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brog315
12-19-2011, 11:46 AM
I have contacts with businesses who are interested in giving sponsorship money to my bbq team. They are wanting me to have a tax number so they can write off the donation. Is this something that is easily done, or would I be required to setup my team as a non-profit and get 501(C)(3) certification? Any thoughts/suggestions are welcome!

AZScott
12-19-2011, 12:22 PM
It sounds like they are looking for an EIN number which is easy to get. If you are starting to take sponsorship money and/or winning money I would talk to a tax professional for their guidance. Check this out:

http://www.irs.gov/businesses/small/article/0,,id=98350,00.html

JD McGee
12-19-2011, 12:24 PM
I have contacts with businesses who are interested in giving sponsorship money to my bbq team. They are wanting me to have a tax number so they can write off the donation. Is this something that is easily done, or would I be required to setup my team as a non-profit and get 501(C)(3) certification? Any thoughts/suggestions are welcome!

Yep...easy peasy...all you need is a business license to get your tax id...start here texas.gov (http://www.texas.gov/en/Pages/default.aspx)

Good luck! :thumb:

PCDoctor_1979
12-19-2011, 01:08 PM
Nope, you don't have to be a 501 (c) 3. Your sponsor will have to issue you a 1099 if they pay you more than $600 in one year and you are not incorporated. JD has is right, business license and Tax ID. I don't know about the business license process in TX, but getting your ID# from the IRS can be done on-line and you receive your number instantly. Here's the IRS link to apply for your EIN:

https://sa1.www4.irs.gov/modiein/individual/index.jsp

Congrats on landing a sponsor!

brog315
12-19-2011, 02:04 PM
Thank you for the quick replies. I already have an EIN. Signed up for one when I was looking into getting a more permanent RD membership.

I'll have to read up on the texas.gov and see what business license process looks like. So, they can donate money and still utilize a tax write-off as long as it's attached to my EIN? With this setup, am I going to be responsible to pay taxes on all donations? So much to learn, but hopefully the sponsorship money will be worth it in the end.

HawgNationBBQ
12-19-2011, 02:40 PM
Basically, I think your friends (sponsors) plan to send you a 1099 form at the end of the year. Very common. Basically, you need an EIN number which it sounds like you have. Your sponsor is probably a corporation of sorts and wants to be able to expense (they used the term write-off) the contribution to your team. Talk to an accountant about the specifics, but in simplistic terms, you want to spend almost as much as you bring in.

Some quick thoughts on sponsorship.


Make sure you understand what the sponsor is looking for in return, if anything.
Some teams, including ours, make drinks and dinner for our sponsor on Friday before events.
If your sponsor wants to attend your events, I recommend that you only take money from people that you really like to hang out with and offer for them to attend at a specific time. You will be busy preparing for your event.

Hope that helps.

didisea
12-19-2011, 04:32 PM
EIN's - the federal gov't in the health care legislation, was going to require a business (or even person) who pays someone more than $600 per year to report it on a 1099 at year end. This was (thankfully) repealed, but as a result, business are being more vigilant about collecting this information because they are cracking down more on businesses who aren't properly reporting payments currently.

"Donate/501c3/Write off" - What the sponsor is essentially doing is giving you money to market their products and/or promote them in some way. They cannot write it off as a charitable donation unless you are actually a charity, which you are probably not. Your sponsor can write it off as a marketing or general business expense. Think about NASCAR, DuPont gives money to sponsor a race car team, which is not a charity.
So when your sponsor says "write off a donation" they really mean they are giving your BBQ team money which you have to report as income.

You can deduct your reasonable BBQ team costs to offset this income, up to the extent of the income from your BBQ "hobby." You cannot use a loss from your BBQ "hobby" to offset income from other sources - like your salary from your main job, or investment income. If you want to read more about this search "Hobby Loss" or "Hobby Income" on the irs.gov site.

BBQ hobby income would also include your winnings from competitions.

If you are a qualified charity, then they must get a letter from you acknowledging the donation to be able to take the deduction. Otherwise they are just asking for your TIN/EIN to be able to issue you a 1099-MISC at year end.

As a side note - if you are running a catering business and a BBQ team, you have a for profit business, and you can write off the costs of the BBQ team as a way to promote your catering business, as a marketing expense.

Please check with your tax professional to understand your record keeping / reporting requirements.


Your Tax Payer Identification number (TIN) can be your SSN, because all income/expenses to offset income will flow to your personal income tax return unless your are a corp. You don't have to get a EIN (employer identification number) unless you are a LLC or you have incorporated or have employees.

brog315
12-19-2011, 11:36 PM
Thank you for the wealth of information. I will speak with the potential sponsors to determine where we go from here. They are good people and we definitely don't mind spending time with them at comps. We'll need to see what their expectations are, and go from there