IRS: 2020 tax year

[HLinNC]

For those of us in states that have pushed fall 2020 football season to spring 2021- many are likely to show little to no income for officiating but they likely had some expenses which would lead to an overall loss for 2020.  For those officials that have reported continuous years of positive income, is filing a loss for 2020 likely to trigger the IRS to want to take a closer look?  Do they have enough sense to realize that 2020 will be an odd year for many Americans?

[bossman72]

For those of us in states that have pushed fall 2020 football season to spring 2021- many are likely to show little to no income for officiating but they likely had some expenses which would lead to an overall loss for 2020.  For those officials that have reported continuous years of positive income, is filing a loss for 2020 likely to trigger the IRS to want to take a closer look?  Do they have enough sense to realize that 2020 will be an odd year for many Americans?

Even if they wanted to audit your high school officiating income, the audit would cost more than the potential new taxes/fines they would get from you.  So it's unlikely you would get audited.  That's why guys that report nothing have ever gotten audited.

Also, if you're deducting everything you can, you usually don't show much profit for high school officiating every year.  Mileage to games, meals after games/meetings, mileage to meetings, dues, uniform costs, etc.

[riffraft]

For those of us in states that have pushed fall 2020 football season to spring 2021- many are likely to show little to no income for officiating but they likely had some expenses which would lead to an overall loss for 2020.  For those officials that have reported continuous years of positive income, is filing a loss for 2020 likely to trigger the IRS to want to take a closer look?  Do they have enough sense to realize that 2020 will be an odd year for many Americans?

As long as your side income doesn't lose money year in and year out they IRS will ignore it.  It you are losing money every year, they could say what you have is a hobby and not a business.

But as was said before, it is unlikely to trigger an audit and if it did it wouldn't be in person, they would just ask you to provide additional information. Not worth their time to pursue.

[TxSkyBolt]

Almost all “audits” of private citizens consist of no more than a written clarification request. Long, long gone are the days of in person tax audits.

[TampaSteve]

I'm not a CPA, nor do I play one on TV nor did I stay at a Holiday Inn last night.

To my understanding, your Schedule C for independent contractor income, shall show a profit 2 years (or 3?) out of the past 5 rolling years.  If so,  it's a "business". 
If not, it's a "hobby".
A hobby cannot be used for tax purposes.

[ncwingman]

I would hope (but I could wrong) that while there's no 2020 income, most of your expenses have been mitigated as well. Maybe you paid your dues in the summer, but with no games was no travel/gas/new uniform etc. If you're posting a $150 loss on the Schedule SE/C, I wouldn't imagine that would trigger anything. Not to mention that *everybody's* income was screwed up this year, so I don't think they'll be hunting down people over claiming $100 loss instead of a $2000 income during a global pandemic.

However, I am in absolutely no way suggesting that you "forget" what day you actually paid the dues and claim the $150 in expenses were actually paid in 2021 when you do have football income to offset with expenses and just forego the Schedule SE/C this year because football was postponed. Because... by the letter of the law, that would be wrong... and you shouldn't do that.

 

[HLinNC]

Well I did have to pay state and local fees, buy the 2020 Reddings guide.  I did work 3 private school games so there will be a little income, probably, until I calculate mileage. 

When it looked grim, I held off purchasing any new replacement gear.  I keep finding brand new hats I've never worn anyway

[bama_stripes]

  I keep finding band new hats I've never worn anyway

Nice to know. I thought that was just me.

[riffraft]

I'm not a CPA, nor do I play one on TV nor did I stay at a Holiday Inn last night.

To my understanding, your Schedule C for independent contractor income, shall show a profit 2 years (or 3?) out of the past 5 rolling years.  If so,  it's a "business". 
If not, it's a "hobby".
A hobby cannot be used for tax purposes.

Well I am a CPA, .

The 3 out of 5 rule is not in the IRS regs and as far as I know is not in any of the IRS guidelines.

There are actually 9 factors that are in the IRS guidelines (not regs) as to whether it is a business or hobby. And while none of them are determinate in and of themselves, it is what an IRS would look at to determine

Whether you carry on the activity in a businesslike manner and maintain complete and accurate books and records.
Whether you have personal motives in carrying on the activity.
Whether the time and effort you put into the activity indicate you intend to make it profitable.
Whether you depend on income from the activity for your livelihood.
Whether your losses are due to circumstances beyond your control (or are normal in the startup phase of your type of business).
Whether you or your advisors have the knowledge needed to carry on the activity as a successful business.
Whether you were successful in making a profit in similar activities in the past.
Whether the activity makes a profit in some years and how much profit it makes.
Whether you can expect to make a future profit from the appreciation of the assets used in the activity.

A number of these do not apply to officiating.

All that said, it has long been established that Officiating sports is generally a business.  And it has also been quite historical that the IRS couldn't care less about going after officials because it isn't worth their time for what they might find.

So in other word I don't worry about the IRS when it comes to income taxes on officiating income, just do what I have always done.

That said, I claim every penny that I make and very detailed on my expenses.  I have no desire to lose my license, even though the chances of the IRS "auditing" me on my officiating income is very, very slim.

The above does not constitute any tax advice for yours or any others tax situation. Please consult your own tax advisor for advice on your particular situations.

[TampaSteve]

Was there ever a tax code like that? - about you having to show a profit x out of Y years. - otherwise, it's a hobby?
I could swear my CPA told me that maybe 8yr ago. - I dont think it was a dream.
..and my CPA is some sort of IRS enrolled agent whatever that is.

[riffraft]

Was there ever a tax code like that? - about you having to show a profit x out of Y years. - otherwise, it's a hobby?
I could swear my CPA told me that maybe 8yr ago. - I dont think it was a dream.
..and my CPA is some sort of IRS enrolled agent whatever that is.

I must admit that I was wrong. For all these years I have assumed that the 3 of 5 years profits was a "rule of Thumb".  However, I just did a search of the reg and it is a safe Harbor in Sec 183(d).  That means if you have profits 3 of 5 years you are a business.  What that doesn't mean is if you don't have profits 3 of 5 years you are a hobby.  You then have the 9 factors to consider to make a determination.

Been doing this for a long time and I still find things in the regs that I didn't know or assumed.  The Tax code is not the easiest thing to navigate.