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VictorSuvorov

Income Tax - training and licensing deductions

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If you received a 1099 for the income you made from being an instructor you can use Schedule C (Profit or Loss From Business) and deduct your training expenses from potential profit. You need to have receipts to prove the expenses.

NOTE: I am not a CPA so check with your tax professional.

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your post did not contribute much to what i already knew. I was looking for a "qualified" advice. Thanks for your input, anyway.

Here is what IRS has to say:

"Ordinary and necessary expenses paid for the cost of the education and training of your employees are deductible. See Education Expenses in chapter 2.

You may also deduct the cost of your own education (including certain related travel) related to your trade or business. You must be able to show the education maintains or improves skills required in your trade or business, or that it is required by law or regulations, for keeping your license to practice, status, or job.

Education expenses you incur to meet the minimum requirements of your present trade or business, or those that qualify you for a new trade or business, are not deductible. This is true even if the education maintains or improves skills presently required in your business. For more information on education expenses, see Publication 970."

it is here http://www.irs.gov/pub/irs-pdf/p970.pdf
page 77

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I think your 2nd post says it all...

The "bare minimum education" - I.E. the 500 jumps leading up to your Tandem Rating - are not deductable...

The licence fees and ratings required by regulations should be tax deductable, as a real estate agent can deduct his continuing education and licence fees and a doctor can do the same.

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If you received a 1099 for the income you made from being an instructor you can use Schedule C (Profit or Loss From Business) and deduct your training expenses from potential profit. You need to have receipts to prove the expenses.

NOTE: I am not a CPA so check with your tax professional.



I deduct every single jump I make and depreciate every bit of my $50k worth of gear every year on my taxes. So long as you can show at least one 1099 from income earned in an instructor capacity, then it's all valid. I also write off the cost of my teamroom, jumpsuit laundering and mending, and all repacks (reserve and main), plus CYPRES maintenance. PIA symposium travel expenses, etc as well. I have been doing this though my tax professional for years.

Chuck Blue
D-12501, AFF-I, TM-I, SL-I, PRO, S&TA

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If you received a 1099 for the income you made from being an instructor you can use Schedule C (Profit or Loss From Business) and deduct your training expenses from potential profit. You need to have receipts to prove the expenses.

NOTE: I am not a CPA so check with your tax professional.



I deduct every single jump I make and depreciate every bit of my $50k worth of gear every year on my taxes. So long as you can show at least one 1099 from income earned in an instructor capacity, then it's all valid. I also write off the cost of my teamroom, jumpsuit laundering and mending, and all repacks (reserve and main), plus CYPRES maintenance. PIA symposium travel expenses, etc as well. I have been doing this though my tax professional for years.



I'm not an accountant either but will point out that the IRS does not like people who claim their hobby is a business and that receiving a 1099 is not what makes the difference.

The IRS especially does not like people who claim their hobby as a business loss against other income.

To be more pedantic, while business expenses come off the top on Schedule C hobby expenses are a miscellaneous deduction (you get them only if you're itemizing, and only to the extent that they exceed 2% of your gross income).

If you're working full time as a DZ bum with no other form of support you should be fine. Profit in 3 of 5 years suggests a business. Otherwise I'd talk to a CPA about my specifics.

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Remember that your occupation is skydiving instructor, the AFFI or TI are just areas of specialization. Like how a bush pilot and a 747 are both commerical-rated pilots.

From that basis:

Per the USPA, the Coach rating is the entry level skydiving instructional position. Given that, the TI/AFFI rating represents a level of training well above the established minimum to serve as a skydiving instructional professional.


-Blind
"If you end up in an alligator's jaws, naked, you probably did something to deserve it."

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To be more pedantic, while business expenses come off the top on Schedule C hobby expenses are a miscellaneous deduction (you get them only if you're itemizing, and only to the extent that they exceed 2% of your gross income).

If you're working full time as a DZ bum with no other form of support you should be fine. Profit in 3 of 5 years suggests a business. Otherwise I'd talk to a CPA about my specifics.



Let me be more specific: I am a retired US Army guy. The small retirement check I get from the government each month is the only "other" form of income I have and report every year other than the 1099 instructor work I do. The jumps I do, both at my home DZ and those where I am coaching/instructing/mentoring, are ALL considered "instructor proficiency training". Skydiving is not my "hobby," Likewise, I believe that any rated instructor who spends his weekends training others, regardless of what he does during the week, is entitled to those same deductions.

