[Quantrill]

I read a post on another forum board about a guys shop that burnt down last month. One of the posters wrote that I hope your insurance covered the losses. Well then on more guys wrote insurance company's look at it as a business since we get prize money. So I called my insurance agent and started asking questions. He basically confirmed that if there is incoming coming in its is a business and it is not covered. I explained to him this racing deal is costing me money and isn't that considered a hobby at that point. Well he starts to back pedal a little and then said its a gray area!! BS

Anyway my question to you guys that have been doing this for a while is if most if not all insurance companies look at any racing that pays money back to the racers as a business why can't I get an LLC and right off all my expenses? Gas, Pit passes, hotel, blown engines and so on? After all if the insurance companies think its a business does the government also?

[dant]

you need to talk to an irs attorney

[Quantrill]

Someone has to be doing this now. I know people who own other business stick a company sticker on the car and call it advertising. But if the insurance companies think of this hobby as a business then the IRS must also. I will talk to my tax guy and see what I can find out.

[throb]

i write my racing off every year as a business. there is a book out there called the new racers tax guide that will get you started in the right direction. however....it would be wise to hire a good CPA as the stuff does get a little complicated.... here is a link to the book


http://www.speedwaymotors.com/Book-T...uide,2800.html

[Quantrill]

Thanks Rob that mite be what I am looking for.

[davidm]

Good topic! I've known a couple racers who have had fires and found out the hard way about what the insurance company covered. Best to talk to your agent, have a good inventory of EVERYTHING and take photos of your shop and stuff also helps.

[Jonr]

Not an expert, but I remember one time reading that you have to be able to occasionally show a profit for it to be considered a business.

[McInturff Racing]

Originally Posted by Jonr Not an expert, but I remember one time reading that you have to be able to occasionally show a profit for it to be considered a business.

I am by no means an expert on the business aspect of the racing business, as a mater of fact it is something that my wife and I plan on looking into more for the 2012 season. From what I have been told the Steve Smith books are a good place to start and plan on purchasing them and looking forward to seeing what gems this post provides.

With that being said, I do have a touch of insight on this particular part. A friend of mine who used to race dirt mods had his operation set up as a "business". What determines if you profit or not depends on what you write off. As a business you will be required to show profit (unsure of the amount) once every 5 years. We all know that output far exceeds income for the level of racing that most of us do. The way around this is once every 5 years you just make sure to write off less loss than you have winnings coming in. Every 5th year he miraculously had a year where the car didn't break anything or use any tires and the fuel for the tow vehicle was free. He claimed everything he could right up to the maximum to show as little "profit" as he could and still be on the right side of tax law. Here is where your friendly CPA could come into play for you and whatever you pay them is also a write off. Sure, it cost a bit more on the surface but if they help you write off more at the end of the year and avoid an audit it is well worth the cost and ultimately you come out ahead. After reading one of the posts here last year we decided that when we do set up our "business" a CPA is a must. I can't remember who it happened to, but they were audited and it was a huge pain in the backside because the IRS auditor flat out told them "I hate racing" and really put them through the paces. Can't remember how it turned out for them but I would prefer to avoid that process all together or at least make sure I had a professional making sure my ducks are all in a row. I am a firefighter\paramedic and a race car driver, not a tax law expert and know my limitations.

The insurance issue is something I had never thought about though. Definitely something I will have to look into this year, but it seems to me that if you establish and LLC for your racing so you can write it off as a "business" that the insurance company would HAVE to recognize it as such. Probably means more in insurance costs but at least it should provide a definitive answer and eliminate that "grey area".

[TQ29m]

Having been in business for over 30yrs, you can hear, and read about everything you want to. I know this, if you receive a 1099 form, you'd better dang well report it, or they'll come looking for ya. I don't know what to believe, I always thought you HAD to have a tax number, to be able to take, or report a profit or loss, but I know several people who somehow get by with it, and deduct it from their taxes, hell, it costs me more to show the 1099 as income, than it does to just not race as much, I guess, we'll find out this year, we didn't go much last year, so no 1099 needed. Bob!

[McInturff Racing]

Originally Posted by TQ29m Having been in business for over 30yrs, you can hear, and read about everything you want to. I know this, if you receive a 1099 form, you'd better dang well report it, or they'll come looking for ya. I don't know what to believe, I always thought you HAD to have a tax number, to be able to take, or report a profit or loss, but I know several people who somehow get by with it, and deduct it from their taxes, hell, it costs me more to show the 1099 as income, than it does to just not race as much, I guess, we'll find out this year, we didn't go much last year, so no 1099 needed. Bob!

The tax number thing is a good point. My wife and I own the duplex we live in and I know as far as rental property goes for the other half we do not have a tax number but there is a form (can't remember the number off hand) we fill out every year to record profit and loss on our "business" in terms of rent VS improvement and repair expense. Not sure if racing would be the same way but I would assume that it is. (Again, not an expert here. Just basing this on the experience I do have) If that is the case I would say no tax number is required but we plan on establishing and LLC that way if something SHOULD go wrong tax wise we "only" loose the race car and whatnot and keep our personal assets separate.