Depending on the form of the business: partnership, llc, sub s, c corp…All of these file tax returns and are taxed in some manner. So, while your example trainer may not be getting a W2, the profits should be taxed, either on its own (C corp) or as a flow through entity where her earnings are reported on the individual’s return. This is in the US.
I agree that writing off expensive vehicles and fancy trips as a business expense is not in line with the spirit of the tax law. How many times have any of you gone out to eat with a self-employed friend who maybe asks one business question so that they can write the meal off as a business expense?
One down side to avoiding being an employee or understating income: you don’t pay in to the social security system. I know a trainer with that dilemma now. But, your folks sound like they may not need SS when the time comes.
Tax cheating is common and the cash economy is real. I don’t like it either.
This seems exactly right, and consistent with my experience. I find it distasteful, and find the lack of disclosure to be unethical on top of that. But these practices typically concur in the context of a barn where you either sign up for their way of doing things or leave for another place.
That said, in a large barn, you forfeit your right to have autonomy over all manner of horsekeeping decisions, like the aforementioned bedding or tack room design. (And much of that is reasonable. A barn with 30 horses on the road can only do so much customization for each client.) Barns know they have a lot of leverage over smaller customers. If you like the training/have limited options in your area, you may be forced to hold your nose about the outrageous split policy or the farrier you don’t love, etc. I think some posters are being a little naive about the ability of customers to demand changes. You can always leave a trainer with a booming business and some undesirable practices–and perhaps you should!–but you can’t easily make them ethical and stay. The proliferation of these kinds of behaviors throughout the industry makes it even harder to find some place good where you can avoid them. (Hello: 15% purchase commissions.)
Personally, I would prefer to be charged more for standard services that I can budget for in advance, rather than having hidden surprise charges I can’t predict. I certainly don’t begrudge a trainer making a comfortable living in an above-board manner.
I have been at a BNT barn where the trainer added his own personal sale horses shipping costs to customer shipping bills, as well as entry fees and nomination fees for their own sale horses in addition to splits to customer bills and got very angry when customers went to the show office to pay their own bills and found charges for classes they never entered. It goes way beyond stall splits and most customers at high end barns look the other way…
Yet another reason I no longer show on the circuit. (shaking head in disbelief). I think you should have a talk with your trainer:
"I just discovered that your horses are not included in the split. This greatly surprised me, since I thought that all horses were equal, and the split was divided among the horses under your care.
When I budget my money, I plan for splits to be evenly divided among all the horses in the barn. As you know, showing is a very expensive sport and I am not in a position to pay part of your horse’s expenses. If this is to be an ongoing way you allocate costs, I will have to re-address my available money and go to fewer shows.
Are there any other costs that have not been discussed with all the clients? If so, I think we should have a barn meeting to review what expenses we can be expected to be responsible for.
— This approach brings up the topic without directly calling her out on this surprise (for lack of a more noxious word). It also puts her on notice that she might be cutting off her nose to spite her face. – And suggesting the barn meeting means she will have to justify her slimy behavior in from of all her people. Please Note: My carefully worded suggestions do not represent the real way I feel about her.
In the 80’s I retired my nice horse and have enjoyed riding on a much more low-key level (I still have 5 horses though . My last trainers were Joe Fargis/Conrad Homfeld and Linda Hough. I cannot imagine any of them pulling this stunt.
It appears tax information is lacking for COTH readers. I’m amazed so many people begrudge people making a good living.
I wouldn’t have wanted my trainers driving around in a 20 year old pickup- I don’t.
Why are more of you not writing off your horse expenses? Look at the tax laws or check with your accountant. It’s very simple!
No one is begrudging horse trainers making a good income. A trainer can set their fees at whatever price point they want. The criticism is of the underhanded nature of sticking the clients with some of the expenses for the trainer’s horses rather than being above board about it. I think it’s a bad business practice, as most clients are going to figure out what is going on and be put off by the practice, even if they would have paid a higher fee if the trainer were open about it. It creates the impression of the trainer taking advantage of the clients above and beyond the stated contractual arrangement.
