Is sponsorship money taxable?

Question

I am requesting money from businesses to front me money to participate (i.e. entry fees to compete) in sporting events. Do I have to report this money as income and therefore pay taxes on it? Is there a maximum I can receive?

Answer 1

Are you a professional athlete? You would be if the event you are entering has prize money available.

If this applies, the sponsorship money is taxable to you. This would be reported as "other income" on your Schedule C, where you would report your prize money as well as your expenses.

If you are entering events where there is no prize money available, then businesses giving you the entry fee would not take a tax deduction, and you would have no income to report.

Answer 2

Whether it's a "job title" or not is irrelevant. The income IS taxable and must be reported. That's true whether you receive a 1099 or not. Not reporting it won't cost you "millions" in fines as one rube suggests, nor will you go to prison for it. But when the IRS learns of it (and sooner or later they will) they will bill you for the taxes plus late payment penalties and interest. If you have just put up a couple of items on YouTube that are generating click-stream revenues this isn't normally treated as self-employment income and you can safely report it on Form 1040, line 21, as Other Income. However if you put a significant amount of stuff up on YouTube that is generating income then it probably will be viewed as self-employment by the IRS and you must show it on Schedule C or C-EZ along with any business expenses. If the profit is $400 or more you must attach Schedule SE to calculate the self-employment tax.

Answer 3

I'd think that sponsorship money would be a gift to you, so it wouldn't be taxable. The donors can't deduct it on their tax returns, though.

Answer 4

Yes it is. Your best bet would be ask for donations in stead of sponsors.