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The PDGA is neither a tax firm, nor a law firm.  We cannot give you tax advice or legal advice, and tax and legal professionals can’t ethically give non-clients advice, either (so we can’t just ask our accountants and attorneys to write this).  However, we can give you a basic, academic framework to help you understand, as a TD, how the IRS taxes sole proprietors engaged in business. This discussion assumes that you’re a sole proprietor who is not affiliated with a club that’s organized as a nonprofit corporation/501(c) organization – you’re just a TD runnin’ stuff.

So, let’s cover two basic facts about taxes.

1) The IRS taxes profit when it taxes businesses, whether we’re talking about corporations, LLCs, or sole proprietorships.

Let’s say you run a shotgun start True Amateur Event C-Tier with a $20 entry fee. You fill with 72 players, all of whom register through DGS. That’s $1440 in entry fees, and you sell 9 hole sponsorships for $20 each, a total of $1620. You spend $194 on sanctioning and per-player fees, $120 on a porta-potty rental, $100 in park fees.  You buy 72 custom-stamped discs for about $850, shipped, as player pack items and you spend $156 on trophies. That leaves you with $200.

If you keep that $200 (which you totally can do), that is the profit for that event. That amount, not the $1620, is what you owe taxes on. Make sure to keep and file all receipts for tournament expenses.  Here’s the IRS’s Self-Employed Individuals Tax Center page for more details about self-employment and taxes, and a guide to Schedule C from the IRS (please consult your tax professional about whether or not Schedule C is appropriate, whether and how to make quarterly payments, and the like).

2) The change regarding third-party payment processors (TPPs) is not about your tax liability, but about what the reporting threshold is.

“The business income that was taxable last year is also taxable this year. Receipts of gifts that were tax-free last year are still tax-free this year. The law determining which income is taxable or not has not changed, but the number of places to hide unreported taxable income is getting smaller and smaller.” Singletary, M. (February 8, 2022). Keep track of your Venmo, PayPal and other payment app transactions in case the IRS comes asking. The Washington Post (quoting Eric Bronnenkant, head of tax for Betterment).

In other words, you don’t suddenly owe taxes on disc golf profits in 2022. Instead, the reporting requirements have made it easier for TDs who were both <$20,000 in receipts from a TPPP and also <200 total transactions from a TPPP to see what they need to report on their tax filings (and also easier for the IRS to see who should be reporting). 

The change is that everyone who receives more than $600 total through a TPPP’s “goods and services” method will receive a 1099-K, which is a tax form that tells you and the IRS how much money you received through that TPPP during the tax year. Your tax professional will tell you how to use the 1099-K when you file, and whether you should list it on Schedule C or elsewhere.

Next time, we will discuss W-9s, 1099-MISCs, and pro payouts.