Sports Official and Referee Tax Guide

Referee taxes are more complicated than traditional employment because you need to track all of your earnings and expenses — you don’t get a nice W-2 at the end of the year adding up everything for you.

Instead, you’ll probably end up filing a Schedule C as a self-employed 1099 earner. Here’s what you need to do.

This post is provided for general information only. Please confirm the details and circumstances of your unique situation with your tax accountant or other appropriate advisor before taking action.

What’s new for 2021 taxes filed in April 2022?

  • Form 1099-MISC is now Form 1099-NEC. This is just a name change.
  • The IRS business miles deduction is now $0.56 per mile. This changes every year. Read what counts as business miles below.
  • More organizations are paying online through electronic payment processors like PayPal, Venmo, Dwolla, etc. You may get a 1099-K from the payment processor instead of a 1099-NEC from your association, league, or club. Here’s what to do if you get both.
  • Soccer referees who are part of PRO2 working USL and other lower leagues should be aware of unionization efforts. This may affect your employment and tax status.

Are you an employee?

You’re only an employee if you provided a W-4, received a W-2, or otherwise entered into an employment agreement. Most sports officials are independent contractors not employees.

If you’re not sure, the easiest way to tell is if you received a pay stub with taxes withheld – if you did, you’re an employee.

If you’re an employee, stop reading. To file as an employee, simply add the wages from your W-2 to the wage line of your tax return. As of the 2018 tax year, employees may not deduct unreimbursed expenses as itemized deductions.

Are you a hobby?

The general rule is that if you lost money in 3 out of the last 5 years you’re a hobby not a business. In short, the IRS doesn’t want you starting a “business” that loses money so you can reduce your taxes. The IRS may also go back and audit you if you filed as a business when it thinks you’re a hobby.

Why does it matter if you’re a hobby for referee taxes?

If you’re a hobby, you report your income on your Form 1040 as other income. You pay income tax but not Social Security and Medicare taxes. This is not an easy tax break. If you’re making a profit, the IRS rules generally say you need to file as a business.

Hobbies also can’t deduct expenses. If you have $1,000 in income and $500 in expenses, you pay taxes on $1,000. As a business, you’d pay taxes on $500.

Who gets in trouble with the hobby rule?

Referees in three categories frequently run afoul of the hobby rule. I.e., the IRS will disallow their deductions and send a CP2000 notice for extra tax.

  • Those trying to make the professional level travelling around to poorly paid minor league games and tournaments on their own dime.
  • Those with large travel expenses (especially the standard mileage deduction).
  • Those who are “aggressive” with their deductions.

If one of these situations may apply to you and your expenses are more than your income, you should discuss your options with a tax professional so that you don’t lose legitimate loss deductions. The IRS will generally audit based on the 3 out of 5 years rule, so you really need to be prepared to document and defend your position if you’re not going to meet that rule.

If you’re sure you’re a hobby, stop reading. The remainder of this post only applies to independent contractors.

What’s your income?

Your income is any compensation you receive in any form. This includes cash, checks, direct deposit, gift cards, etc. It includes income that isn’t reported on a 1099. (Yes, the IRS can track cash payments without a 1099, and youth sports organizations have been under a lot of scrutiny lately.)

If your association withholds money for things like dues or assigning fees, your gross income for your Schedule C is your income BEFORE those deductions. You’ll claim the expenses later on. Similarly, if you receive pay designated as for mileage, meals, or other expenses, you’ll usually report it in your gross income and claim a deduction separately.

What are your travel expenses?

Travel expenses mean actual travel. Commuting from home to local games is almost never deductible.

Platforms like Arbiter and Horizon show your miles, but that doesn’t mean they’re tax-deductible. Some games pay mileage when you can’t deduct it. Some associations consider distance when making assignments to keep referees close to home.

Tip: Use a mileage tracking app to track your actual miles and create the IRS-required mileage log.

Local commutes are just like driving to work as a W-2 employee. Commuting expenses aren’t deductible. For mileage to be deductible, it needs to be either between business locations or travel outside of your metro area.

  • Between business locations means from your day job to a game or between fields.
  • Travel outside of your metro area means farther than a normal commute. This is a gray area. I take the position that it means either greater than 50 miles one way (based on the standard practice of leagues and tournaments to use this as the cutoff for travel reimbursements and hotels) or if an overnight stay away from home is required.

