Question about taxes

SixPapaCharlie said:
Yes. I'd love to deduct stuff but not if it violates one of them pro rata type rules.
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You already made the money. Whether you can deduct the expenses on your taxes or not seems tangential to FAA compensation rules.
 
Might as well get your commercial to remove any doubt. Do it with Christy, film it, and deduct the gas, the plane, her fee, the dpe fee, and the coffee.
 
There are two things going, here: Whether your operation would be restricted by the FAA for requiring a commercial license, and to what degree your expenses are tax-deductable.

For the former, I don't think there's any issue. It's an entertainment product, not "aerial photography." You aren't taking orders for places to shoot aerial pictures of. What you do could be done on the ground with a green screen (Might even be more realistic :). Besides, no one actually pays you for flying. It's not even like you're towing a banner.

IRS tax deductability? All expenses associated with the income-producing product, including the avgas running through the engine. Years ago, I wrote a flight simulation program that was sold at places like Toys-R-Us. With the concurrence of my CPA, I bought a Cessna as a research tool. I allowed that I *might* be getting some enjoyment out of it, so we decided to deduct only half the purchase cost of the airplane. Since my income that year was about ten times the cost of the aircraft (and I only deducted half of the cost) the IRS still got a ton 'o money from me. That year, my entire engineering salary went to paying my tax bill, and the IRS seemed to like that.

In short: If they're legitimate expenses that helped gain your income, deduct 'em, and the FAA isn't going to be concerned about it. Especially if you don't publicly mention it...

...oh, wait.

Ron Wanttaja
 
No tax expert here but someone who receives regular correspondence from the IRS. First, the IRS will probably go along with you deducting purchases for your YouTube gig. In fact you could show a loss and get away with it but not for an extended period of time. I heard of a wealthy person who poured money into a NASCAR race team and lost bucketfuls of money. After three consecutive years of the race team loosing money the IRS audited and declared the venture a hobby and dis-allowed any future deductions. The guy was making money in his regular business but deducting the race team losses against his profits. Second, are the items you use for the YouTube gig [such as a GoPro] used exclusively for that venture, or used part of the time? So if you use the GoPro to film the little princess in the school dance you may wish to only take a 50% deduction of the equipment. Third, NEVER EVER claim a portion of you home as a home office and deduct a portion of home expenses for a home office. The IRS looks at home offices as a red flag. Finally, [and most obvious] consult a tax advisor about your venture. A good one is worth their weight in gold and it will probably be the best money you ever spent and that fee would most likely be deductible.
 
SixPapaCharlie said:
So I got my 1099 tax form or whichever form from youtube.

I gave it to my CPA and he said "Don't you have expenses like cameras, fuel, and other things that go along with this that you'd deduct from these earnings?"

I am under the impression that I cannot do that. Maybe I am wrong but If I deduct fuel costs am I not in a sense making money of flying? Feels like a bad idea but I don't know what the rule really is.
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Deduct your expenses.
 
Hang 4 said:
Read post #1 - his CPA started it :).

Think the question is about how not to cross the boundary into commercial flight
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Yes. I'd listen to my CPA, do what she says, and stop there.
 
Possum said:
Third, NEVER EVER claim a portion of you home as a home office and deduct a portion of home expenses for a home office. The IRS looks at home offices as a red flag. Finally, [and most obvious] consult a tax advisor about your venture.
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And, when you sell the home you're going to have to pay a capital gains on that portion of the home that you declared as a deduction regardless of the one time $250K single/$500K married exemption for this..

Not worth aggravation...
 
Clearly the stuff that doesn't involve flight is not "flying for compensation or hire", so revenue made for the humor of, oh say the test center, doesn't run afoul of the FAA. Likewise anything done at home or in front of a green screen. The flying stuff, well you need a good legal opinion from a legal professional willing to defend you should it come to that. Whether that's through the AOPA legal plan or not is a up to you.

The IRS is a different animal, and different rules apply. All they care about is getting their share of your income.
 
Any FAA violation from making money from the flying has already happened in the past and cannot be undone. I think it's ridiculous to think they'd even connect those dots.

Maximize the number of deductions to offset that 1099 income, up to the total amount of the income if possible. Aircraft are bottomless wells of deductible expense. If your CPA can't adios the entire 1099, get a new CPA or a better plane. :D
 
Ok, after sleeping on this my opinion has changed. Yesterday my thought was
schmookeeg said:
Any FAA violation from making money from the flying has already happened in the past and cannot be undone. I think it's ridiculous to think they'd even connect those dots.

Maximize the number of deductions to offset that 1099 income, up to the total amount of the income if possible. Aircraft are bottomless wells of deductible expense. If your CPA can't adios the entire 1099, get a new CPA or a better plane. :D
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I disagree, If the FAA decided to go after him for commercial flying on a PPL, I can see them using tax records as evidence against him.
 
SixPapaCharlie said:
Yes. I'd love to deduct stuff but not if it violates one of them pro rata type rules.
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The FAA doesn't know from taxes. I have seen nothing in the regs nor in any official letters of interpretation that mention tax deductions or define them as a form of compensation. Deduct every last cent.

Also someone I used to fly with would routinely take a business card and menu from every $100 hamburger restaurant we would visit. Why? Because his family owned hotels and restaurants and if he brought back a business card and a menu, the flight became a business expense in the form of market research. The exact ratio escapes me now, but it was either 1/3 or 2/3 of his flying had to be for business purposes in order for him to be able to write off 100% of his flying expenses, the cost of the flight, the cost of buying the plane, the cost of the hangar, insurance, maintenance, the whole kit and caboodle. I'm pretty sure he never lost a minute of sleep over concerns of running afoul of the FAA in regards to his business deductions.

