Special Article

Special Article

Update on Tax Changes

By Rick McIntosh

By now, you all know about the passage of the One Big Beautiful Bill Act (OBBBA). I’ll focus below on just the most significant changes and highlight the only specific change for independent contractors and one other topic affecting you as an umpire. But, a little follow-up on my article released last May. (Read past article.)

Filing an Amendment to Previous Tax Years

If you realized that any of the items I mentioned to reduce your net umpire income such as self-employed health insurance (SEHI,) or other expenses such as fees paid, supplies, and/or driving mileage were omitted in a prior year return, you may now file an amendment for up to three tax years.

This means you could adjust (amend) 2022, 23, and 24 federal tax returns. The amendment if you add deductions, your return would then show less income and will likely result in some money being returned to you by the government. If you do amend a federal return, it would also make sense to file an amendment to your state tax return for the same year because federally- taxed income directly influences state income. There is the potential that you could also receive money back from the state in which you live.

If you are retired military and living in Virginia you may have missed the relatively new state subtraction for retired pay. This particular change has no impact on the federal income tax return, so in this instance, you would only amend just your state return.

It is strongly recommended that you consult your original tax preparer and have them prepare the amendment for you. They would have kept a copy of the original return and are much more capable of preparing any amendment for filing. Using an alternate preparer could complicate the process because they’d have to recreate your original return.. Lastly, there’s the option of filing an amended tax return manually by using Form 1040X, but trust me, that is not the path of least resistance.

Should you file an amended return, be prepared for a long wait! Amendments are processed manually and you can expect to wait at least six months, perhaps nowadays as long as eight to ten months.

OBBBBA

The OBBBA did not have many substantial changes for an individual filer, but there are four noticeable ones. The biggest overall change was setting as permanent many of the changes from the first Trump tax bill (2017 Tax Cuts and Jobs Act) such as the increased standard deduction, among others. Contrary to popular misinformation, the OBBBA did not make Social Security tax-free.

The four noticeable changes include:

1. Further increased standard deductions and tax brackets beyond what the COLA adjustments would have been.
2. Added a Senior deduction for taxpayers 65+ of $6,000 per person, reduced slightly for income over $75,000 ($150,000 for joint filers) and phasing out to zero once income reaches $175,000 ($250,000 joint). This deduction is in addition to the regular standard/itemized deduction.
3. When you itemize, the SALT (State & Local Tax) deduction is increased from the current $10,000 to $40,000, although it reverts back to $10,000 in 2029.
4. If your job includes tips and/or overtime, you may be eligible for up to a $25,000 deduction for tip income and $12,500 ($25K joint) for overtime income.

The procedures for you to report 1099-K income and complete a Schedule C for your officiating income are unchanged. The only thing that may affect some of you is that the Qualified Business Income (QBI) deduction that some of you have been able to claim depending on income, now has a minimum of $400 if you have at least $1,000 in income.

Business miles

Allowable mileage to and from games is the biggest business expense you can claim on your taxes. As I mentioned in May, the mileage to a game from your normal workplace is limited to just the distance from work to game and return. However, what if you’re driving to a game on a weekend from home? Subject to interpretation, IRS Pub 463 Travel, Gift, and Car Expenses infers that travel from your home to a temporary work location is deductible as long as the temporary work location is not the same location as your primary or main job.

It is reasonable to presume that when you drive to a game at Madison HS on a Sunday morning, you’re going to a temporary work location. You do the job there and go home. An important thing to do is to keep an accurate record of your games and mileage to them and make sure it matches the record of games worked maintained by the assignors. If you don’t keep accurate records, you could be audited and struggle while defending the returns you filed.