is there any way around this tax? my wife does our taxes and says the min. dollar value is $600.00. she figures if I do my last Varsity [High School] game it will cost me $130.00. while I do not do this for money only, I do get damm tired of paying the gov. for the pleasure of wearing my knees out!!!!!!!!!!!!!! thoughts and/or help will be greatly appreciated. thanks Rod in AZ
Does the school district send you a 1099? It is a net tax isn't it? So, you can offset income by all the expenses. Clothing, gear, gas and car depreciation, ref class fees. If you book your games through email or a website, you could probably even depreciate your computer. I thought it was $400 threshold. Of course, that is $400 net, so maybe $600 is what it is for you because you have $200 in expenses? If you made over $128,000 in a W2 type job then you would only pay a small percentage not the full tax. Either way, $600 in self-employment income should only cost around $90, so not sure how it is coming out to $130 for you. Unless your State is also involved? If you are close, then you should be able to find some more expenses to net things below the threshold for reporting.
Talk to an accountant. I'll confess that I am always a bit bewildered by referees that think somehow their referee income should be exempt from the taxes that everyone pays on income. Claim the deductions for the things you legitimately can.And keep in mind that the SS payments you make while you work determine what you collect from SS when you retire.
Where I am, you only have to pay tax on income for each school over $600. Our HS assignor keeps telling us that if we think we are getting close to $600 at one school to let him know so that he won't assign us to that school. This is usually more of a factor for people that do multiple sports. I have never run into that problem.
Not a tax accountant and didn't stay in a Holiday Inn Express last night, but..... I think the $600 magic number is for the school or district to determine if they need to issue a 1099 to a contractor. I think if you had $599 in income from 20 schools, the IRS or your state (if have state income tax) might interested in knowing about it. But then again, I'm not a tax accountant.
Ahh, now the original post makes sense. Gladly pay the $92 and be happy you live in such a great country where you can net $508 for getting exercise. Or come up with $201 of expenses to get under the $400 level where you have to report it. If you drive 10 miles each way to a game, the IRS will probably let you count that as like $12 in expense (you have to look up the current mileage cost they are allowing but it was like fifty cents a mile years ago iirc). A shirt or two, some socks, your ref recertification class, the mileage to get to that class, it shouldn't be hard. A bit late now, but you should go over this at the end of December. Then you could buy some new socks or a shirt or a new watch if you need one to make sure you have the necessary expenses.
And with the new tax law, it might be beneficial to start a pass through corp. Of course, I'm sure you mean that you have declared every cent that you have earned reffing if you got a 1099 or not... I've always had my W-2 job hold back more than required so come return time, I'm not in a hole with the government. Last year's taxes almost went sideways because I had traveled less for soccer while doing better paying games but my wife's Schedule C contributions went really well.
The amazing thing here is that you are not paying ANY tax on the other monies you have earned while reffing. I probably grossed between 8-10,000 reffing and umpiring this past year. Because I’m ethical as all get out, I declare it. And, even though I am retired, I still pay a ton of taxes. I choose to live in a high tax state,which means high property tax and a state income tax. I take my deductions. I easily paid more in taxes during some of my working years than some people will EARN in 10+ years. I am not complaining. I choose to live where I live, worked where I worked, and never worried about taxes. My advice: Pay what you owe, but not a penny more.
^ This ^ Just because one doesn't receive a 1099 (paid < $600), that doesn't mean the income is not reportable. Also, as independent contractors providing services to other legal entities, it can't be considered hobby income either (or so I was told by a CPA). My total mileage expense was a surprise - glad I tracked it and everything else. What I'll have to find out is if co-pays or deductibles for minor surgery due to injury while refereeing can be deducted too. (AR2, unplanned dive over a young ball-boy that had crept up and squatted to my right by the touchline when a counterattack launched into my half... I got over him but crash landed.)
I forget – are offsetting ref'ing expenses deductible against ref'ing income even if you're not itemizing (which will be the case for even more of us with the new higher standard deductions)? And blanket reps to all here who are offering (generally) good advice.
Lots of good advice in this thread (first and foremost, if you're not sure, talk to a tax expert). But whatever you do, don't do this! Adult Basketball League Referees Plead Guilty To Income Tax Fouls According to a criminal Indictment filed on September 15, 2011, by the Manhattan U.S. Attorney – yup, that’s where this is all going, if you can believe it -- the defendants and others used stolen identification information to ensure that referees were rarely, if ever, paid more than $600 per year in their own names.