Are you asking why trainers are not writing off their horse expenses? I assume that in most cases they are.
Of course as someone else mentioned and it bears repeating, if the trainer is writing off show expenses on their personal horses as a business expense, but those expenses are in fact being paid by the clients, then that is tax fraud.
Well then she should be charging them for her horse show costs up front. Not being sneaky and setting it up so she isn’t charged at all for rented stalls for her own horses ( and dogs). That is the real issue here.
My point is that any profit that they make is theirs to spend as they see fit. If the tax accountants and attorneys say it’s ok, and the client agrees to the “program”, as they are calling it, then it’s really nobodies business but the trainers what her business model is, and where her money should go.
Not gonna lie, a LOT of trainer bashing gets done here. Everybody should have the opportunity to work and make as good of a legal profit as they can. It seems to be a problem when it’s a trainer making money. Are there shady trainers? Hell yes, the worst sort of people. Terrible people. But if someone is working hard, provides good service, and other people like the program, then what they spend their money on is no ones business. It reminds me of that thread where someone referred to the trainer as “the help”. SO offensive
As a very hard working trainer that makes a nice living, and doesn’t rip people off, it gets really irritating here sometimes. There is a lot of trainer bashing.
I also think you misunderstand which comment I am remarking on. I also think it is wrong for the trainers horses to not be included in the splits, and said so upthread.
No, that’s not it at all. I’m fine with a trainer making a nice living. I have paid a lot of money for lessons with outstanding trainers and not felt anything but good about paying highly skilled people a highly skilled wage.
But that’s the point. Own it. “This is what my time is worth, this is what it costs to hire me.” Be clear and ethical with your pricing and your accounting. Charge $100/hour, or more, for your lessons, if that works, and then pay for your own shavings. Your clients will respect you more and you’ll have better relationships that way. It’s just more professional AND it also puts you in a better position on just about everything.
It creates clarity about what is YOUR money and what is MY money, among other things.
If I’m paying that $100/hr and you’re driving a fancy car and have a fancy barn but your accounting is very clean I’m going to feel way better about it than if I’m paying $50/hr but I’m always socked with surprise and odd extra bills for shavings for your horse or morning coffee or whatever, and then ESPECIALLY if I see spending on the fancy car. In the first case, even if I’m stretching to pay it, I’ve made a choice, and I also probably feel pretty safe trusting you with my financial, emotional, and physical safety. In the second case, I’m always going to be wondering what you’re going to pull on me next and never able to fully trust you.
In fact, it’s not “very simple”. The IRS takes an especially hard look at “hobby loss” filings; there’s a 9-part test to determine whether the deductions are warranted (hint: you have to expect to make a profit on your horse business eventually).
Endless hours of fun. Please, please, please - consult a good tax professional and an equine attorney before going down this path. The IRS might be understaffed at the moment, but the statue of limitations can be longer than one might think.
Because that’s not good business. Why should a trainer “carry” customers for a month while waiting to get back the $$ they took out of their bank account for customer?
Also, I can guarantee that the show office would rather have 1 trainer call in with stall, hay, feed bedding reservations and then work with trainer to split the order amongst customers as opposed to 20 different customers all calling at various times leading up to the show and asking to stall with the trainer.
Plus every horse pays an office fee and doing trainer splits is pretty painless.
But to answer OP question, no, I would never charge my customers for a dog stall or not include my horses in the splits. That’s ridiculous.
I’m an AA who runs my horses as a business. Actually turned a profit this year—woohoo!–which I will pay taxes on. I did indeed issue a few 1099-NECs. Don’t conflate running horses as a business with amateur status. I do not get paid to ride, show, train, or teach, and I only ride my own horses. I do, however, sell them at a profit.
I am not understanding your concern here. LLC profits and losses flow through to the member (owner’s) personal tax return. So whether the training fees go direct to the individual trainer, or get folded into a single combined training/boarding fee paid to the LLC, I am not seeing what the problem is? The income is going to get taxed regardless.
. My last trainers were Joe Fargis/Conrad Homfeld and Linda Hough. I cannot imagine any of them pulling this stunt.