If you have a qualifying home office, trips from home could potentially be between business locations. However, a qualifying home office requires much more than just having space in your closet for your shirts. In most situations, referees who do not have another work-at-home job do not qualify.

So what can you deduct for transportation for trips between business locations or travel outside of your metro area?

  • Miles at the standard IRS mileage deduction rate. You could also track actual expenses (gas, depreciation, car maintenance) but this is a pain, and most people come out ahead with the standard rate. See mileage log audits for more on how to prove this deduction.
  • Tolls.
  • Parking.
  • Bus, plane, and train tickets.
  • Actual rental car expenses (you can’t use the standard mileage deduction for rental cars).
  • Hotel nights you paid for.

Note: If you travel to games or a tournament as part of a longer vacation, your travel deductions may be reduced or eliminated based on how much of the trip was personal in nature versus how much was for business.

IRS Standard Mileage Deduction Rate

  • 2022: $0.585 per mile
  • 2021: $0.56 per mile
  • 2020: $0.575 per mile

What are your meals expenses?

Meals are deductible when you’re traveling overnight such as to a distant game or tournament. Deducting other meals as entertainment expenses was highly questionable under the old tax law and almost certainly not allowed from 2018 on under the Tax Cuts and Jobs Act.

For overnight travel, you have two options.

  • Keep your receipts and report your actual amounts.
  • Use the GSA per diem rates as a standard meals allowance ($50-70 per day depending on zip code).

How to use the GSA per diem rates.

  • Get the zip code for your hotel or wherever you’re staying.
  • Use this link to search: https://www.gsa.gov/travel/plan-book/per-diem-rates
  • When you select the year, the GSA fiscal year doesn’t match the calendar year. The government fiscal year starts on October 1st. However, you still need to use the same rates for the entire tax year even if it’s after October. For example, in November 2022, you’d still use fiscal year 2022 instead of changing to fiscal year 2023.
  • Find the number under M&IE. This is your standard allowance per day.
  • For the first and last days, you multiply the standard allowance by 0.75.
  • Example: 4 day trip, M&IE on GSA website = $54. Day 1 and Day 4 = $40.5 each ($54*.75). Day 2 and Day 3 = $54 each. Total standard allowance for that event = $189.

Whether you use the actual amount or standard method, the deduction is only one half of your expenses. So in the above example, your deduction is $94.50 not $189.

Filing tip: Pay close attention to whether your tax software is asking for your full meal expenses (and will divide by 2 later on) or for half of your expenses.

What else can you deduct on your sports official taxes?

The following items are generally allowed deductions.

  • State and national association registration fees and annual recertification fees.
  • Association dues.
  • Background check fees.
  • Assigning fees (if paid by referees rather than by the league or association).
  • Uniforms, whistles, flags, and other equipment.
  • Assessor fees (report your game fee as income and the assessor fee as an expense even if you’re paid in cash and hand the entire fee directly to the assessor).
  • Liability insurance.
  • Health insurance, if you qualify for the self-employed health insurance deduction.

Gray Area: Shoes, Running Clothes, and Similar Equipment

Equipment deductions are only allowed for things that can only be used for your business. Your referee jerseys and whistles are pretty safe claims. Cleats and running shoes are not because you could use them to play in or go for a jog.

If you’re wondering about the bold, it’s because there is a difference between what you actually do and what you could do. Clothing items go by what you could do. It’s not enough to buy a pair of cleats and really only wear them to ref. If you could use your shoes to play in or everyday wear, you can’t deduct them. Your uniform shirts are different because they clearly identify you as a ref, so they aren’t suitable to wear doing other things.

There is a gray area where it’s arguable if an item can be used for personal use or only in your business as a referee. For example, there are other things you can use a whistle for. But since so few people in general use whistles outside of officiating or coaching sports, it’s easier to say it’s a specialized piece of equipment versus a generic running shoe.

The bottom line: If you use it for something else, don’t try to deduct it. Otherwise, you might end up with a certified letter from the IRS saying they’re auditing your tax return and adding penalties.

Don’t Push Your Luck: Cell Phone/Internet Bills

“I use it to accept games, so I can deduct it” is not a valid reason for claiming your entire cell phone or internet bill as a business expense. Technically, you can deduct these bills in part if you’re able to prove how much you used them for business and how much you used them for personal reasons.

This is probably more trouble than it’s worth. Do you really want to sit there counting cell phone minutes or kilobytes of data and then keeping records of it?

