1939 yikes. I am curious about Mr.Priest’s point and if anyone has written to their congressmen on this.
If you expect your Congressman to react to a suggestion you make that isn’t accompanied by huge campaign donations, you’re gonna be sadly mistaken.
That is get no traction. There are extensive hobby loss-tax rules. They’ve been in the code for years.the 2018 law changes made it even more restrictive. The implications go far beyond chess, and any such change has. In my opinion, a chance of change fairly close to 0
And it’s not a matter of campaign contributions. It’s a matter of very settled tax law in which the only changes in the last several decades has been to be more restrictive rather than less.
Also the code us very clear on this. You have 0 chance of winning in an examination or in court. None
1939 was the year the United States of America Chess Federation – later USCF, and now U.S. Chess – was founded.
The point is that the tax law is older than U.S. Chess itself – probably by at least an additional century.
Indeed. It’s time to lock this thread. There are more interesting (and more important) things to talk about.
Bill Smythe
The 16th amendment wasn’t passed until 1909 (ratified on 2/3/1913), so the income tax has only been possible for some 109 years. In 1913 the rates ranged from 1% to 6% (the maximum rate anybody anticipated it would reach) and only 3% of the population made enough to pay those taxes.
If a person has regularly played in CCA events for several years with no success and finally hits the big one, can they revise x years worth of previous taxes to now claim they were in “business” and deduct the costs of the previous tournaments.
If that is a no, what about after the year with positive schedule C income?
I don’t believe income averaging exists any more, so a big windfall profit is taxed at that year’s rates.
And it can be difficult to convince the IRS that something is a business instead of a hobby. I know photographers and cottage-industry (ie, home) bakers who deal with this issue frequently.
No
And no
The Union imposed an income tax during the Civil War which was ruled to be unconstitutional after the war. The refutation of the reasoning in that Supreme Court ruling became the basis for the 16th amendment 40-50 years later.
And you are correct it applied to few people. The 1% rate didn’t apply until your income was 3000. The top 6% rate was hit at income over 500,000. You can do the inflation math…
One seriously needs to be aware of the hobby loss rules in dealing with taxation on chess earnings. It’s too complicated to go into here. But income from a hobby is taxable and expenses related to a hobby were miscellaneous itemized deductions. But in 2018 the Republican tax bill removed the ability to take miscellaneous itemized deductions…
This is all interesting. One thing I do not see in the USCHESS rules is that a TD has to report all of the prizes given out during the year. This would make it difficult to track if someone has made enough in a years worth of tournaments to be considered taxable income.
I suspect that this would be the organizer’s responsibility rather than the TD’s, since the organizer is generally who handles the money and pays the prizes. In any event, I have never done this as a TD, nor (to my knowledge) has it been done by anyone at any of the tournaments I’ve worked. Of course, I’ve only ever worked what might be called “penny-ante” tournaments. We don’t offer huge prizes like some of the big tournaments do. It’s possible that this kind of reporting is required if and only if the prize values are over a certain amount. Also, I’m not sure the US Chess rulebook is the right place to look for this. If it is required, you might have to look at the tax codes to find it.
Reporting requirements are in the USA tax code. However prizes are taxable regardless of whether or not they are reported or reportable.
I think this is misleadingly stated. I’m pretty sure that the concept of “enough to be considered taxable income” applies only to your total income, not to isolated components of it. So your question is really only meaningful if chess winnings are your only source of income – and I suspect that even for chess professionals, this is rare.
This is because it’s not required. Anyone running a business should be aware of all applicable tax rules, whether it is a chess business or not.
Alex Relyea
However you ignore self employment income which starts at much lower levels than income tax and arguably applies. That must also be considered.
The penalties for failing to report required 1099s and failure to withhold if required can be significant
The post upthread about reporting requirements being the organizer’s responsibility, not the TD’s, is a good one. In many cases the organizer and the TD are essentially the same thing, and if the TD is involved in handing out prizes then the TD probably has a responsibility to the organizer to make sure reporting requirements (like collecting SSIDs) are followed.
I think maybe a rule change is in order so organizers and tournament directors must report all cash prize winnings within a year. I know it sounds crazy because many would never agree to the rule.