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JD McGee
01-04-2011, 09:14 PM
Hi folks...this past season was my first year having a comp team associated with my catering business as a "DBA"...("SouthPaw BBQ" DBA "Left Hand Smoke"). I am hoping some of you seasoned vets can steer me in the right direction as to what is legally deductable...etc...etc...:becky:

HBMTN
01-04-2011, 09:22 PM
I imagine you will get many different opinions on this.

Red Valley BBQ
01-04-2011, 09:53 PM
I thought I remembered reading somewhere that you can deduct a certain percentage of your net loss. Similar to gambling deductions. Not 100% certain on this though.

txschutte
01-04-2011, 10:08 PM
If you show a loss for two years, they throw it out and call it a hobby. Better win more than I do.

landarc
01-04-2011, 10:16 PM
JD, from a person that owned a business, but, not BBQ, there are a lot of variables in terms of what and why to deduct. If you made enough, I would advise you take some money (which is deductible) and find a good CPA to explain the plus and minus equation in terms of deductions.

In terms or private property used for business, you need to keep track of what percentage of strictly business related costs were incurred. You can deduct a percentage based upon this use. Essentially, if you store your BBQ equipment in a specific location and use it strictly for business, then the square footage of that storage area may be used as a deduction off of you house expenses. However, if you use it for home cooking (not competition) then you may not have a deduction.

Your expenses for doing business for profit are deductible. But, you need to track them. You may want to deduct a certain amount of your vehicle value, but, you need to recapture it if you sell or dispose of it. Mileage and repair costs are figured on a percentage of use basis.

In the end, I suggest you find a way to only use your catering and competition gear for business and not for personal use. Then it becomes business equipment and it is fully deductible, based on either a one time deduction or Section ??? (I forget the number) deduction over time. This has to do with maintaining a deduction without over-stripping your profit.

I would suggest you try not to run a loss, and if you do, try not to do it two years in a row. Ideally, if it is a hobby and you do not need money, you can run it as a break even proposition, or if you must, make a profit and pay a little. If you run consecutive losses, you are throwing up audit flags, do it three or four times and you will trigger a silent audit. Hobby businesses with deductions are a bad idea.

This can go on forever...I did this for 9 years and came to hate my company and all the people I hand selected, trained and supported over the years. Now, I am poor and happy that I no longer own or run a small corporation. My best advice is to get a good accountant to at least guide you for one year.

JD McGee
01-04-2011, 10:22 PM
Thanks Bob...I have all the home based deductions for SouthPaw BBQ down (thank you Turbo-Tax...LOL!) I'm just curious as to the comp deductions...travel, entry fees, meats, etc. :thumb: My daughter is an accountant...I'll give her a jingle. Hey...I paid her tuition for 4 years...it's the least she can do! :becky:

Sawdustguy
01-04-2011, 10:38 PM
Hi folks...this past season was my first year having a comp team associated with my catering business as a "DBA"...("SouthPaw BBQ" DBA "Left Hand Smoke"). I am hoping some of you seasoned vets can steer me in the right direction as to what is legally deductable...etc...etc...:becky:

JD,

I am not discounting the information that others will give you in this thread, but if I were in your shoes I would simply talk to a good Tax Accountant. He will probably give you the most accurate information.

landarc
01-04-2011, 10:44 PM
Hey, you already paid for a accountant, perfect!

Rub
01-04-2011, 10:52 PM
As the others have said, get professional advice.

jbrink01
01-04-2011, 11:15 PM
I'm married to my CPA. I'm just a cook.

CivilWarBBQ
01-05-2011, 01:54 AM
First, the obligatory advice to seek professional help...

-o--o--o--o--o--o--o--o--o--o--o--o-

OK, so here's our story:

When we started out, head cook Johnny paid for everything for the two of us. We did only local, non-sanctioned events where there was no real money to win, just bragging rights and exposure to potential catering customers. As such, these competitions were considered promotional and all expenses written off as "marketing" on the chart of accounts.

Fast forward to 2010. Now we are cooking a couple weekends a month all season long, mostly sanctioned State Championship events. We travel farther, the team is larger, and we have higher expenses. The team now also generates income via sponsorship deals, cooking classes and product sales. It became too confusing to have the team funds co-mingled with Johnny's business accounts (now grown from catering to a full restaurant).

So we opened a new checking account just for the Team, and all expenses are paid out of that account. Much easier to track things for the member's tax purposes, and goal for the Team is not to make a profit, but to fund itself. On the happy occasions when we win a big check, it is generally used for large equipment purchases i.e. a new trailer. Tax-wise it's pretty much a wash, with income = expenses, basically a hobby as far as the IRS is concerned.

Dunno if that helps, but its working for us so far.