Automatic: 20% of Your Profits

When you file a Schedule C as an independent contractor, you’re filing as a business. That gives you the right to claim the Qualified Business Income (QBI) deduction under Section 199A.

How the 20% Deduction Works

  • You get an additional deduction equal to 20% of your business profits. This is separate from your Schedule C, and your tax software should automatically add it.
  • You end up only paying income tax on 80% of the money you make as a referee after your other expenses.
  • Your self-employment tax does not change (based on 100% of your profits not 80%).
  • This is a separate calculation on your Form 1040. Don’t add this deduction to your Schedule C.
  • Note: The “the principal asset of such trade or business is the reputation or skill of one or more employees or owners” exception. Regulation 1.199A-5(b)(2)(xiv) defines this clause as a very narrow list of specific services. Referees aren’t on there.

What’s the catch?

Congress added this deduction to level the playing field for other businesses when it cut corporate tax rates. You qualify if your total gross income (not just refereeing) is within the following limits.

Filing Status20222021
Single and Married Filing Separately$170,050$164,900
Married Filing Jointly and Qualifying Widower$340,100$329,800
Head of Household$170,050$164,900

If your income is higher, you lose part or all of the deduction for that year. You may be able to get it back by increasing your retirement contributions to reduce your taxable income. Assignors, tournament directors, or those who own other businesses may also have additional tax planning options to reduce their taxable income to qualify for the QBI deduction.

How much do referees pay in taxes?

Expect to pay 15.3% in self-employment taxes plus your marginal income tax rate on your net profit.

To cover these taxes, you either need to increase your withholding at your day job or make estimated tax payments throughout the year. If you do not and your tax liability is greater than $1,000, you may be charged additional interest.

How doe estimated taxes work for sports officials?

Generally, you need to make four quarterly tax payments. For example, if you will owe $1,000 in taxes on your income as an official, you should make four payments of $250. You can also increase your withholding at your main job to cover those payments.

Estimated tax payments are due as follows.

Action Needed2021 Tax Year2022 Tax Year
First Quarter Estimated Tax Payment DueApril 15, 2021April 15, 2022
Second Quarter Estimated Tax Payment DueJune 15, 2021June 15, 2022
Third Quarter Estimated Tax Payment DueSeptember 15, 2021September 15, 2022
Fourth Quarter Estimated Tax Payment DueJanuary 15, 2022*January 15, 2023*
Receive Your 1099No later than January 31, 2022No later than January 31, 2023
File Your Tax ReturnMonday April 18, 2022 (due to Good Friday and Passover on the 15th)Tuesday April 18, 2023 (15th is a Saturday; Monday is Washington, D.C., Emancipation Day)
Extended Filing DeadlineMonday October 17, 2022 (15th is a Saturday)Monday October 16, 2023 (15th is a Sunday)
*You can skip the final estimated tax payment if you file your tax return and pay your full balance due by February 1st.

In order to avoid penalties for not paying enough in estimated taxes, you need to pay at least the following amounts.

Based on Current Year Tax ReturnBased on Prior Year Tax Return
AGI up to $150,000 ($75,000 if married filing separate)90% of current year taxes100% of prior year taxes
AGI over $150,000 ($75,000 if married filing separate)100% of current year taxes110% of prior year taxes
To avoid the estimated tax penalty, you must pay one of the above percentages through a combination of estimated tax payments and withholding. Typically, you need to make four equal payments. If you have uneven income, you can use the annualized income installment method.

How do taxes work for referees who are minors?

Referees who are minors still need to file a Schedule C.

Parents should strongly consider having their own tax preparer file the minor’s return or, if using online software, doing the minor’s tax return with them. This is especially important if you are claiming the minor as a dependent, for head-of-household status, or for other credits.

How do taxes work for referee who are college students?

College students also file their own tax return. As with minors, college students and their parents should discuss how they will file their returns for the purposes of claiming dependents and other credits.

They should also be aware of the support tests that determine whether the college student is a dependent. Don’t forget to consider all sources of income including officiating, other employment, and student financial aid.

Do sports officials have to file state tax returns?

If you live in a state with income tax, you probably need to file a state tax return.

If you traveled to a state with income tax, check that state’s rules for the filing requirements (may be based on income or number of days in that state). The tax will be based on your portion of income that’s attributable to that state (sometimes based on complex rules that don’t reflect the actual cash you received).

Can a referee open a retirement account to lower their tax bill?

