Having a professional CPA firm handle the record keeping and taxes for any race team or single race driver is more and more important. The tax rules governing this business are complex and ever-changing.
For the individual driver, the appearance that his/her racing is a hobby and not an actual business is something that the IRS is constantly scrutinizing.The cost of doing business as a race car driver is not considered an allowable deduction if the driver cannot show that he/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 1 out of 3 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 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 this complexity is in addition to the normal accounting functions for any business.
We offer our racing clients the following services: