Game Show Pro

Much of this post was derived from two articles: Hobby Business Tax Rules on nolo.com and Taxes and Freelancing from Tax Planning: U.S. at about.com. I take the information in these articles and discuss them from the perspective of a professional game show contestant.

How does one demonstrate that an activity is a business? One rule of thumb is if it makes a profit in any three of five consecutive years. This is the acid test– if a business does not (or cannot) turn a profit, then it is not considered a business at all, but a hobby with tax-undeductible expenses.

Demonstrating a profit in three of five years could prove difficult for a professional game show contestant. Many game shows have proscriptions against featuring a person who has been on another game show recently. Also, getting onto a game show requires some luck; making it on is outside of one’s control. And even if you make it on, it may not be possible to control in what year you appear.

Even so, if you satisfy the 9 considerations discussed in part 1 of this post, then you stand a chance of having the IRS recognize that you are operating a legitimate business.

There is an emphasis that you must conduct the business “in a business-like manner.” People should be able to tell that you are in this particular business. Obtaining business cards, keeping careful financial accounts, maintaining a separate business bank account, obtaining required licenses and permits, and advertising one’s work are all ways of demonstrating that you are in business. Additionally, to be taken seriously, you should keep a log of what you did to make the business profitable.

But very few of these activities are worth the trouble when one is a game show pro. To whom should you give out business cards? Advertising is also a bad idea; game show recruiters generally do not want someone who has appeared on many other game shows, so announcing you are pro would be a bad strategy. Maintaining a separate business bank account would be overkill for a business that might cash one check every two years. There are no licenses or permits necessary to become a game show contestant, and advertising your services as a contestant would likely be unproductive.

What you can do: keep good books. This will be easy since each successful appearance will usually result in a check (and at the end of the tax year, a 1099-MISC). Another good idea: keep a log of your profit-seeking activities, the actions you take to become a professional contestant. This would be especially useful in the event of an audit. Otherwise, you will have little or no documentation that you have a business.

If you decide to take the plunge, here are some useful tax documents for those of you considering becoming a game show pro.

• Publication 334, “Tax Guide for Small Business”: Maximize the likelihood that your being a game show pro is recognized as a business endeavor and discover the limits of what expenses may be deducted.
• Form 5213: Allows you postpone the IRS’s determination as to whether you engage in your activity for profit. This will give you time to do the research to hone your strategy as to how to get on game shows and, once on, how to win money.

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