Expense write-offs as a guide

Last year was my first year guiding part-time.

Since I am very organized and proactive, I did my taxes last night.  I am now realizing that since I got paid on a w2 (only a few thousand bucks), I can't write off any expenses for guiding: AMGA membership, new gear, WFR class, mileage, etc.

Any other guides out there that get paid as W2 have any pointers for how I include my expenses as a guide in my taxes?

Ryan Nellingwrote:

Last year was my first year guiding part-time.

Since I am very organized and proactive, I did my taxes last night. 

Yep, sounds like a ‘guide’!

Tax accountant here. Unfortunately as a W2 employee you really don't have an option for writing off your expenses. Either talk to your employer about the option for reimbursing expenses, tell them you want to be a 1099 contractor next year, or ask for a pay bump to cover it.

Since the Tax Cuts and Jobs Act of 2017, one can no longer deduct unreimbursed employee expenses or education costs that qualifies one for a new career.

TaylorPwrote:

Tax accountant here. Unfortunately as a W2 employee you really don't have an option for writing off your expenses. Either talk to your employer about the option for reimbursing expenses, tell them you want to be a 1099 contractor next year, or ask for a pay bump to cover it.

But, you have to balance the benefit of being on a 1099 versus the downsides including but not limited to self-employment taxes. 

self employed you pay all your own insurance including workman's comp in addition to a 12% self employment tax. many self employed folks skip the workmans comp and only carry liability insurance so when they get hurt they are completely fcked.  Its worth it if you make twice as much   but anything other than a 100% raise I am not so sure....  speaking from a carpenters perspective. 

One thought is starting your own private guiding business that you operate, even if it is only on paper at this point, while you continue to be a W2 employee.  You could arguably write off gear for your business, gathering the necessary gear to be able to guide on your own

John Ryanwrote:

One thought is starting your own private guiding business that you operate, even if it is only on paper at this point, while you continue to be a W2 employee.  You could arguably write off gear for your business, gathering the necessary gear to be able to guide on your own

I’m not a guide anymore but I’m constantly working for different companies on different projects.  I’m probably half W2 and half 1099.  I claim all of my expenses through my LLC.  It is a good balance.

I did that with my photography company for quite a few years. Winter time I worked for a concession at a major ski area. summer time I was completely self employed.  The Winter W2 gave me some security but I was still in the game as self employed. 

Not a guide, but have a lot of experience filing both W2s and 1099s as a writer. 1099 is only worth it if you're making significantly more than a W2, because you'll rarely make it up in expense deductions. It also depends on your tax bracket. As Mikey says, LLCs are the way to go, but note it's a lot more hassle administratively and only really saves you a lot of money when you're making a decent amount to being with. In my biz (TV/film writing), most writers start a "loan-out" LLC when they hit the 100k mark. Studios then hire the LLC, which allows the writer to expense and changes how their income is taxed in complicated ways, which results in big savings.

A guide could theoretically do the same thing: start his own LLC that other guide services would then hire out. But this would create more work for the guide service and they may not keen on that for a part-time guide. Plus I really doubt the income involved would make it worth your while.

A single-member LLC is a "disregarded entity" for income tax purposes--that is, for income tax purposes, there is no difference between doing business through a single-member LLC and being a sole proprietor. There may be other reasons to form an LLC but there is no particular income tax benefit, and you could be a self-employed guide without forming an LLC. You should also consider the pros and cons of an LLC vs. a corporation (probably an S corporation). Liability protection comes to mind, but be sure to understand when the liability shield can be pierced. If something goes wrong, an injured client is going to sue everyone in sight--you as the guide as well as your LLC or corporation, so the entity might not be giving you the protection you think. Be well insured.

You should become familiar with the hobby loss rules. Essentially, the IRS wants you to run your guiding business in a business-like manner with a profit motive. If it looks like you're not trying to turn a profit (i.e., you have what looks like it might be a business but it's really a vehicle used to deduct expenses), your deductions are limited to the income generated from the activity. Maybe that will be enough, but it could be painful if you take deductions in excess of your guiding income that the IRS later determines were impermissible.

My photo business is a total PINTA simply because it is basically a hobby that generates enough income to be taxed.  if they raised the threshold of what needs to be reported it would  save everyone a lot of paperwork.   last year I worked more and grossed about 5k. the year before was 2,700 which in my mind was a joke that I had to do all the taxes, paper work sales tax etc for that little bit of revenue.  If they don't want hobby business writing too much stuff off stop taxing hobby business. 

Allen Sandersonwrote:

Since the Tax Cuts and Jobs Act of 2017, one can no longer deduct unreimbursed employee expenses or education costs that qualifies one for a new career.

Education expenses that qualify one for a new career were not deductible before the TCJA.

Having been self employed for over 30 years I gotta say that a good accountant is worth their weight in gold. I'd probably have given up on self employment a long time ago without a CPA.

M Mwrote:

Having been self employed for over 30 years I gotta say that a good accountant is worth their weight in gold. I'd probably have given up on self employment a long time ago without a CPA.

+1

Even when the news they bring is unwelcome, I’m thankful for their objective view, and longtime history with them.

I have an Accountant help me several times a year for my carpentry business. 

The standard deduction is now almost 16k. This should cover a lot of expenses. It used to be much smaller, and then it made sense to itemize. Now, for may situations, it does not make sense to itemize.

I own a guide service and I W2 all of my employees because our insurance doesn't cover independent contractors. I offer some financial support to them when they complete those professional development courses (WFR, AMGA cert, etc) It's absolutely worth it for me. 

Speak with your employer about that. You could also consider working as an independent contractor, but then you'll likely need your own insurance which is a significant upfront cost. But depending on the amout of guiding you do, it could be worth it

Also, a good accountant is absolutely worth it. I have 16 employees and it would be impossible to get taxes done right without him

jay2718wrote:

The standard deduction is now almost 16k. This should cover a lot of expenses. It used to be much smaller, and then it made sense to itemize. Now, for may situations, it does not make sense to itemize.

?????? You are talking apples and oranges here.

The standard deduction has nothing to do with deductions for business expenses on your Schedule C.  You can take the standard deduction and still deduct for any and all ordinary and necessary business expenses. 

Mike Bondwrote:

?????? You are talking apples and oranges here.

The standard deduction has nothing to do with deductions for business expenses on your Schedule C.  You can take the standard deduction and still deduct for any and all ordinary and necessary business expenses. 

But the OP said they were paid on a W2, not as self-employed/1099. My understanding was that you need more than 16k of expenses to justify itemizing on a 1040 with W2 income only. If the OP was a teacher for 9 months, and had 4 months of 1099 guiding income, then a schedule C should work for expenses, but if they only get W2 income, then I don't see how a schedule C would fit into the equation. But I'm not an accountant, that is just my interpretation from doing my own taxes. Maybe an accountant could clarify?

Mike Larsonwrote:

In my biz (TV/film writing), most writers start a "loan-out" LLC when they hit the 100k mark. Studios then hire the LLC, which allows the writer to expense and changes how their income is taxed in complicated ways, which results in big savings.

A guide could theoretically do the same thing: start his own LLC that other guide services would then hire out. But this would create more work for the guide service and they may not keen on that for a part-time guide. Plus I really doubt the income involved would make it worth your while.

I also work in the film production world and do the loan out company.  I do wonder if it would if it would make sense for some guides to do a similar thing.  One of the problems I could see would be the liability insurance and how guide services have theirs structured.