Tax advice for referee / independent contractor

Discussion in 'Referee' started by wjarrettc, Jan 31, 2004.

  1. wjarrettc

    wjarrettc Member Staff Member

    Joined:
    Oct 1, 2002
    Location:
    Cliffs of Insanity
    Club:
    Carolina Railhawks
    Country:
    United States
    This is my first tax year as a soccer referee and I'm trying to figure out how exactly to claim the income from the 1099-Misc that our league sent me as well as deducting my expenses for certification, uniforms, etc.

    A while back I seem to remember seeing a website with advice on how to handle this. Does anyone have the URL handy or have any pointers to get me started in the right direction?

    Thanks in advance.


  2. jkc313

    jkc313 Member

    Joined:
    Nov 21, 2001
    I don't have an URL but it's treated like any other outside business. You file a Schedule C. Be sure to deduct EVERYTHING including mileage, any books you bought,wathches,pens,notebooks,videos,etc.
    If you were just over $600, be careful this year and don't take a few games to keep you under. Be sure to be able to document everything you deduct.
  3. Footer Phooter

    Footer Phooter Member

    Joined:
    Jul 23, 2000
    Location:
    Falls Church, VA
    Schedule C or Schedule SE?
  4. steever

    steever Member

    Joined:
    Jan 14, 2002
    Club:
    AFC Ajax
    Maybe both; maybe neither.

    Sched. C is used to report profit or loss from a business you operate or a profession you practice as a sole proprietor (such as refereeing).

    Sched. C-EZ may be used instead of C if your expenses total $2500 or less (and certain other basic conditions are met) and you have a net profit.

    Sched. SE is used to figure your self-employment tax. If your net earnings from self-employment are less than $400, you do not have to file SE or pay self-employment tax.


  5. jkc313

    jkc313 Member

    Joined:
    Nov 21, 2001
    \

    You're correct in this. Gotta figure in that nasty Self Employement tax on SE
  6. shinpan

    shinpan New Member

    Joined:
    Jan 30, 2004
    Here's another angle on how to report, I saw this on a tax bulletin board the other day. Link is:
    http://moneycentral.msn.com/community/message/board.asp?board=TaxCorner

    and scan for a thread titled: "Self Employment Income/Expenses" thread dated 12/8/03. The most salient response:

    QUOTE
    I have officiated since 1983, but I do not consider my activity as entered into for profit (although I actually do make a profit at it). I enjoy reffing and would work the games (lol but not those adult league games!) for free. Consequently, I report my game fees under the hobby-income rules.

    Under those rules, gross fees are entered on Line 21 (other income) on your 1040. Your expenses, but only up to the amount of your game fees, are then added to any other 2% itemized deductions you may have on Schedule A (itemized deductions). You must itemize to claim these deductions, and only total 2% misc. deductions exceeding 2% of your AGI is actually deductible.

    Some refs do fill out Schedule C for their income, but you have to watch out for hobby loss rules. If you do not make a profit in at least 3 out of 5 years, your business could be reclassifed as a hobby. That would result in having to use the procedure I described above, with a resulting balance due to the IRS.
    END QUOTE

    I make no representations as to the accuracy of the above information! Just posting another idea; as always, check with your tax advisor.

    Shinpan
  7. 2wheels

    2wheels Member

    Joined:
    Oct 4, 2005
    Probably, the single-most aspect is avoiding triggers for an IRS audit. Information contained herein mainly applies to the officials in the USofA, but the main themes are applicable to all national equivalent of the IRS.

    Here's what people who are in the know suggested to me:

    • Do not file late. If necessary to file later than midnight of 15Apr, remember 18Apr is the last date. See Extension information.
    • Avoid numerical errors. This especially applies to referees who do not reconcile scores at half-time and full-time with their crew. Since it is easier now-a-days to use any of the online utilities to avoid mathematical, there is no reason why an error must crop up. Just make certain the SSN is correct - this is the most common error in getting an audit. Get network-savvy a bit fellows.
    • Paying less than what you owe. If your sole income is from footy, then pay what you owe at the time of filing. Do not pay less, uncle will collar you for short-changing him. If you have no option but to send less monies, give a good and proper explanation. Read more about the installment option here.
    • Dubious deductions and large amounts on Schedule C. Taxmen, having no sense of humour, look at filers with a sharp eye, especially those who claim deductions without having good and valid supporting records for the write-offs being claimed. This may include using business-from-home (as will be the case of referees) deductions in last year's return, and then not reporting gains from sale of that home for current year. (discussion of this is beyond the scope of this forum)
  8. jkc313

    jkc313 Member

    Joined:
    Nov 21, 2001
    I have to disagree with the last 2004 post. If you are making a profit this is NOT a hobby and you should be using schedule C. Take ONLY those deductions you can prove. This means saving receipts, writing down mileage etc. File schedule C. If you get your income below $400 you do not have to file schedule SE.
  9. Paper.St.Soap.Co