I am not sure how "into it" some of you other inidependant instructors are, but I have a LOT of time and money invested into this sport. I own my own tandem rig, my own AFF rig, two instructor/sport rigs, 12 wingsuits, at least ten other jumpsuits, two camera setups, video editing equipment, and I pay for a teamroom. If you have anywhere near that level of commitment, regardless of what your "day job" might be, then you are not going to get any hassle from the IRS when you itemize all of your expenses (so long as you can show your profit/loss by means of at least a 1099).

Chuck

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Im no CPA but you shouldnt even have to receive a 1099 for these expenses to be deductible. It would definitely throw a red flag if you were claiming a loss on the Sch C with no 1099 to verify the true income amount, but receiving a 1099 is not necessary to deduct expenses. Im glad you are doing it though, I have worked in a CPA firm for 3 years and have seen alot of 1040s. I knew that all the expenses and depreciation on the gear could be proven if the IRS wanted to come check it out but to me there is nothing wrong with the way you are doing it. All the income and expenses are legitimate and I would keep filing the way you are now and never look back.

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Ok, as a tax professional explained it to me.....

There are two race car drivers who are his customers. Each competes nationally.

Both are doctors. Both make money being doctors. And both have large sponsorships for their race cars (income reported).

Both have large expenses as race car professionals too.

One guy's business plan is to make money and retire from the doctor's office.

The other guy's business plan is to be a hobbyist, do it for fun, take days off of normal work as needed to race cars.

Both race car guys have lots of expenses. Both are losing money at the end of the year.

The guy with the hobby plans can deduct 100% of his expenses against 100% of his RACE car income and show a net taxable profit/loss of $0 for the hobby race car business, even though he really lost $100,000 on the race car business...

The guy with a business plan to retire from doctor work and eventually make profit from his race car business can deduct all expenses just the same as the hobbyist, but since he has a business plan, he can not only deduct the $100,000 in losses from his race car business but ALSO from the profits of his DOCTOR'S business...

I asked the tax professional, "what is a business plan"... He said, "eventually you would make money, or you would give up. If you lose money over a few years and give up, OK, you can deduct all that against other income because there are no restrictions for being a poor business man and making mistakes. If you lose money over decades and never give up, the IRS will wonder if you really have intentions of making profit."

Thus - what it boils down to - all of your skydiving income is offset by your skydiving expenses... But if you want to deduct it against other business/employment income, you better make some taxable income sooner or later in the skydiving....

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Agree with you totally! Dont expect to have a loss on your Sch C year efter year after year. Eventually you will hear from the IRS, the bad part is you never know what or when and audit is triggered.

On a side note, who would willingly admit that it is a hobby and not another form of trying to get additional income when its a tax advantage to you. Im sure some are more honest than others, but I would imagine alot of people would not call it a "hobby" when it could create a larger refund or minimize your tax liabilty. The CPA has to take the clients word, and how would he know the difference.

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I have a regular day job (six figures) and I do tandems on the weekend. I operate as a business and claim income from doing tandems- I also write off milaage since I could in theory work at any DZ- I depreicate my equipment, deduct training, repacks, USPA fees, internet(to check weather) phone I also SCUBA dive and am currently working toward an instructor certification- I deducted a trip to Curacao because I got some training while there- my intent is to do these businesses when i retire Get a good tax professional and remember - Pigs get fat- hogs get slaughtered.

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I agree with both sides of the fence - you can get extreme with deductions, but if you make income and you spent money getting the ratings that require that income, then you have a 'small home-based business' and you have real expenses that relate to that.

Even with all that, the worst the IRS can and will do is 'deny' the expenses. Fraud happens when you take deductions for which you have no proof or receipts.

I have claimed pretty much every jump i have made, my gear, auto expenses for travel, courses and more for the past 28 years in both Canada and the USA. Skydiving is my business, even when it was a hobby. The tax code allows me to run a small business from my home and that is what it is.

I have never had so much as a glitch or even a question from either the IRS or Revenue Canada, - what I have gotten is a nice tidy tax refund check every year.

Sure, be cautious, be reasonable, but go ahead and make all those deductions, track your expenses, keep receipts and do a Schedule C every year.

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jeswaincpa@aol.com

Contact her. Ex jumper and CPA. Been doing my taxes for years. Even when I use to recieve them "care of general delivery". AKA homeless bum.
U only make 2 jumps: the first one for some weird reason and the last one that you lived through. The rest are just filler.
scr 316

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As a tax professional for the last 15 years preparing many types of business and personal returns, about 450 this last tax season, I will do my best to answer some of this without writing to much of a book, ya right.

