Having a professional CPA firm handle the taxes for any racing team or single racing driver is extremely important. The tax rules governing this sport/business are complex and ever-changing.
For the individual driver, the appearance that his or her racing is a hobby more than a business is something that the IRS is constantly scrutinizing.
To lose money several years in a row will usually trigger an audit. The IRS does not allow deductions for the cost of doing business as a race car driver if the driver cannot show that he or she is driving as a full-time profession. They will look at earnings and costs over several years and the business should show a profit in at least 2 out of 5 years.
If the IRS feels that the driver is racing as a hobby and not as a business, all costs will be disqualified since they are not considered costs of doing business.
Race teams receive many tax benefits and credits. The racing business incurs many high costs and it is important to qualify as a business in order to take advantage of these benefits.
Costs related to traveling to and from racing events, all costs related to purchase and maintenance of the racing cars, salaries for employees working on maintenance and transportation crews, costs of promotional goods that are sold at events, such as T-shirts, mugs, and other items are all costs to be deducted from the income derived from winning races and drivers making personal appearances.
Tracking all of these costs is a monumental task, since there is a lot of travel involved and many valuable cars that must be tracked as to their individual winnings and costs.
All of this complexity is in addition to the normal accounting functions for any business.
Turlington and Company, L.L.P. has experienced CPAs on our staff who work closely with the NASCAR Racing Teams. This experience is valuable, since many accounting firms are not familiar with the many rules that govern business activity for racing teams and individuals.
Race drivers and team owners have the same employee benefit issues, fraud concerns, accounting questions, stockholder reports and business valuation needs as any business. At Turlington and Company, L.L.P., we have a large staff of professionals who specialize in various accounting disciplines. Large businesses are many times concerned about potential fraudulent activities within their organization or from outside sources. We have two dedicated Certified Fraud Examiners on staff who can assist with risk assessment, investigate suspicious financial transactions or resolve ongoing sensitive disputes. It has been estimated that most businesses lose 5% of revenue every year due to fraudulent activity.
Turlington and Company, L.L.P. prides itself on our audit staff, our membership in the American Institute of CPAs Employee Benefit Plan Audit Quality Center and our ability to handle the most complex of tax reporting or accounting scenarios. We are available to assist any business with consulting services when a business needs guidance or advice on succession planning, wealth preservation, forecasting or purchase of new software.
Our clients are able to access professional help when any accounting or financial management issues arise. Please contact us to discuss how we may be of assistance to your team!