Frequently Asked Questions About Sports Officiating Tax Issues
What should I do if I receive notice from the IRS saying my return has been selected for audit?
After picking yourself up off the floor, consider hiring an experienced tax professional to represent you at the audit. Often times, the mistake made by taxpayers who represent themselves is saying something that causes the auditor to look into issues other than those that they originally intended to audit. IRS agents are trained to audit the taxpayer, not just the return. Because of this frame of reference, some of the questions asked by the auditor are hot buttons or emotional areas for the taxpayer. To avoid the audit being based on emotions instead of facts, it is very important that the person dealing with the agent be knowledgeable about both the tax issues that may be raised and the system in which the auditor must work. Your most important job is having complete documentation in good order. This process starts when your return is filed, not when your return is selected for audit. If you have knowingly understated your income or grossly overstated your deductions, do not disclose this to anyone but your attorney. An attorney is the only person having privileged communication.
Do I have any retirement plan options from my officiating activity?
Yes. If you’re being treated as an independent contractor, you may be able to contribute to a retirement plan over and above what you are doing now. The options and limitations available to you will vary based on the rest of your tax facts. This area requires consultation with a professional familiar with your situation and goals.
Are the officiating camps I attend deductible?
Yes. Your education and training to stay current in your skills are directly related to the business of officiating. Some of the expenses that might be incurred include travel, meals (at 50%) and registration fees. Keep careful record of these expenses at the time they are incurred.
Is all my mileage deductible if I leave my primary employment and stop by home on the way to a game?
No. If you went home before you went to the game site, the miles from home to the game site would be personal miles. A simple way of looking at it is if you are going from one business location to another business location, your miles are business. If you are leaving from your home, the miles are personal. This gets even more complicated if your home is also your business location (office in the home). The key to maximizing this deduction is keeping good records of the use of your vehicle and using common sense when traveling from your primary job to your officiating assignments, meetings, etc.
If I receive my fee in cash do I have to report it?
Yes. Income is not determined based on how it is paid to you or how much it is. If you provided services for the cash it is income to you. This will be true even if you do not receive a Form 1099 for the income.
If I travel away from home overnight can I deduct my spouse’s expenses if she or he travels with me?
No. Unless your spouse is officiating also, those expenses are personal. Only your expenses are deductible.
Can I deduct my telephone for use in my officiating business?
Yes. At least you may deduct the long distance charges relating to your business. If your home phone is also your business phone, the monthly base fee is considered a personal expense first.
If I go to a game in the sport I officiate to watch the officials can I deduct those expenses?
No. The expenses related to this activity will be personal and nondeductible. The training you might gain is too ambiguous to be directly related to your business.
Can I deduct my computer?
Yes and No. If you are officiating as an independent contractor, then you should be able to deduct the business portion of your computer. If you are officiating as an employee, the computer must be a condition of employment before the business portion would be deductible.
How long should I keep my records?
For federal purposes you should keep proof to support your claim to a deduction for as long as your income tax return can be examined. Generally, it will be necessary for you to keep your records for three years from the date you file the income tax return on which the deduction is claimed. A return filed early is considered as filed on the due date. The statute of limitations for state returns will vary by state. Check with your tax advisor for your state requirement.