I *thought* I had figured out how to handle contingency income but made the
mistake of doing some last-minute research on the subject and now I'm even more
confused. What do people do for their racing winnings? BTW I'm assuming for the
minute that you don't have a legitimate race-related business, I'm just talking
your regular racer who wins a few events and gets a 1099.
Looks to me that there are two choices of how to handle this, both of which
TurboTax flags as possible audit flags:
1) Report it as "hobby income" on Line 21 and offset that with your racing
expenses up to the total of your winnings on your Schedule A. The problems with
this approach is that the first $1000 is taxable and Kumho for some reason
reports the income in box 7 rather than box 3 which is the correct one for
hobby winnings so there may be some IRS issues here.
2) Report it as a Schedule C business but make sure that you either make a
small profit or break-even (so you don't end up with the hobby loss problem).
Which approach are people using?
Thank you,
- Alan
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