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musicmanryann
04-02-2009, 03:01 PM
As my wife keeps bothering me about all of our money that is going towards doing comps, I was thinking that perhaps it might be appropriate to get a Tax ID# and "go legit" with the whole thing. This would allow me to keep the finances associated with doing a comp separate from my personal finances and keep things clean. Does anyone do this or has thought of doing this? I am just trying to get an idea if it is possible and if any other benefits of going that route. Thanks!

~Ryan

Countryhb
04-02-2009, 03:15 PM
Great question!

Brew-B-Q
04-02-2009, 03:16 PM
You can certainly make a case for a BBQ team being a business. It's not going to stop your wife from complaining, necessarily, but it could help at tax time. I'm not an accountant, but I understand that in order to be legit in the eyes of the IRS, you will need to pass their "hobby or business" test. There are several factors involved, but the most important, and perhaps most difficult to obtain in bbq, is making a profit 2 (or 3?) out of every 5 years. If you lose money every year, I believe they can call you a hobby and force you to pay back whatever breaks you saved in prior years. Plus interest and maybe penalties.

This has been discussed a couple times recently, so a search may turn up some good threads.

musicmanryann
04-02-2009, 03:42 PM
You can certainly make a case for a BBQ team being a business. It's not going to stop your wife from complaining, necessarily, but it could help at tax time. I'm not an accountant, but I understand that in order to be legit in the eyes of the IRS, you will need to pass their "hobby or business" test. There are several factors involved, but the most important, and perhaps most difficult to obtain in bbq, is making a profit 2 (or 3?) out of every 5 years. If you lose money every year, I believe they can call you a hobby and force you to pay back whatever breaks you saved in prior years. Plus interest and maybe penalties.

This has been discussed a couple times recently, so a search may turn up some good threads.

Thanks! The first time I tried a search, nothing came up. I tried it again and there it was.:redface:

Anyway pertaining to that discussion, if you established a catering business to subsidize your bbq obessio...I mean...hobby, could you deduct at least part of your expenses for contests as a marketing expense? On the other hand could would you add your winnings as revenue to the catering business? I understand these are more apporpriate questions for an accountant, and I do plan on talking to mine once tax season is over, but I just thought I might have a chance at benefitting from others' experience with the question at least to scrtach my curiosity itch.

Brew-B-Q
04-02-2009, 04:07 PM
if you established a catering business to subsidize your bbq obessio...I mean...hobby, could you deduct at least part of your expenses for contests as a marketing expense? On the other hand could would you add your winnings as revenue to the catering business?

My unqualified opinion is yes to both of your questions. If you're going to claim expenses, you'll be expected claim earnings as well. I did have a discussion with an accountant friend regarding this several months ago, and went as far as getting a credit card and checking account in the Brew-B-Q name. I also applied for a DBA with the county, but that was partly to get into Restaurant Depot (which worked, by the way).

I'm still leery of the whole tax thing, personally. Now if I had a catering business with a revenue stream, I'd be all over it.

Finney
04-02-2009, 05:32 PM
As a hobby, you can deduct expenses to off-set what you win. But only up to the amount of winnings.

As a business there are more deductions, but all monies have to be separated from your personal money. You can't just declare yourself a business to further your personal activities.

Just Smokin' Around
04-02-2009, 09:40 PM
As a hobby, you can deduct expenses to off-set what you win. But only up to the amount of winnings.

As a business there are more deductions, but all monies have to be separated from your personal money. You can't just declare yourself a business to further your personal activities.

You can deduct expenses up to the amount of your winnings on your Schedule A under miscellaneous expenses which are subject to a 2% threshhold of your adjusted income. In short, your deduction starts AFTER you hit the 2% mark. If you make $50k, the 2% is $1,000. So that first $1,000 isn't deductible. If you win $2,000 and put in a $2k misc deduction for expenses, you end up being able to deduct $1k and pay taxes on the other $1k. If you and your spouse had a total income of $100k, you would get no deduction - 2% would = the $2k you could deduct.