I will start with just because you have been doing something for years and have never been audited/caught, it doesn't mean you were doing something right or that it would be accepted in an audit, it just means you haven't been audited (not a dig).

It is a very small percent of returns that ever get audited. There is a general percentage and they do go in cycles of what type of schedules on a return or type of return will be in a higher audit base, i.e. the schedule C (sole proprietor/self employed) might be raised to say 7% one year, the next year Sch F (Farmer/Fisherman), the next year 1120 (C Corp), the next year 1120S (S-Corp), etc. When they raise the auditing of those specific types of returns, you are obviously at a higher risk of getting the random audit, which is how most are chosen, blind draw.

If you do show a continual lose (yes the 3 out of 5 is the rule of thumb) on a Sch C, you may draw attention to yourself and they may ask to see the business plan and if you are truly running it as a business to eventually make money, as stated if yes you are and can prove it, then lose all you want. Some of these are just compliance checks and not actually audits

As for deductions there is a lot of gray area. Mileage is not really one of them, the mileage that you drive to work (commuting) is NOT deductible, unless it is to go from your first job to your second (not straight to the 2nd if on a different day). Yes the trick is to have an office in the home (form 8829), the key to that is the office (room) must be used exclusively AND regularly for business use, i.e. you CANNOT use the kitchen table and call it an office. More home expenses can be deducted as well if you have a qualifying home office, i.e. taxes, insurance, repairs, utilities, etc. You also must keep a daily log of the miles driven for business (regardless of actual expenses or standard mileage), if audited and you don't have this or they can tell you just constructed it cause of the audit (make it dirty and use different colors), you will lose the deduction. Also slapping a sign on the vehicle does NOT make it qualify as a business vehicle.

The whole writing off all jumps and 100% of the gear. I would say with certainty, that in an audit (not very likely chance of being audited) you would lose at least part of it. You can legally only take the portion that is business and not the personal. If you keep track and you should, it would be easy to figure that percent. You are less likely to have an auditor nit pick the hell out of you if you don't take everything. As an Instructor, you have more to stand on saying that you have to stay current, but really it is very unlikely that you have to make fun jumps to stay current. As a vidiot only, I would give you a less likely hood of using the fun jumps as a currency requirement.

Yes all ratings and renewals are deductible. Training jumps can be classified as a business expense.

I think that is enough basics to get you on the right track.

I will also tell you that one auditor might have a different interpretation of some laws than another, just like a cop or judge. Then it all comes down to if you can prove similar case law in your jurisdiction or be good enough to set the tone for others to follow.

You are guaranteed to not get the deduction if you don't try, but if it is a blatant attempt to defraud (does not have to be just claiming something you do not have proof of) you do open yourself up to an unlimited statute instead of the normal 3 year.


Good Luck!
Be Safe and Have Fun, in that order!
Tuffy

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As a tax professional for the last 15 years . . .



You appear to know what you are talking about so I was wondering if I could hijack the thread for another question.

If you as a professional prepare a return that gets audited and basically fails (not enough active participation in a passive loss) does the IRS go after other clients to see if you made similiar mistakes?

A couple I know who used the same accountant as I do got nailed at an IRS audit. My situation is very similiar to theirs.

Should I move to Canada?
For the same reason I jump off a perfectly good diving board.

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You appear



Man at least I fooled one personB|!

On a serious note!

Yes if the IRS/agent feels that a preparer is doing wrongful/illegal/fraudulent returns, they may decide to audit anyone that that preparer has prepared a similar tax return for.

Start packing your bags, just kidding. Just cause they found 1 return I would not be overly concerned, but if they find several, there is a good chance of them wanting to see all returns of that type prepared by them.

Remember in a normal situation the statute of limitations is 3 years, so 2006 and before are closed years for the most part.
Be Safe and Have Fun, in that order!
Tuffy

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actually you reinforced most of what I said - since I make a living at skydiving, it is somewhat easier for me to have the business deductions.

I do track car mileage and deduct what is business related. I do have a home office and it is used for that business, which i can demonstrate via the emails, the documents, the accounting, etc that goes on there.

I do actually have a profit, not a loss, so I pay some taxes, but yes I claim all the deductions I can

Sure, if you make $500 a year and claim $5000 in expenses, eventually the alarm bells go off, but I am not sure I was ever in that range. But I operated 'money-losing' skydiving for a long time as well.

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