I don’t see a reason why US Chess needs to know all the dollar prizes.
I could see putting something in the rulebook to remind organizers that they have to meet IRS reporting requirements on cash prizes, and possibly on some non-cash prizes as well.
Why? It is not the role of US Chess to enforce tax law. We don’t have a rule requiring players to report the income to all proper authorities either. And we shouldn’t.
Chess is becoming a severe money-making business for a small percentage and should be treated as such, which means that TDs and Organizers need to understand how serious the taxes are. I think USCHESS would also benefit from seeing how much money is being paid out and can create a metric that could be used in future statistics.
Of those doing the major work for big-money events I don’t know of any TDs and organizers that do not understand how serious the taxes are. I declare all of my TD income and only once have I made more than $10K in a year from directing (it is not a “severe money-making” source for me).
I would expect more total money is being made by all the coaches and chess teaching companies than by big-money tournament organizers and TDs.
Non-profit school-based tournament organizers might be making a decent tournament profit that is used to fund the school’s chess club and chess team, at least if they can use the school as a low-cost or free tournament site. Such non-profits are unlikely to have much of a tax bill at the end of the year.
Thank you for the input. I appreciated your thoughts on this topic. I think we do need a rule change of this, though. It would create some interesting metrics for USCHESS and how much prize money is being generated in a year.
What activity the office is doing now should be discontinued to create a system to collect this data and then analyze it to create the “interesting metrics”?
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Many many years ago, FM Doug Eckert wrote a wonderful article for Inside Chess on US tax law for chess players. My biggest takeaway from that article: players cheat themselves more than the IRS by failing to comply with US tax law.
As Allen Priest notes above, Social Security liability (just under 14.2% of self-employment income) kicks in long before one is subject to Federal income tax. For the starving artists among us, however, a sizable portion of self-employment tax is covered by the Earned Income Credit. And when they pay self-employment tax on $10,000 of earned income, they are effectively buying a 6% annuity. (If you need an afternoon nap, google “bend points” for a more detailed explanation.)
Win chess tournaments, pay taxes, live a long life, and you win again.
I’ll have to find that article. The tax system is interesting and sometimes complex.
Sometimes?? I know more than a few accountants and tax attorneys, they make a lot more money than I ever did and they fully admit they only understand a small fraction of the tax code.
Yep. But we generally understand how to read the law, research, and interpret.
In my experience if you think you’ve found some great tax situation that seems too good to be true, you haven’t done enough reading yet.
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