Guiding and the tax man?

[Wahl eye]

Those of you that guide, do you use it as a tax write off. Can you give me some tips how to do it? Is it considered legitimate by the IRS, I sure don't want any trouble from Uncle Sam. It seems like anyone with a boat calls themselves a guide now a days. What does the tax man consider to be a buisness? Any ideas or information would be helpfull.

Thanks, Wahl

[bob oh]

You really need to see an accountant who has quides for clients. Every stiuation is different and he can be your "guide" to taking full advantage of your tax situation. I talked to a good accountant first and it really made a difference in my decisions.
Bob

[Jiggereye]

Wahl,
In Wisconsin we are required to purchase a guide license. To
assure that there were no gray areas we formed a business. It includes our guiding and tournaments. Keep track of each day you are guiding with a customer, fishing or prefishing for a tourney,
or entertaining sponsors or sponsors guests. All of the costs of these activities are legal expenses. By the way our taxpreparer made it very clear that "anything" recieved from a sponsor is income. You must also include any type of income you recieve, or should I say all. It isn't worth it to us to nit pick over the expense of personal recreational fishing so we base our expenses on the cost of replacing items used up or lost while guiding or tourney fishing. When it comes to tax time you will have to do additional tax forms to show profit or loss from business so make sure you keep receipts. Lawrence

[Jiggereye]

Wahl,
In Wisconsin we are required to purchase a guide license. To
assure that there were no gray areas we formed a business. It includes our guiding and tournaments. Keep track of each day you are guiding with a customer, fishing or prefishing for a tourney,
or entertaining sponsors or sponsors guests. All of the costs of these activities are legal expenses. By the way our taxpreparer made it very clear that "anything" recieved from a sponsor is income. You must also include any type of income you recieve, or should I say all. It isn't worth it to us to nit pick over the expense of personal recreational fishing so we base our expenses on the cost of replacing items used up or lost while guiding or tourney fishing. When it comes to tax time you will have to do additional tax forms to show profit or loss from business so make sure you keep receipts. Lawrence

[Bob G2]

What I have learned, in general, is watch your profit/loss statements. I have heard that if you post yearly business losses for 3 years over a 5 year period, the IRS will possibly try to consider your "business" as a "hobby", thus negating any write off. This is something I heard and you may want to check on this with a good tax person.

[Tommy Mac]

Wahl eye,

What Bob has said is true. From what I understand as a Hobby, you still deduct your expense's up to the amount of your income.
You will not however be able to claim a loss. Hope this helps. Just make sure that you keep excellent records. Good Luck. Tom

[donnie]

I have been guiding for 4 years, after i pay my license, insurance, etc, I dont show much of a profit so it has beeen a tax benifit, however this year my accountant says we have to show some profit. I keep good records and dont play in the real gray areas, take my depreciation on the boat, mileage on my truck, etc. Talk to a good accountant before you go too far, ive had friends who tried to write off Tournement stuff and ended up in trouble because they tried to take too much, most accountants (at least the good ones) know how far you can push it without getting in trouble. If you decide to go ahead with it keep all your recipts, records etc just in case.

[Robertp]

Overall, you have received pretty good advice. As stated, talk to a good tax practitioner. I'd recommend a CPA. Determining if an activity, ie: guiding, chartering, etc., is trade or business can be very subjective and is based on all facts and circumstances. An activity must rise to the level of a "trade or business" in order for expenses associated with the activity to be deducted in full. Some of the factors to consider are, has a profit motive been established, is there a reasonable expectation of deriving a profit from the activity, do you have prior expertise, do you devote substantial time to the business activity, is the activity a substantial part of your overall income, do profit motives outweigh any elements of personal pleasure, or recreation, from the activity. No factor is determinaative by itself and it is not dependent on the number of factors indicating a "for profit" motive versus the number indicating a "not for profit" activity.
If an activity does not rise to the level of a business, it is referred to as a "hobby". Income from "hobbies" must still be reported, but expenses associated with "hobbies" are limited to the amount of income only and cannot be used to generate losses. Also expenses are only deductible on Schedule A, so you would have to be able to itemize deductions to benefit from them, while trade or business expenses are reported on Schedule C and are deductible directly against the income from the activity and subsequently against any other income you have.
One other possibility would be a combination of recreation and business which requires an allocation of expenses between the two activities, including depreciation on the boat and other equipment.
There is a "safe harbor" provided in the statute that, if met, causes a presumption, that an activity is engaged in for profit. To meet the safe harbor a business must generate a profit in, at least, three of five years ending with the year in question. If the safe harbor is met you are still not home free but you will shift the burden of proof for lacking a profit motive to the IRS which could be proven by them, say if the profit years were very minimal in amount, but the loss years were very large in amount.
Again, talk to a knowledgeable CPA who can also advise you how and what records to keep, what expenses you can deduct, other tax and non tax factors regarding operationing a business,etc.
And, in case you are wondering, I am a practicing CPA for the last 30 years. Hope this helps.

[Doug/CO]

Thanks, Robertp, for the detailed response. This is the type of solid information shared by users that has made this board the friendly and very useful site that it is. Also, more fun to read than bashing and negative responses that sometimes show up. We could all take a lesson.

[Backwater Eddy]

Great info, thank's!

The part that scares me a bit is ....

"Do profit motives outweigh any elements of personal pleasure, or recreation, from the activity.

I can see a IRS person saying, "Well it looks like your haveing way to much fun to call this a REAL job Mr. Backwater?".

CHA-CHINGGGGG!!!!

:D

Backwater Eddy

[a pro with intent]

Please induldge me a little rambling here. I am a professional angler with full intentions of making money. In fact, I intend to win every tournament I enter. Seriously, my intent is to make a full-time living in the fishing industry between guiding, writing and tournaments, however, I have not reached that so called "safe harbor" yet. My very competent tax preparer assures me however that I do meet the intent requirements. I make sure to claim all income derived from fishing i.e. product from sponsors, seminar fees, guide income etc. etc.. i also take every legal deductions. My true goal is to become successful enough to hide income as most businesses do.

Just a curious thought. Major league baseball has stated that small market teams have been losing money for years. Does this make them less of a business than they were before and have the billion dollar owners lost their tax write-off yet.

Name with held just in case big brother is watching.


Take my pole and my jug down to the river, going to sit up on the bank. Everytime a fish starts to nibble going take me another drink. I'm going fishin'. Just to ease my mind.
Elvin Bishop