[mitchntx]

OK ... I think I have all the elements in place to call my racing a business.

I have been reluctant in the past because in CMC there is no prize money and therefore no attempt at income.

But now that I have landed this Texas Driving Experience driver/instructor gig, there is my avenue for income.

It is my undersanding that all expenditures that I incur to help me in my driver/instructor role can be deducted.

All my safety gear is obvious ... suit, helmet, gloves, underwear, shoes ...

But what about the CMC car itself? Could I not contend that without the car, I would have never gotten the job? And to increase or maintain my skill level, I must continue my education as a driver ... enroll in CMC hands on "seminars" ... al of which is deductible ...

Right now, I am being paid via a 1099 and as an individual. Should I set up a sole proprietership and have TDE pay the SP? Could I, as an individual, support that SP from my regular income and get a tax break that way?

What about my shop where I build and maintain the car(s) ... how would that figure into the equation?

[CMC#5]

If you're being paid then you are a business. If you didnt claim you're a business, you'd also be breaking the law! (IMG:http://www.frrax.com/rrforum/style_emoticons/default/laugh.gif) The fact that they are paying you and issuing a 1099 means that in the eyes of the law you already are a sole proprietor...you just havent registered as such yet.

There are several good books that guide the fledgling entrepeneur through the decisions needed to set up a small business, you might want to pick one up (cost will be deductable!! (IMG:http://www.frrax.com/rrforum/style_emoticons/default/laugh.gif) . We just did this because my wife works freelance in the tv ad business.

My quick opinion is that you set yourself up as a SP (yes you run a bigger risk in the case of lawsuits, but in this case I think the cost of setting up an LLC will be prohibitive and if you're really paranoid you can buy an insurance policy for less than it costs to create an LLC or an S-corp) and you deduct legitimate driving expenses. The business model is you are a consultant with expert driving, racing, and car setup skills that others will pay for. You set up a web page whoring yourself out for that purpose, and you proudly use your CMC car for advertising and to justify your rates. The car should have the business name all over it, and the web page should display it, experience, etc. The fact that most folks wouldnt hire you just yet is not the point....the government doesnt expect you to be a good business man, just a legal one.

With an expected income of ~$2k a year you can easily show 0 profit without getting into the more complicated details of trying to deduct part of your house (lots of rules about that) so I would stick to simple stuff like NASA license fees, entry fees, advertising fees (web site, decals), legal fees (state/county/city registration, fictitious name registration, business license etc etc) and other expenses required to maintain your status as a race car driver and bolster your credentials. I think if you set it up right and don't abuse the deductions you have a legitimate business. You could get away with deducting everything you spend in '06 and claim a huge loss (startup costs are a bitch eh?) but you might want to consider the cost of a major audit and simply deduct to essentially a $5 profit.

Another way of looking at it is that if you do nothing, you are breaking the law. You are required to at minimum register as a SP, and most likely pay state, county, and even city fees. At that point you might as well just keep going and deduct legitimate expenses down to a $5 profit, otherwise you're just giving the government money.