounting firm.

 

But big corporations use the biggest accounting firms.