Well, I finally have all of my ducks in a row to get all of my federal and state license, EIN, Etc. I have my accounting stuff setup as well. What I am wondering is what kind of fishing related things would fit in as deductions....reels, entry fee's, etc. etc. Does anyone have an idea of where I can find that information, or what some of you do.

My accountant told me that my trip to ICRBE (I cancelled though) would have been covered. He said the flight, my food, entry fee, etc could be deducted. He also said that my wife's expenses would not be covered. As I understand it you can also deduct computers used in business, the square feet of the shop area, etc. It would be best to sit down with your accountant to go over it.

Definitely go over it with a CPA ... do NOT guess at it or you could end up in a big mess. Deducting a portion of the square footage of your home is a great way to get audited AND will restrict your exemption from capital gains, under the new laws, should you sell the home.

IMO, there is NO substitute for a great CPA, attorney, banker and insurance agent ... establish relationships with them all and use them. In the long run, you will be much better off.

There is a fine line here - a trip to the ICRBE would have been a business deduction as an from the standpoint that it offers educational benefits as well as allows you to make necessary business contacts required in the normal course of your custom rod business.

Now when you start to deduct things like fishing reels and fishing trips and claim them as "field testing" and that sort of thing, watch out. Really, watch out. The IRS is not oblivious to this type of thing. Unless you can prove that it is somehow directly related to the actual expense of your business you do not want to get caught claiming such a thing. You should take legitimate expenses but be careful not to just start putting everything down as an expense of your business.

The first time I got audited (I get audited every 2 years now) the lady who showed up at my doorstep said this, "I don't know anything about fishing or fishing rods, but I know one heck of a lot about taxes." She did, and they all do. If it smells, they'll smell it and know where it's coming from.

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Edited 1 time(s). Last edit at 04/14/2008 07:48PM by Tom Kirkman.

And therein lies the problem. They don't have the faintest idea what you're talking about but they figure they'll make the decisions and you'll pay up just to get rid of them. Most do.

The only good way to handle it is to have your accountant do it. If you went to the trouble of setting up a business to the extent that you already have, don't mess it up with opinions, conjecture, or "my brother-in-law told me" stuff. No, putting a magnetic sign on your truck won't make it deductible. And no, you can't "lose money for the first five years". Get an accountant to tell you what you can do and what you can't do. Always err on the side of caution. If your accountant isn't spot-on clear about what you can do, and what might cause an audit, find another accountant (unless you are one, and even then, a tax specialist is a whole different animal.

Uncle Russ



Edited 1 time(s). Last edit at 04/15/2008 08:34AM by Tom Kirkman.

I had a salesman tell me he used a room in his house for a office. bought cigarettes and Booz for clients for holiday gifts. Well he had the tax people at his door to audit him. Luck for him there were no real personal items in the room just office stuff. Then the tax guy ask if could smoke. This guy nor his wife smoked (no ash trays), lucky again. From out of the Blue the tax guy starts talking about different types of liqueurs. Well again this guy lucked out neither he nor his wife drank and never did. The tax guy was trying to trap him. So watch out and do not try to beat the system. Those people have heard it all. They give classes inside the company and roll playi to see who can beat the system. It pays to be honest with them. They have all the time in the world to catch a cheat
Good Wraps Bob

Some good advice so far- but be careful who you go to for tax advice. I am a degreed accoutant but went to a tax "specialist" when I first set up my business this year.

Got some of the worst advice I ever heard. On top of that they claimed to have no idea what the F.E.T. was all about.

As Tom said the ICRBE does meet the requirements for a business deduction- btw I believe you can only deduct 50 % of your meal cost. As far as the wife's expenses, that might be a bit tricky- if she is involved in the business, yes, but be careful.(don't try deducting her trip to the day spa while you were attending classes ). Also taking a rod building class in and of itself is likely not deductible.

Purchasing an asset (fishing reel) or rod wrapper for that matter- is not an expense- it is an asset, but you may be able to to take depreciation on certain items, while other items- shop suplies like glue, finish , etc, may be taken as direct expenses. Depending on your circumstances, taking depreciation on your home is a major headache that can cause you problems at the time of sale of the house- tho deducting part of the electric bill, water bill etc- is ok- you will need to determine the percentage of space used in your business- for example if 25 % of your total home is used for your business- there should be no problem in deducting 25 % of each months electric bill- assuming you are actively building each month- and consuming electricity why doing so- (meaning wrapping by hand turning does not count), tho using the lights, heaters, dryers , etc. would.

Buying a blank is not an expense- it is part of your cost of goods sold- and needs to be thought of in that vein. It does reduce your net income as part of the cost of producing the goods (fishing rod)- but is technically not treated as an "expense" up front. When you purchase the blank it is part of your inventory and is classified as an asset. Only when it is sold as part of the finished package does it become part of the cost of goods sold.

Small hand tools may be taken directly as an expense, but larger shop items such as lathes, drill presses, etc- will likely need to be depreciated over their usefull life.

I'm not trying to offer advice- simply trying to give you ideas of what to expect- seek out a good accountant that knows the tax laws and business regulations for your locale- a licensed CPA is your best bet.

Mark

Thanks for the suggestions/guideance. I will seek out a CPA and see what they have to say. The difference between an assett and an expense also makes sense. I guess the biggest thing I am going to try to find out about is if tournament entry fee's could be considered part of an adertising expense since that is where I tend to generate most of the interest in my rods.

Scott Sheets Wrote:
-------------------------------------------------------
> Thanks for the suggestions/guideance. I will seek
> out a CPA and see what they have to say. The
> difference between an assett and an expense also
> makes sense. I guess the biggest thing I am going
> to try to find out about is if tournament entry
> fee's could be considered part of an adertising
> expense since that is where I tend to generate
> most of the interest in my rods.


Another tricky proposition- if you donate a build as a door prize or or are in some other way connected in an official capacity with the tournament(sponsor, etc.)- you should be able to take a deduction(at a minimum for the cash equivalent of your donation)- I can't make a call on the entry fee part tho- and I suspect you could go to several CPA's and get different answers. It's not a straight up yes or no situation.

Is there anyone at the IRS you can contact with a question like that?

As a general taxpayer no- if a CPA detemines he needs a specific ruling on a particular "rule" he can ask for guidance- or he can ask for a ruling on a situation, but if that is done you are stuck with the answer given for that particular scenario.

Give your CPA the full details- they will likely have more questions for you and should be able to give the proper advice for your particular situation without having to ask for a ruling from the IRS.

The way I see it -is your participation in the tournament "required" for you to do business there - in other words could you go to the event and show your rods and conduct business without actually entering the contest yourself- you walk a fine line when you try to utilize your business to write off your "play time" expenses.

I surf fish regularly at the outer banks- and enter surf fishing contests as well- but doubt that the IRS would accept the idea of using these trips as a business deduction for my rod building business- even tho I may actively try to drum up business while fishing- demoing new rods and such to people- showing off latest builds and handing out business cards at every opportunity.

I'm not saying you can't or shouldn't look into it, by all means it only makes sense to find out for your particular situation- and an intial meeting with a CPA to ask a few questions will be worthwhile- You can't expect them to work for free- but an initial consultation may be free or small charge- as long as you aren't drilling them for hours on every detail.