Your game fees count as earned income. This allows you to contribute to a Traditional or Roth IRA even if you don’t have other income (e.g., students or retirees). As a Schedule C 1099 filer, you may also open a SEP IRA or Solo 401(k). These small business retirement plans allow you to contribute up to 20% of your profits on a tax-deductible basis.

SEP IRAs are usually the easiest to open and have the lowest (or no) fees. Solo 401(k)s allow you to contribute more overall if you don’t have a 401(k) from a different job or if your main 401(k) has poor investment options.

Should you form an LLC for your officiating side gig?

If you’re only an official, forming an LLC probably won’t help you from a tax standpoint. You’ll also likely get little to no liability protection if you form an LLC.

Assignors, booking commissioners, tournament directors, event organizers, and others may gain a benefit from forming an LLC or S-corporation. That’s because instead of only your personal services and payments, you’re also potentially responsible for the actions of others working with or for you. See Financial Accounting for more information on accounting steps you may need to take.

Is it practical to form an LLC?

Before getting into tax issues, the question is if it’s even practical to form an LLC. Many (most?) sports officials sign up as individuals under an independent contractor agreement. The organization may not have a process or want to go through the hassle of signing a contract with an LLC.

In some circumstances, forming an LLC can be a sign to the IRS that you’re trying to establish a business activity rather than trying to take deductions for a hobby. In the officiating context, this will probably have little to no weight.

You can easily prove you have business income through your contracts, 1099s, and assignment logs. For obvious expenses, such as fees to register as an official, your receipts, membership brochures, etc., should be more than enough.

For those gray area expenses, such as a pair of shoes that can be worn in other activities, the main question is whether this is a personal expense? The IRS probably won’t take “it belongs to my LLC” as proof that it’s a business rather than a personal expense. They’re looking for things like why it can only be used for business or how you divide up the personal vs. business use percentages.

Does an LLC substantiate home office expenses?

Again, whether you have a formally registered business is something the IRS considers (but in no way requires) for business expenses including the home office deduction. But the two big questions are what business activities are you doing in the office, and do you use the office for any other purposes?

Checking your assignments, taking online certification classes, and filing match reports are all administrative activities that could potentially allow a home office deduction if you have a separate area where you do those activities.

But then there’s the smell test of do you really reserve a portion of your home for a couple of hours of work per week related to a part-time side gig? That means no paying personal bills at the same desk, nobody playing games or surfing the web on the computer, etc. Since an LLC is evidence that you have a business but not what you’re doing with the rest of your time, it won’t help much here.

If you have another business, you can share a home office between two or more business activities. However, you only get one home office deduction, so it may be easier to just include the expense on the Schedule C for your main business.

LLCs and State Taxes

One another thing to note is that an LLC could cost you more in state taxes.

Most states charge you anywhere from $100 to $1,000 per year just to have an LLC. If you work in another state, you may need to pay that state’s fee as well. This is because LLCs are under state law not the IRS or federal law. If you don’t register with each state, your LLC may not exist in that state.

Along the same lines, some states don’t require you to pay income taxes if you, as a visiting non-resident individual, are only there for a few days or don’t exceed a certain amount of income in that state. However, as an LLC registered in that state, they may want income taxes on every dollar of income you earn in their state.

Bottom Line on LLCs

An LLC probably won’t help an individual official reduce their taxes, but it will definitely come with extra costs.

What is the tax business code for a referee?

When you do your tax return, it may ask for you a business or activity code. This is mostly for statistical purposes and does not affect your taxes due. You may want to choose one of the following codes:

  • 711210 Spectator sports (including professional sports clubs & racetrack operations)
  • 812990 All other personal services
  • 999999 Unclassified establishments (unable to classify)

What tax software should you use?

Almost any tax software can handle referee taxes. Keep in mind that you’re filing a single tax return with your referee income, day job income, and everything else. Before you choose which software to use, make sure it can handle everything you need in addition to doing your referee taxes.

Frequently Asked Questions

What is the business code for a referee?

You can use 711210, 812990, 999999, or anything else you think fits.

Can I deduct my mileage?

Most referees can only deduct mileage for long trips not regular games in your home area.

How do you file referee taxes?

You’ll usually file a Schedule C with your regular income tax return. You may or may not get 1099s depending on how much you worked and for who.