Side note to AYSO (or other volunteer) refs. Expenses for charitable activities have rules for what is deductible as a charitable donation, including different rules for mileage. (Only helps if you itemize.)
The self-employment tax is a net tax and is figured separate than your regular wages and deductions. In other words, you use the Schedule C to report your earnings and your expenses, then get taxed on the difference. It is much like Rental Income, where you report rent but then all the expenses of owning the property, then get taxed on the rest. A quick look at Schedule C-EZ and it is pretty explanatory. What I forgot above is you have to report on your 1040 and for the Self-Employment tax.
I will have to look at my taxes from last year at home. But I know that expenses and income for the 'business' of refereeing get totaled up on Schedule C then put into your 1040. So itemization does NOT apply. Because I use part of my house for what little assigning I do, I deduct that square footage percent of the total house (200 sqft office in a 2000 sqft home would be 10%) as expenses including, electric, gas, water.
FWIW, I have read that claiming a home office deduction significantly increases your chances of being selected for audit. But no worries, they ain't auditing anybody this week ...
A bit of a tangent, but I doubt that is causative. Probably more like, claiming a large amount of business expenses (trying to offset a large amount of business income) will get you audited. Of which, almost any such person is claiming a home office deduction. You have to decide if the deduction is worth it as you will have to file extra paperwork to reduce your capital gain exclusion when you sell the house.
Anyone seeking to do the home office deduction should check with a tax adviser. It can get complicated. And the IRS knows it gets abused. And it can complicate things when you sell the house.
Others have stated some of this, but, to recap: All of your refereeing income is taxable, whether it shown on a 1099 or not. It is not true that there is no tax below a certain amount of income. Failure to report income is a great route to time in prison. You report that income on schedule C. Below the income line, you show your referee related expenses. Schedule C is the computation of your net referee income, which is the amount taxable. One of our retired assignors even tracked the postage for sending in his game reports. He was an IRS Special Agent. You do not want to meet an IRS Special Agent while he is on the job. He does not come with a green eye shade. He is packing. The net income is taxable for both self-employment tax (aka Social Security/Medicare) and income tax. Unless your day job takes you over the limit for social security tax, you will be paying both the 'employer' and the 'employee' portions of the tax, so it is a higher rate than what your day job's deduction would imply. (and I won't take us on the tangent of whether employers would pay you more if there was no employer portion of the tax, because social security taxes aren't going down in your lifetime.) Home office deductions will, as socal lurker points out, complicate your tax life. I've seen it done once and that was by an architectural designer who worked from home. It was still a complicated calculation and required keeping handy many years worth of records.
Getting mad about having to pay taxes is like getting made for a speeding ticket. You knew you were breaking the law, now you’re made when someone calls you on it. Take the risk of you want but know that penalty may not be a fun thing to experience. BTW, I’ve claimed every dime of referee money since I turned 18. 1099 or no. Plenty of expenses to offset it with. Uniforms being a big one recently.
There's also the fact, if I recall it correctly, that the look-back period for unreported income is significantly longer than for reported but improper treatment such as disallowed deductions. My recollection is that it's 7 years vs. 3 years, but that recollection dates back to the last century.
I've heard more than once: "Cool! Rec league pays us cash after each game - no taxes!" Nah, filling out and signing/dating the game pay sheets filed with the league treasurer leaves no record whatsoever... Heh heh... whenever wifey gives me static about another "box of ref crap" arriving (@GearRef would likey approve ), I remind her that I'm in the black on my "exercise habit" while she pays for her exercise class. Yeah, I still lose the discussion in the end, but feel victorious for a good 30 seconds...
Not a ref, but what do you mean IF you do your last Varsity game? My understanding is you're taxed on what you RECEIVED in 2018. So if you did a game on Dec. 27 and got the check Jan 3, it doesn't count in 2018 taxes. So it's not like you can turn down a game now and it make a difference.
1099-misc amounts for an individual's tax year are based on the payor's check date (as printed on the checks), regardless of the payee's actual receipt date or deposit date. Same thing when no 1099 is required (< $600) -- payor's check date determines the applicable tax year for an individual. As always, verify with one's tax advisor.