    Paper.St.Soap.Co Member+

    Joined:
    Jul 29, 2010
    This is why giving tax advice on a forum is a bad idea. First of all, I wouldn't deduct everything that you buy. When you look at how the IRS views business expenses you have to consider that if you can use the item for other non-business activities, it's likely not a business expense that you should deduct. For example, I use my referee watch when I go running during the week and at the gym. Is that watch a business expense? My CPA says "probably not."

    To the OP, I would strongly suggest seeking the advice of a tax professional instead of taking the cursory advice of forum members who have no responsibility for giving you accurate information (i.e., if you get audited you can't say "well someone on bigsoccer said...).
  10. cleansheetbsc

    cleansheetbsc Member+

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    Mar 17, 2004
    Location:
    Albany, NY
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    --other--
    Why? If you can demonstrate that it was purchased for the purpose of refereeing, than you have a legitimate business expense.

    Now if you are buying a Rolex, then there is an issue. If you are buying a sports-oriented stopwatch, it seems that you need it to do your job.

    You should question your CPA.
  11. Paper.St.Soap.Co

    Paper.St.Soap.Co Member+

    Joined:
    Jul 29, 2010
    I'm not saying you can't deduct I'm just warning you what might happen if you have to prove that expense. As you are likely aware of, some expenses are not clear cut business expenses. There are several cases where you only deduct a portion of the expense because it is not solely there for business use.

    One of my old college buddies is a hated auditor with the IRS and I ran this by him years ago when looking at deducting referee expenses. He stressed the fact that when you are audited there are a lot of expenses that aren't questioned, like if you can prove you traveled to a tournament everything is good (hotel expense, mileage, food costs). But when it gets into the equipment that you use to do your job things get shady. Referee uniform? No problem. Running shoes and a watch? Well then they start saying "what else can that be used for?" Remember this isn't as clear cut as running a small business from your home; it's a glorified hobby, really.

    Again, I'm just saying that in my experience its better to be conservative with claiming expenses on equipment instead of the shotgun approach of deduct everything. It will only come up if you are audited but by that time you aren't having fun. Regardless of how you choose to approach this just make sure to document everything.
  12. cleansheetbsc

    cleansheetbsc Member+

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    --other--
    Full disclosure, I am a CPA and have prepared many, many, many tax returns - none for referees, but if you bought it for direct business use - there is no problem. Yes, you may be limited to the percent you use it for (like a home office deduction), but if you purchased it for work, by all means take the deduction. You shouldn't do your taxes out of fear of being audited if you are honest.
  13. Paper.St.Soap.Co

    Paper.St.Soap.Co Member+

    Joined:
    Jul 29, 2010
    Good to know and I appreciate the advice. From now on I'll take my own advice and stop giving advice for taxes on a forum, lol.

    Given my background, I get a lot of legal advice questions and I'm always hesitant to give it. Not because I don't want to give free advice but because "snap shot" advice can be wrong without the full disclosure of the situation. I think that applies here, too, and people with specific questions are best to consult someone who can get the big picture and provide sound advice.
  14. Pierre Head

    Pierre Head Member+

    Joined:
    Dec 24, 2005
    But since you go running and go to the gym to keep in shape in order to pass the tests and referee the games, then it is a legitimate expense. If you also have another nice dress or business quality watch (Rolex;))that you use for going to work, social events etc., thus being able to show that the referee-type watch is only used in connection with the refereeing activities, this will support your claim.

    I think this should be 2 out of 5 years. However, just make sure you show a profit every 3rd year. If it is close, report all the income as usual, but leave off some deductions. Even $10 profit should be enough to satisfy this rule in theory.

    But not if you already max out on Social Security deductions in your regular job, which I think is about $107K this year, so the lawyers and CPAs can avoid it!

    (Disclosure: I am not a CPA or a lawyer, so this is all just another ref's input for the benefit, or not, of some newbies!)

    PH
  15. cleansheetbsc

    cleansheetbsc Member+

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    Not all.
  16. Pierre Head

    Pierre Head Member+

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    Dec 24, 2005
    Sorry. It was just a little joke because there were posts from a lawyer and a CPA. Perhaps I should have said plumbers!