Common Tax Problems

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Leave a Comment

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16 thoughts on “Sports Official and Referee Tax Guide”

  1. If states like Pennsylvania deduct a portion of your game check I believe for taxes, how would I claim that or get tax relief when doing taxes to indicate this?

    Reply
    • This sounds like state income tax withholding. If it is:
      1) Each state sets its own requirements for filing a state tax return (could be total amount earned, number of days worked in that state, or some other factor).
      2) If you’re not required to file a return, but they have your money, you generally need to file a state tax return to potentially claim a refund. That could either be because you’re not subject to their taxes, or they withheld too much for your tax rate and deductions.
      3) You will need to track your income and expenses by state (and city if any city taxes apply) to do the state tax returns.
      4) Once you figure out the state taxes, you may be eligible to claim what you owed each state as an itemized deduction.

      If you’re using tax software, it should ask whether you worked in multiple states. Pay close attention to whether it’s asking if you moved states or worked in multiple states as a traveler. If you’re using software that doesn’t have a good Q&A for this or one that is good, please let everyone know in the comments.

      Reply
  2. Is gym membership an allowable deduction? For the officials that run or jog (soccer, basketball, football, etc..) – being in fitness is crucial.

    Reply
    • This is a gray area at the intersection of a non-deductible personal expense (general health, fitness, and leisure) versus saying that it’s an ordinary and necessary business expense. The IRS may or may not allow it depending on the exact circumstances.

      Reply
      • If the membership is added to the deductions but not allowed, the penalty is just a fine right? Best case scenario, deduction allowed. Meh case scenario, deduction causes audit, but after stating case for necessity, deduction allowed. Worst case scenario, deduction not allowed and person owes a little more taxes (<$100 max)

        Reply
        • If the deduction is not allowed, you would owe the additional tax plus penalties and interest back to the original due date of your tax return. The IRS may also decide to take a closer look at your other deductions on that tax return as well as past and future tax returns.

          Reply
  3. If I take my son to a soccer tournament but I also earn significant referee income during the weekend (working every day of the tournament) can I take any, some portion, or none of the expenses (mileage, hotel, per diem meals) as a deduction? Tournament is over 100 miles away from our home and requires a 2-night stay.

    Reply
    • This is getting into a gray area with arguments to be made either way without doing more research and getting more specific info about the situation. IRS publication 463 can give more info (https://www.irs.gov/publications/p463). The biggest issue is that while you can possibly meet the rules for a business trip, the intent of the trip isn’t actually business.

      Reply
      • Erin, thanks so much for the information. Your blog is very useful and I will be sharing it with other friends in the referee community!!

        Reply
  4. A question about medical expenses. If I’m injured as a result of officiating, can I deduct medical expenses (doctor visits, scans, physical therapy) that I would need to start officiating again?

    Reply
    • I added a link to the self-employed health insurance deduction to the post. There is a general itemized deduction if your medical expenses are over a certain percent of your income and your income is under a certain level. https://www.irs.gov/taxtopics/tc502

      Trying to claim medical expenses as business expenses seems like an uphill battle. Maybe sport-specific expenses like PT for an athlete? If you’re in this situation, you need to talk to a tax pro in your area. If you’re not, talk to an insurance agent about coverage for both medical expenses and loss of income.

      Reply
  5. If your are an sport official that has has formed an LLC, and your cellphone and internet service is owned by your company, will you be able to deduct your phone/internet service?

    Reply
    • An LLC can deduct business services. If you’re trying to put personal services under an LLC to increase your deduction, you’re pushing your luck. And also probably spending more registering the LLC than you’re saving in taxes.

      Reply
      • Your information has been very helpful, in learning and understanding how to file officiating income, thanks a great deal for your shared knowledge. Will you be updating the Schedule C spreadsheet for soon? Also any information on and the ability to apply for a PPP loan as a sport official? Thanks

        Reply
        • The spreadsheet has been discontinued due to low use. QuickBooks Self-Employed works well but the cost may be overkill. Otherwise, it’s really just keeping a log of your income and expenses that you can add up at the end of the year.

          The PPP situation has been a mess. Technically, independent contractors should have been eligible. However, banks were largely being difficult on loans that were “too small” and not accepting or wrongfully denying applications. Expanded unemployment was/is another potential option depending on whether the referee’s total income from all jobs was down enough to qualify.

          Reply
  6. I have been looking for answers to the items that you have listed and this is the best detailed, most informative article that I found.
    Thank you!

    Reply
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