Is this taxable income?

[JoJo]

There is a for profit social club that I do some hosting for.  I'm don't think I'm technically an employee but I did fill out a tax form last year.

So, if we host an event, we get a small amount of "event credit" that is effectively money that could be spent on other events this club does (trips, local shows, art classes etc).  May times we don't even get paid minimum wage (the event credit divided by the number of hours to host an event can be way lower than minimum wage) so effectively these need to be events we'd want to do anyways.  We do have the ability to cash out all or a portion of these event credits but so far I have not cashed any of it out, I have spent some of them on some events (and overpriced events at that).  I should also mention that if the club goes bankrupt and we have event credit sitting there, we would likely not be paid any of it.

All year long I was told that I would not receive a 1099 unless I cashed out more than $600 of credit, so I hosted enough events to get about $900 of event credit.  Now I'm hearing from another host that it doesn't matter if we cash out or not, that we will get 1099 if we earned more than $600 of credits.

Does anyone have an opinion on whether this is taxable?  The accounting department is so non-responsive and has now told me 2 different stories.  I don't want to file my taxes and then they give me a 1099 on April 14th leading to an audit.

 

[Quidnon?]

All year long I was told that I would not receive a 1099 unless I cashed out more than $600 of credit, so I hosted enough events to get about $900 of event credit. Now I'm hearing from another host that it doesn't matter if we cash out or not, that we will get 1099 if we earned more than $600 of credits.

Does anyone have an opinion on whether this is taxable?  The accounting department is so non-responsive and has now told me 2 different stories.  I don't want to file my taxes and then they give me a 1099 on April 14th leading to an audit.

This sounds like the "casual labor" rule.  I'm pretty sure this is taxable income, and that you should end up with a 1099 before February.  In kind trading of labor is something that is done in many fields, and yes, that is taxable in general.  If they file a 1099 on yourself, they are supposed to send a copy to both you and the IRS; so there shouldn't be any surprises.

[JoJo]

ugh.  I think I need to quit this.  If I'm getting taxed it makes it even more not worth it.  Literally, sometimes I'm paid $30 of event credit for events that last 3-12 hours, then I need to spend at least 20 minutes writing up a report afterwards.

OK... other questions.  As it is a 1099, can I write off mileage to these events?  Money I spent at these events (as host, we often buy our own dinner and non-alcoholic drinks).  Also, can I write off mileage to monthly host meetings that we get paid nothing for but are part of our hosting duties.  Unfortunately I didn't keep receipts but I might be able to calculate mileage and find some recent credit card statements.  After these expenses I'm probably closer to $0 but it will take several hours of work to save $200-something in taxes.

[ltt]

Sounds like it.  Form 1099 is for contract work or, as mentioned, casual labor.  Anything $600 or more, a 1099 is issued.  Just search for Form 1099 rules.

This social club events group sounds---I don't know--is it legit?  Have you ever tried to cash any of the event credits out to see if you get your money quickly?

[terran]

The whole event credit thing is kind of strange, and I don't know how that would effect things, but do note that whether or not you receive a 1099 does not indicate whether you what you were paid is taxable. One only has to issue an 1099 if they paid over $600, but income under that amount is still taxable.

The fact that you can redeem for cash makes me think this would be taxable just like any other payment.

Barters are also considered taxable income at the fair market value of the goods/services bartered, although I'm sure a lot of this goes unreported.

If you make more than $400 in self employment income (which this would be if it is income), then you also have to pay 15.3% self employment tax (employee and employer FICA taxes).

[Quidnon?]

OK... other questions.  As it is a 1099, can I write off mileage to these events?

Yes.

Money I spent at these events (as host, we often buy our own dinner and non-alcoholic drinks). 

Maybe, it depends.

Also, can I write off mileage to monthly host meetings that we get paid nothing for but are part of our hosting duties.

yes.

Unfortunately I didn't keep receipts but I might be able to calculate mileage and find some recent credit card statements.  After these expenses I'm probably closer to $0 but it will take several hours of work to save $200-something in taxes.

Sounds like a net loser of a deal.

[JoJo]

If you make more than $400 in self employment income (which this would be if it is income), then you also have to pay 15.3% self employment tax (employee and employer FICA taxes).

Is the $400 before or after expenses?  I calculated the mileage for a few of the events and it looks like after mileage at 54 cents a mile, the $900 will be $0 or negative.   If negative, can I write this off?

Thanks everyone for the advice!

[terran]

After expenses I would think, but take a crack at filling out a schedule C. You can write off business losses (expenses greater than income), but if you do it for too many years the business will be classified as a hobby and you won't be able to anymore. There may be other requirements around showing that you intend to run it as a profitable business (to stop people from starting businesses just to create write offs), so you would want to look into that.

[JoJo]

After expenses I would think, but take a crack at filling out a schedule C. You can write off business losses (expenses greater than income), but if you do it for too many years the business will be classified as a hobby and you won't be able to anymore. There may be other requirements around showing that you intend to run it as a profitable business (to stop people from starting businesses just to create write offs), so you would want to look into that.

Thanks everyone for all the answers, I think I'm good.  I only plan on doing this for a couple years so the ongoing thing isn't a problem, but I do have a general question about this tax loss/hobby thing.  I'm aware of this 2 year rule, but I have a hypothetical question:


Say there is something I want to do that is sort of a hobby/business that on an ongoing basis causes me to earn $5,000 but costs $11,000 in expenses  (this is totally hypothetical, it's possible this would earn more in the future).

So clearly in year 1 & 2, this would be a 6,000 loss.

In years 3+ what is the "gain".  Could I just say I have $5,000 earnings but write off only $4,999 of the expenses to show a $1 taxable gain?  Or is it something different than that?

[terran]

Looks like hobby expenses can only be deducted up to hobby income, and then only if you itemize, so not as attractive as schedule c losses. This  and some of the links from there should get you started: https://www.irs.gov/uac/newsroom/five-basic-tax-tips-about-hobbies

In particular, you should probably look at https://www.irs.gov/help-resources/tools-faqs/faqs-for-individuals/frequently-asked-tax-questions-answers/small-business-self-employed-other-business/income-expenses/income-expenses for whether you should even treat this current endeavor as a hobby or business (I would say hobby after reading that).