    (BTW, why would anyone be a CPA for <$107K pa after all that work to
    pass the CPA exam? I would expect at least $250K, then your taxes would not go up:D)

    PH
  17. jkc313

    jkc313 Member

    Joined:
    Nov 21, 2001
    While I am NOT a Tax consultant, I absolutely stand by what I said and MY CPA says if you buy a referee watch you would be crazy not to deduct it. Don't be stupid and try to deduct questionable items but by all means deduct the things you buy for your job, your mileage , and any materials you use to help you referee. And of course if you have questions, ask your accountant but if I had an accountant that said I shouldn't deduct my watch, I'd look for another accountant.
  18. cleansheetbsc

    cleansheetbsc Member+

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    Location:
    Albany, NY
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    --other--
    definitely plumbers.

    Why would I want to work late into the night billing at $150 per hour when I can be refereeing a U-12 Girls 4th division match for $38. Seems like a no brainer.

    As for me - quality of life issue. I am 35 pounds lighter with a lot more free time since I got out of the public accouting field and went to private industry.
  19. refontherun

    refontherun Member

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    Location:
    Georgia
    Country:
    United States
    That doesn't sound like a very confident answer from someone who is supposed to know. It seems that a stopwatch/timer is a absolute necessity to do the job as a referee. That being the case, you should be able to claim it.

    I could use my whistle as a rape prevention device, but I couldn't do my job as a referee without one. I can't claim that either?:confused:
  20. Paper.St.Soap.Co

    Paper.St.Soap.Co Member+

    Joined:
    Jul 29, 2010
    I intentionally kept my answer vague since I don't like giving specific advice on matters involving tax code, hence the "probably."

    It is necessary to do your job. I would agree it's a business expense. The difficulty is what percentage of time is that used for business and what percentage is personal. Cleansheetbsc is clearly more qualified than I admit I am, so listen to him :)

    Perhaps I'm just a little gun shy after my third audit.
  21. DadOf6

    DadOf6 Member

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    Taylorsville, UT
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    Real Salt Lake
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    United States
    Instead of not listing you watch as deductions, maybe you should stop listing Fido and Rover as dependants :D
  22. whyref

    whyref Member

    Joined:
    May 26, 2006
    As I have read through the responses I am struck by the fact no one has asked what would you wear and use as a referee that you would wear or use in everyday life? Other than a watch or your underwear? All of my equipment is packed to travel or in the laundry and I can not imagine using any of it for everyday use; including the shoes.
  23. cleansheetbsc

    cleansheetbsc Member+

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    --other--
    Three times! You should have a better chance of being struck by lighting three times.

    Its not because you referee that you are being audited. You are setting off the metal detectors at the IRS because of something on your return. Do you run a business through a schedule C? Mormon or super generous with Tithing donations? Jeez. Three times?
  24. Paper.St.Soap.Co

    Paper.St.Soap.Co Member+

    Joined:
    Jul 29, 2010
    It is definitely not because I'm a referee. I had taken some time off from a traditional job and focused on my investment real estate work, including flipping some houses and managing about ten rental properties. So suddenly I dropped off of paying excessive amounts of tax contributions every two weeks to having to pay big at the end of the quarter or year. Plus a lot of apparently suspicious amounts of capital gains.

    The reason I focused on getting my referee house in order is they looked at everything each time, not just my real estate income. I've found now that I'm back to also doing a traditional job, the IRS seems to have lost interest in me. Thank god.
  25. fairplayforlife

    fairplayforlife Member

    Joined:
    Mar 23, 2011
    Country:
    United States
    Look the basic things you need to think of when doing your taxes and claiming referee income are as follows:

    1. You must file a Schedule C, this makes you more apt to be audited as per the IRS. Schedule C filers are more likely to commit some form of tax evasion based on risk this is why more people that file Scedule C are audited.

    2. You can only expense things which are "Ordinary and necessary business expenses". That does not include anything that you use for anything other than refereeing. Your shoes and under armour are not deductible if you use them to say, play soccer or workout.

    Mileage can be deducted but unless you have a car for just refereeing you should file it in miscellaneous expenses at the given rate of 50 cents per mile for 2010 and 51 cents for 2011. Filing your mileage in the mileage section implies that you use your car exclusively for business and you then must portion out all miles driven for the year for personal or business.

    Gym memberships are not deductible for the average referee. While the job of refereeing states you should be in good physical condition this is obviously NOT a requirement for continued employment. So unless you are at least a National Referee you probably can't justify this deduction.

    Lastly with all expenses, you must have the documentation to prove your expense. This is not a credit card statement but a reciept. The IRS wants itemized reciepts. Also for mileage they want a log book for all miles you drove and where you went.

    I am pretty conservative but I do know that if I am ever audited I will be able to keep all of my deductions and not have to pay anything extra. Hope this helps.

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