Used to write off my entries and winnings(very little) and my accountant depreciated car over time. When I wrecked car at San Antonio Raceway, he depreciated the rest of the value. I did have a business at the time.

quote:

Originally posted by jenavet:
id rather pay a fair amount and or the correct amount of tax than walk any type of fine line with the irs or state department of finance.

After "dealing" with the IRS, I'm in that same boat. Just to give an idea, the IRS TOOK about $150,000 out of the account-and I knew nothing about it until we went to move that money around, and the bank said we couldn't do it....day later, the CID's showed up and not peacefully...

It can be done, but it has to be real and completely documented. Separate bank account, tax returns, etc. But you also have to have a paper trail of money being generated, which means you have to have real sponsors.
If you just use it to advertise your own company you need to be able to prove that you generated income because of the car.
I got audited, and the agent apologized afterwords. I was told by the agent that most of the racers are really just trying to write off a hobby and thats why they crack down on them so hard.
It still cost me a bunch of money to pay my accountant to appear for me during the audit, but it was worth it to pass the audit with flying colors.

Get 1099, pay tax on amount won, just like the casino...otherwise you ARE commercial.

My experience with taxes and racing is this: My father years ago had an aggressive and accurate accountant that suggested that he write off all he could for a period of years, then show a profit for at least a year. That went on for years with no issue.
Then when I was in business, I would simply spend money out of the business account and that went into the advertising account in Quickbooks. It was a small part of business spendings really. I never had an issue for any of those years. I did have some accounts that the racing legitimately earned me. And advertising is difficult to always completely legitimize.
After I sold the business, I never wrote off racing expenses and have always reported winnings on a 1099. I think to have racing by itself as a business, you need to be clear and organized as Scott above said. Be clear about what your intentions are. The intention is to make money....that's the goal of businesses. If it is clear that there is no feasible business plan with the goal to be profitable, you are on shaky ground. And claiming that you could win a big race any day is weak. Consistent earnings from races and sponsorship are the profit centers that make it legitimate. I really don't think today with some of the changes in the IRS views that we could get away with what my father's accountant suggested and we did years ago. If you can pull out an account, with its own check book, and show earnings and a business plan, and profit here and there, the ground is much more solid.
IMO, when you use it as advertising for your legitimate business, it is much easier.

quote:

Originally posted by TORQIN:
Get 1099, pay tax on amount won, just like the casino...otherwise you ARE commercial.

This. If you are running it as a business and not a hobby it brings a lot more into it like CDL etc. If your racing is truly your main source of income, write everything off. But keep good records. Good Luck