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 examination?
After picking yourself up off the floor, consider hiring an experienced tax professional to represent you at the examination. The most common mistake made by taxpayers who represent themselves is saying something that causes the examiner 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 that frame of reference, some of the questions asked by the examiner 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. That process starts when the expenses are incurred, not when your return is prepared or when your return is selected for examination. If you have knowingly understated your income or grossly overstated your deductions, what the IRS calls fraud, do not disclose that to anyone but your attorney. An attorney, not a CPA or tax preparer, 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. For example, your attendee fee for the NASO Sports Officiating Summit would be deductible. Some of the expenses that might be incurred include travel, meals (at 50%) and registration fees. Keep careful record of those expenses at the time they are incurred. If your camp fee includes meals it is 100% deductible, no adjustment is required for the value of the meals.
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 the 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. That 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 also on a business related trip with you, those expenses are personal. Only your expenses would be deductible.
Can I deduct my cell phone for use in my officiating business?
Yes, you may deduct the amount related to your business. If you have a flat fee plan, you need to document the portion that is used for officiating, usually by looking at the minutes used.
If I go to a game in the sport I officiate to watch the officials, can I deduct those expenses?
Maybe. The expenses related to this activity will usually be personal and therefore nondeductible. The training you might gain is too ambiguous to be directly related to your business. If the purpose is to evaluate the officials for your association, then the expenses would be deductible.
Can I deduct my computer?
Again, maybe. If you are officiating as an independent contractor, then you can 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. 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 professional for your state requirements.