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Question: Tax Implications of turning pro (Bowling)?

Hey, this is my question:

If a person bowled merely as a hobby, it is my understanding that related expenses will be nondeductable. However, if a person chose to turn pro and join the Professional Bowlers’ Association of America, what would be the tax effects? The problem is that the person has not yet become an approved member. He is still completing credits and other requirements.

Thanks!

Answer: As a hobby, related expenses (up to the amount of income received) could be deducted on Schedule A, if the bowler itemizes instead of taking the standard deduction.

To bowl as a professional athlete, there must be a reasonable expectation of making a profit in the business.

The IRS knows that establishing a business takes time. You do not have to make a profit the first year, but your bowling effort must be business-like. You must keep clear, concise, and accurate records of all income, including the source, description, and date. You must keep and organize copies of all receipts, and all paid invoices as proof of expenses.

http://www.irs.gov/pub/irs-pdf/p583.pdf Recordkeeping

If most professional bowlers have an average over 205, and your average is 192, the odds you are going to win tournaments is very low. The 192 average bowler is better than most, but if audited, IRS might disallow his claim to be a professional “self employed” bowler. More likely he is pursuing bowling as a hobby, winning a certain percentage of his games on the local level.

If membership in the PBA, and the certifications allow someone to enter professional tournaments, then trying to run the business without the necessary certification might not seem reasonable to the IRS.

If the individual is audited, and the IRS disallows the business claim, some deductions could be disallowed, and additional taxes could be assessed at that point.

However, if the bowler has been showing a profit while pursuing the sport as a hobby, the odds that he will succeed as a professional are more likely. If he has shown talent and experience through a history of being a “winning” hobby bowler, the IRS might look more favorably on his effort to turn professional. As a professional bowler, related expenses, could be deducted on Schedule C, Profit or Loss from Business.

Schedule C, and Instructions for Schedule C

http://www.irs.gov/pub/irs-pdf/f1040sc.pdf

http://www.irs.gov/pub/irs-pdf/i1040sc.pdf

As with starting any business, it’s a good idea to get professional advice, and plan your business endeavor beforehand. Especially if the professional bowler is looking for sponsors, or plans to compete in out of state tournaments, it’s good to get legal advice, and business advice ahead of time.

Good luck.

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