Drag Illustrated Issue 141, February 2019 | Page 26
Dirt
Tax
Time
Veteran drag racer and accountant
Wayne Clemens explains how
to write off racing expenses
By Nate Van Wagnen
T
eam owners and businesses at the
top of the drag racing world have long
understood the ways racing expenses
can be written off when tax time rolls
around. Many local or regional racers, though,
might not realize that the same benefits can apply
to racing operations that don’t include dozens of
employees, big 53-foot tractor-trailers and major
corporate sponsors.
With the 2019 tax season rapidly approaching,
D rag I llustrateD spoke with Wayne Clemens, a
veteran drag racer with nearly 30 years of expe-
rience as an accountant, to take a closer look at
writing off racing expenses. Clemens, one of the
Midwest’s original Pro Modified racers with his
“King of the Jungle” car, has helped a number of
successful drag racers and businesses make the
most of their deductible expenses through a deep
understanding of tax laws.
“We deal with all sorts of guys: drag racers,
stock car guys, sprint car guys, professional
bass fishermen,” says Clemens, owner of Osage
Accounting in Osage Beach, Missouri. “A lot of
guys don’t even want to take the risk of writing
this stuff off and they’re losing so much money
to the government because they’re afraid. It’s just
because they don’t know anyone to show them the
right way to write it off. The government allows
you to do this, you just have to take advantage
of how you do it.”
1. ESTABLISH A LEGITIMATE BUSINESS Clemens
believes most people don’t realize how much
they can write off, or they’re afraid of getting
in trouble for writing off racing expenses. If
you do it as a legitimate business, though, you
should be in the clear. “Say you have an automo-
tive business – a lot of stuff can be written off
as research and development and advertising,”
Clemens says. “Basically, the rule states that if
you’re actively searching for sponsors or you’re
not a hobbyist, then you can write it off. A lot of
times, we’ll advise guys to set up LLCs for their
race team and run it as a legitimate organiza-
tion and actively seek sponsorships, be it local
or worldwide.”
2. DON’T BE AFRAID TO REPORT WINNINGS
Clemens says a common belief is that reporting
racing income like winnings is bad. The opposite
is true. “That income looks good for you as a vi-
able business,” Clemens says. “If you show some
racing income, you can take the expense against
it so if you do have a loss year, it’s OK because you
had years that had income. And the IRS doesn’t
say you have to have a lot of income, you just
have to have income. Those profitable years will
work for you on the bad years because you still
get those write-offs because you showed income
on previous years.”
3. REPORT FREE PRODUCTS AND SPONSORSHIP
AS INCOME Keep track of income in the form of
free products, services or direct payments from
sponsors, even if they seem small. “A lot of guys
go out and buy a truck and a trailer, then guys
are giving them tires or fuel or parts. This stuff is
being given to them and they don’t turn in any of
that as income. Then they just take the expense
of their truck and trailer against their sole pro-
prietorship. What happens is that doesn’t look
like a viable business and they get caught with it
being considered a hobby operation.” Including
these forms of income serves two purposes, as
Clemens explains. “Here’s another thing: Let the
guy give you a 1099 as income for a set of tires or
whatever. Let them get the write-off because it
helps them and their business, plus it helps you
show that you’re a viable business with income
from some source, be it a parts sponsorship, a
cash deal or whatever. You can find local guys
who will give you $500 here or a thousand there.
That can add up to income that you can use to
justify writing off that truck.”
4. LOOK THE PART Investing in crew uniforms
and vinyl wraps for your race car and trailer might
seem expensive, flashy and unnecessary, but these
moves can help legitimize your racing operation.
“If it looks like a duck and quacks like a duck, it’s
a duck,” Clemens begins. “If you look like you’re
hobo bums out there and you’re trying to write
everything off, it’s too questionable. If you’re
wearing nice, matching crew uniforms and your
car is wrapped with your sponsors’ logos, it’s a
lot easier to justify it as a legitimate, professional
operation. Even though it costs more up front,
that slick wrap is going to help you attract more
sponsors, which will help make more of your
equipment tax deductible.”
5. SAVE YOUR RECEIPTS This might be the most
obvious tip of them all, but Clemens says the
importance of this step can be underestimated.
“There’s nothing scary about turning in racing
income if you can turn in expense to offset it.
That’s a big one. Don’t be afraid to collect your
data and at least look at it. That’s one thing I
would definitely stress to guys. A small guy might
all of a sudden take off to be a big guy, but he
hasn’t kept his records of his truck, trailer and
what he paid for stuff. The minute he wants to
use it as a business expense, he doesn’t know how
much he actually has invested in stuff. Record-
keeping is really big. If you’re going to write off
your racing expenses, you’ve got to keep your
records. You can’t just know in your head what
something’s worth.”
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I l l u s t r a t e d | DragIllustrated.com
Issue 141