The tax laws are what they are and businesses need not be profitable to still be businesses in the eyes of the IRS. Take every last deduction the regulations allow. The FAA has no mechanism I'm aware of the find out what you deduct, nor would they care if they did have such a mechanism.
 
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Salty said:
Ok, after sleeping on this my opinion has changed. Yesterday my thought was

I disagree, If the FAA decided to go after him for commercial flying on a PPL, I can see them using tax records as evidence against him.
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I don't see how the FAA gets tax records without a subpoena and a case in progress. I don't see how the FAA begins the case without the evidence in hand. Seems like chicken and egg to me.

A 1099 from "Google" or "Youtube" is hardly evidence. They need to build one hell of a technical case... and for what? There are WAY lower hanging fruits for them to pluck.
 
schmookeeg said:
I don't see how the FAA gets tax records without a subpoena and a case in progress. I don't see how the FAA begins the case without the evidence in hand. Seems like chicken and egg to me.

A 1099 from "Google" or "Youtube" is hardly evidence. They need to build one hell of a technical case... and for what? There are WAY lower hanging fruits for them to pluck.
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How did the faa get veterans health records?
 
His flights and activities are public. It’s on YouTube for god sakes. If the FAA takes issue, and I hope they don’t, it’s not going to be some IRS deductions that clue them in.
 
Salty said:
How did the faa get veterans health records?
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No idea, I'm a civilian. If that's the 'pilots claiming disability benefits from the VA and then holding commercial jobs' thing you're referencing -- well, that seems like a bigger fraud on the VA than on the FAA/CAMI, ie, more appropriate to claw back those cash benefits paid than to claw back the 2nd class+ medicals these guys were flying on.


...but even if the FAA grabs every pilot's tax records... what is OP's tax record going to show?

1099 for payment from Google or Youtube in some amount. Not 'cool flying videos', not 'clearly commercial flying operations lol', just general compensation, which OP can happily claim is from one of his non-flying videos, and what fed can prove otherwise?


If I run an illegal 135 charter, what are my tax records going to show?

1099 from Joe Customer or more likely Joe Customer's Company, Inc.


Or if I did it properly and I'm a corp also, there is no 1099, there is only a giant lump 'income' number, and the FAA will need to subpoena my bank records, trace the payments... it's a huge undertaking, and they need to do it for everyone they suspect. They're not equipped, funded, or interested enough -- particularly when they can just troll any airport hangar row and take their pick of violations to meet quota. (I do not believe they have this quota, just saying, why work hard and go all Erin Brockovich, when you can get the same thing by going to any airport and just looking around?)


If the FAA get every pilot's tax filings and some pilot set up an LLC called FAKE PLANE CHARTER LOL EHRMAGERD, LLC , well, they sort of were asking for it. But those company records are already public, and the problem of 'proving it' still exists. The tax returns add nothing actionable.

I can't think of a single thing in an IRS tax form that directly indicts a pilot for breaking FARs. Maybe I lack imagination here. Even so, I still think OP's scenario with the IRS has nothing to do with the FAA, as the puny little potential violations of FAR that could be argued -- they're in the past already, so he should focus on the present and minimizing tax liability payable.

$0.02
 
schmookeeg said:
No idea, I'm a civilian. If that's the 'pilots claiming disability benefits from the VA and then holding commercial jobs' thing you're referencing -- well, that seems like a bigger fraud on the VA than on the FAA/CAMI, ie, more appropriate to claw back those cash benefits paid than to claw back the 2nd class+ medicals these guys were flying on.


...but even if the FAA grabs every pilot's tax records... what is OP's tax record going to show?

1099 for payment from Google or Youtube in some amount. Not 'cool flying videos', not 'clearly commercial flying operations lol', just general compensation, which OP can happily claim is from one of his non-flying videos, and what fed can prove otherwise?


If I run an illegal 135 charter, what are my tax records going to show?

1099 from Joe Customer or more likely Joe Customer's Company, Inc.


Or if I did it properly and I'm a corp also, there is no 1099, there is only a giant lump 'income' number, and the FAA will need to subpoena my bank records, trace the payments... it's a huge undertaking, and they need to do it for everyone they suspect. They're not equipped, funded, or interested enough -- particularly when they can just troll any airport hangar row and take their pick of violations to meet quota. (I do not believe they have this quota, just saying, why work hard and go all Erin Brockovich, when you can get the same thing by going to any airport and just looking around?)


If the FAA get every pilot's tax filings and some pilot set up an LLC called FAKE PLANE CHARTER LOL EHRMAGERD, LLC , well, they sort of were asking for it. But those company records are already public, and the problem of 'proving it' still exists. The tax returns add nothing actionable.

I can't think of a single thing in an IRS tax form that directly indicts a pilot for breaking FARs. Maybe I lack imagination here. Even so, I still think OP's scenario with the IRS has nothing to do with the FAA, as the puny little potential violations of FAR that could be argued -- they're in the past already, so he should focus on the present and minimizing tax liability payable.

$0.02
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I’m only saying if they decide to investigate you for some other reason, your tax records could become evidence against you. Not suggesting they will use IRS to initiate the investigation.
 
Salty said:
I’m only saying if they decide to investigate you for some other reason, your tax records could become evidence against you. Not suggesting they will use IRS to initiate the investigation.
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Ah. Then I Concur. :cheerswine: I can't imagine it ever getting that far for an online video, though. Or if it does, hopefully that Jerry Wagner creature will be the first canary in the coal mine and provide plenty of advance warning for OP to enroll in AOPA legal and to start amending tax returns or setting videos to private status. :D
 
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