One of my sponsors is interested in covering certain track costs like driver entry fees. However, they aren't in the racing world themselves and aren't familiar with how those entry fees are typically tied into the driver registration process. So what would be the best way that they could pay for those fees? Anyone have experience with this? How do you typically get funds from a sponsor? I think there would be concerns with them direct depositing money to me because firstly they can't verify how and what I'm spending it on, and second it seems to me that might have tax implications as it could be seen as a sort of income. So would reimbursement be the best? Or maybe they might be able to give me a company credit card? How does this process typically work?
Isn't it income, even if they're directly paying for the events on your behalf? Which also... couldn't they do that? Just create an account for them on motorsportsreg.com and give them the username and password. Then send them links to each of the events you'd like to sign up for. They sign you up, you go play race car.
It might be easier for them, though, to just agree to a certain amount of money each year and/or maybe you invoice them for the events you sign up for. They cut a check, you sign up.
Probably the sponsor wants the expenditure to appear as an 'expense' on their books. They most likely don't want you to appear to be one of their employees.
If you created your own business (create a LLC), then you could invoice them. But, creating a business causes all sorts of other hassles that are not worth it unless you are truly profitable, which most amateur racers are not. As one example; There rapidly becomes all sorts of D.O.T. hassles with tow vehicles and trailers. Plus then you are doing a lot more tax filing, etc.
Easiest way is for them to pay you as if services are being rendered and then at the end of year if the total yearly amount is over $600 they issue you a 1099 form and you pay taxes on it. For example if the entry fee was $100 and you were in the 20% tax bracket, you could bill them $120, and that would cover your tax burden. You would bill after the event, and your invoice could include pictures or results from the event.
Best to talk to a tax accountant. Because I didn't sleep in a Holiday Inn last night.
Do you have:
an LLC (or similar entity) to place your racing expenses / income under?
written sponsorship agreements?
LLC for the Win
Invoice on a per event basis
confuZion3 said:
Isn't it income, even if they're directly paying for the events on your behalf? Which also... couldn't they do that? Just create an account for them on motorsportsreg.com and give them the username and password. Then send them links to each of the events you'd like to sign up for. They sign you up, you go play race car.
It might be easier for them, though, to just agree to a certain amount of money each year and/or maybe you invoice them for the events you sign up for. They cut a check, you sign up.
I second this approach of having them pay directly for cost items if the concern is having to report income and wanting your sponsor to know their dollars are going directly to expenses.
Otherwise, approach it like any other sponsorship, which is income.
