Any CPA's here

[Tex1961]

Any CPA's or instructors with experience on tax write-offs...


I don't have a lot of questions, but here is my primary one which if answered would probably be the majority of what I need.

Below is a summary of events and expenses... These are not actual, but fictional for purposes of this question.

My current hobby is shooting... As such I usually invest around $250.00 per month between range fees, ammunition and such. I just got my Instructors certificate and would like to do some independant work. While I don't plan on this being anything remotely profitable, I would still like to see some small return. My main question is tax deductions...

I've setup a website to advertise my profession, I have business cards printed up.. so on and so on...
I have some capital expenses. My instructors fees, training aids such as blue guns, laptop for slides. etc. etc.
I also have existing range fees and ammo for training (to keep my skills up). Now, many of these current fees such as range membership and ammo were related to my hobby, but I will now utilize those ranges to conduct classes and as said before, ongoing proficiency training for myself....

What all that being said. Anyone know the rules related to how much or what percentage of those past and current fees are now deductible.....

Hope this wasn't to convoluted of a post...

Thanks

P.S This is kind of rude to ask, but unless your a CPA or currently have experience with these deductions, I would humbly ask that you do not reply. Assumptions and guesses don't quite fly with the IRS.... Thanks again...

[Keith B]

I have an overarching LLC as my business. Under that I have 4 DBA’s (Doing Business As alias's). I see you already have a business, so you could do a DBA for the training portion.

Now, as what can be written off, that depends. I am an instructor, so that is one of my businesses and justified by classes and training I provide during a class. I do not put any firearms under the business, because if I fold that portion, it becomes an asset that must be accounted for and I want to keep it. I do write off expenses related to classes (paper, ink, folders, supplied ammo, targets, etc.). I also write off costs of certifications (NRA Instructor renewals, LTC Instructor renewals) and liability insurance for the range. You could probably justify ammo costs for your continued training, but I would only think a portion of that due to personal gain you get not related to instruction.

Be aware though, if you do not make a profit on you business for I believe 3 years in a row, it becomes a hobby business and is no longer valid for deductions.

[Tex1961]

I have an overarching LLC as my business. Under that I have 4 DBA’s (Doing Business As alias's). I see you already have a business, so you could do a DBA for the training portion.

Now, as what can be written off, that depends. I am an instructor, so that is one of my businesses and justified by classes and training I provide during a class. I do not put any firearms under the business, because if I fold that portion, it becomes an asset that must be accounted for and I want to keep it. I do write off expenses related to classes (paper, ink, folders, supplied ammo, targets, etc.). I also write off costs of certifications (NRA Instructor renewals, LTC Instructor renewals) and liability insurance for the range. You could probably justify ammo costs for your continued training, but I would only think a portion of that due to personal gain you get not related to instruction.

Be aware though, if you do not make a profit on you business for I believe 3 years in a row, it becomes a hobby business and is no longer valid for deductions.

Thanks Keith,

You are correct on a lot of points for sure... I've held my DBA for the past 18 years and do run a full time business.... I've already setup my accounting system for the new business. I do know that for the IRS, I just legally need my SS# as my identifier.... As you said, instructor fees, targets, office supplies, etc for sure to be deducted.... I'll probably dedicate X number of rounds per month as training and I'll look into how often I use the range for classes and deduct a percentage of the yearly cost based on that....

Also to let you know, the 3 year loss really isn't a set rule, more of a guideline... What the IRS really looks for is that you are actively engaged in the business. Some companies due to research, development, etc.. can and do sometimes take losses up to 5 + years... Of course that opens them up to audits.

Interesting part about not taking a capitol deduction on your firearms... I doubt any that I purchased for my classes would be anything that I personally would want to use and keep for myself... If I ever do, I would just sell it back to myself and take it as income on my schedule C...

Thanks again for your reply.... Of course the virus has pretty much put a halt on my schedule, but that's fine... It's giving me time to finish my website, get supplies ordered and develop my various training classes that I want to teach....

[thenick_ttu]

I'm a Texas CPA and everything that was mentioned in the OP is a fully deductible business expense. Range fees, ammo, targets, etc are all deductible because you need to keep up your skill level in order to provide a quality service to the public. That is all part of doing business.

There is definitely a fine line between a hobby and a business, but the fact that you are advertising, have business cards and have a website make a GREAT case that you are indeed running a business and this is not simply a hobby that you are trying to deduct. You may not be very good at running your business since you (hypothetically) have losses every year, but nonetheless you are still trying to run a business and you hope to make a profit some day.

As far as the IRS checking in on you to determine if this is really a business, Keith is somewhat correct that showing losses for many years in a row is a big red flag but that doesn't automatically mean you will be determined to be a hobby. It is a "facts and circumstances" test and the items mentioned in my previous paragraph give you some real facts that are on your side. Additionally, reporting many years of losses on your personal return via Schedule C is significantly more risky that the alternative, which would be to file a separate partnership tax return to report all of this business activity. I have clients in unrelated fields that have filed partnership returns with business losses for 10 straight years (or more) and the IRS has never come knocking... knock on wood.

I'd be happy to answer any other questions you may have.

[thenick_ttu]

I also want to add that having a separate bank account that is used ONLY for business related expenses and income is a must. That will be the first thing the IRS looks at if they’re trying to determine if you are a business or hobby.

[Tex1961]

I also want to add that having a separate bank account that is used ONLY for business related expenses and income is a must. That will be the first thing the IRS looks at if they’re trying to determine if you are a business or hobby.

Wow... Thanks for the reply....

I'm trying to decide that part out now.... Obviously I do have my business account setup and I accept credit cards, checks, PayPal.... BUT... The names of my existing company and the new training business is so different that I don't want to confuse customers.... On the other hand I don't know if I want to got through all of the trouble setting everything up from scratch again...

I've hesitated to bother with an LLC in the past because as a Singe entity LLC, the corporate veil can be easily broken... And since I run off of my SS#, do not really receive any benefits from it... Or at least none that I can determine..... But I may go ahead with a Generic sounding LLC now to cover both DBAs.. That way even in the future I can open other DBAs if I'm so inclined and run under the LLC.