If you do catering and create a LLC or other business organization, the company can sponsor the BBQ team an deduct it as an advertising expense. But, the company still needs to show a profit, so you need to be selling food to be able to sponsor.

beam boys bbq
04-02-2009, 09:46 PM
this was what i was doing three years ago
become LLC
why (it cost about 386.00 an year )
llc you serve bad food and get sewed they can only take the bbq business
and not the house and everythnig in it

i did mine on line

your winnings is profit
you sell your bbq profit

all the crap we buy loss of profit

my bbq business is getting money back this year be cause i loss money

i hope this helps
beam boys bbq LLC


york

ps
tax ID is an pain in the butt to get so i use my SS # as my ID
my tax man said it would be better in the long runn with all my income in one bunch

early mornin' smokin'
04-03-2009, 08:30 AM
im an xray tech, and of course ive thought about ways to write off my bbq purchases, like everyone says, you need to make money, to write off money. Its like gambling, you can only write off an ammount equal to what you win. With that being said you need a pretty serious tax guy who can figure bbq and equiptment depreciation into the equation. I know anybody, especially now who has a hobby, and are trying to make it look like a legitimate business will stand a chance to be red flagged by the irs.. Example, anybody who tries to write off photographic equiptment, as a side business, are almost always flagged for review.

Pig Headed
04-03-2009, 08:38 AM
I'm certainly not an accountant, but what I did was form an LLC, and get a catering license. This way I claim my equipment as business and the comps as advertisement since I can claim award winning bbq ( I didn't say 1st place award winning):-P, for the catering business. My accountant was very dubious when I just asked about the comps, but when I explained the advertising he got onboard. I do operate at a loss, so it's been beneficial so far.

BBQ_Mayor
04-03-2009, 09:10 AM
You can deduct expenses up to the amount of your winnings on your Schedule A under miscellaneous expenses which are subject to a 2% threshhold of your adjusted income. In short, your deduction starts AFTER you hit the 2% mark. If you make $50k, the 2% is $1,000. So that first $1,000 isn't deductible. If you win $2,000 and put in a $2k misc deduction for expenses, you end up being able to deduct $1k and pay taxes on the other $1k. If you and your spouse had a total income of $100k, you would get no deduction - 2% would = the $2k you could deduct.

If you do catering and create a LLC or other business organization, the company can sponsor the BBQ team an deduct it as an advertising expense. But, the company still needs to show a profit, so you need to be selling food to be able to sponsor.


I think we found a winner.
I think Finney hit the nail on the head. In the end, if you weren't going to be a "buisness" then it wasn't worth it.
I've looked into before and it just wasn't going to benifit me at all. To help you with your hobby and to keep the wife off your back, I would say dig ups some sponsors.

The Core Team
04-03-2009, 07:49 PM
As my wife keeps bothering me about all of our money that is going towards doing comps, I was thinking that perhaps it might be appropriate to get a Tax ID# and "go legit" with the whole thing. This would allow me to keep the finances associated with doing a comp separate from my personal finances and keep things clean. Does anyone do this or has thought of doing this? I am just trying to get an idea if it is possible and if any other benefits of going that route. Thanks!

~Ryan


****
My recommendation would be to speak with your accountant. Find out what system makes most since. But, fwiw, in my experience, a sub-chapter s corp is best for the type of venture you're discussing. Most of this should be straight forward. Check your state's depart of of corporations for how to register. It's often quite easy. Getting a tax id is equally easy, and all f this should be accessible online. BUT, be aware that if you want to do a sub-chapter S that there are certain requirements that you do it and make your designation in a timely manner. It's a form, and is easy to submit.

In the end, though, you can run yourentire set of expenses through it, and then if you generate any income, you can ofset it against your expenses and or losses. It will be worth it.
Best wishes!