-Gowan

Smoke'n Ice
01-05-2011, 07:29 AM
I pay about $2k a year for a good CPA with credentials for tax. She only does tax work for corporations and a few small businesses. I find it is worth the money. I tried it myself early on in life and the cost from fines and late fees of our friends at the IRS far exceeds the CPA cost. Even the cost of a knife is deductable as small wares.

Jorge
01-05-2011, 09:43 AM
As others have said, hire a qualified pro. When I started my business I got a lot of free advice from friends, that frequently contradicted each other. When I was able to find the time to look into it I'd often find that both were wrong!:laugh:

Peace of mind, and avoiding issues with the IRS is worth every penny you will pay for a qualified accountant! Keep good records and talk to them before major purchases as you go along, but most importantly sit down with them at the beginning and figure out where you want this thing to go, and a reasonable timeline for that to happen. You may be surprised at some of the input you will get that can help you down the road.

ThomEmery
01-05-2011, 10:05 AM
I show a VERY small profit each year (pay taxes on it)
and am able to write off most of what I do
The corporation owns the team

Lake Dogs
01-05-2011, 10:29 AM
JD, definitely ask your daughter, but I do taxes for a living... For what it's worth,
it's probably a hobby even if it is under your business name. As a hobby, you can
take all of your expenses straight off all of your hobby earnings, up to the amount
that you earned, but no more. Meaning, if you spent $800 and won $100, you can
use $100 of the costs to zero-out the winnings and pay no taxes on the winnings.

I always take the tack of "what if you're audited". IF you can show that it's a true
business expense, an expense of the business itself and NOT a hobby, then it's
treated as any other business expense. However, honestly, it'll be very tough to
explain this to an IRS auditor, UNLESS you actually vend at the contest. In that
case you'll want to separate the vending costs from the competition costs. It
gets murky here. Some will just say that the competition is basically advertising for
the vending and a cost. That's a tough sell to an IRS auditor with a clue. As
vending thereby being a business, the vending expenses (food cost, set-up, travel,
etc) are considered expenses, but only those attributable to the vending. Without
getting into details, the tough part will be mileage, etc.

I believe Ford does this quite a bit (vending at comps as well as competing). I'm
sure he deducts trailer costs, as it's needed to vend. I'd ask Ford about the mileage,
etc. and how/if he separates it.

Speaking of Ford, I haven't seen him around in a while....

Best of luck with it.

Scottie
01-05-2011, 11:30 AM
I completely agree. Especially if it's under a SS# and not a registered LLC. dba's really don't mean much. The IRS doesn't care about how you interpret, it's about how they interpret. While there are plenty of professionals here, I sure wouldn't risk a IRS audit by relying on info from a Forum. I would talk to someone that is knowledgeable on this topic.


JD, definitely ask your daughter, but I do taxes for a living... For what it's worth,
it's probably a hobby even if it is under your business name. As a hobby, you can
take all of your expenses straight off all of your hobby earnings, up to the amount
that you earned, but no more. Meaning, if you spent $800 and won $100, you can
use $100 of the costs to zero-out the winnings and pay no taxes on the winnings.

I always take the tack of "what if you're audited". IF you can show that it's a true
business expense, an expense of the business itself and NOT a hobby, then it's
treated as any other business expense. However, honestly, it'll be very tough to
explain this to an IRS auditor, UNLESS you actually vend at the contest. In that
case you'll want to separate the vending costs from the competition costs. It
gets murky here. Some will just say that the competition is basically advertising for
the vending and a cost. That's a tough sell to an IRS auditor with a clue. As
vending thereby being a business, the vending expenses (food cost, set-up, travel,
etc) are considered expenses, but only those attributable to the vending. Without
getting into details, the tough part will be mileage, etc.

I believe Ford does this quite a bit (vending at comps as well as competing). I'm
sure he deducts trailer costs, as it's needed to vend. I'd ask Ford about the mileage,
etc. and how/if he separates it.

Speaking of Ford, I haven't seen him around in a while....

Best of luck with it.

JD McGee
01-05-2011, 11:38 AM
Cool beans...thanks guys! It is under my ssn...so...since we didn`t make THAT much money...I`ll take the "hobby" deduction route. I`ll probably consult with a local tax accountant just to be sure...my daughter lives in Cleveland, OH.

Jeff_in_KC
01-05-2011, 07:17 PM
I wonder how they'll look at large amounts of money? Think there will be a limit to what you can make and still call it a hobby? On the bright side, I'm thinking only about HALF of our 2010 winnings will see us getting a 1099 in the first place.

C Rocke
01-05-2011, 07:30 PM
I wonder how they'll look at large amounts of money? Think there will be a limit to what you can make and still call it a hobby? On the bright side, I'm thinking only about HALF of our 2010 winnings will see us getting a 1099 in the first place.

If you can see them thru all the smoke and ash...