tag:blogger.com,1999:blog-7253074264607624153.post108551894234855112..comments2024-02-17T02:28:46.454-05:00Comments on That's What Jenni Said: Trip Report: Mt Rainier National ParkJenni Stephenshttp://www.blogger.com/profile/14032674707429381218noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-7253074264607624153.post-36829101546467306492010-08-21T11:53:46.461-04:002010-08-21T11:53:46.461-04:00Answer to question#2 (what are the tax implication...Answer to question#2 (what are the tax implications for trip fee revenue): IRS treats everything over the raw cost of the member (not the organizer but the member) expenses as hobby income and hobbyists must follow the rules under deductions and reporting (meaning anything not offset by allowable hobby deductions must be reported and taxed). In practical terms this means your deductions are limited to covering your income and you can never file a loss beyond that even if you had one) Hobbyist who turn a consistent profit year after year may elect instead to file it as business income (and therefore take greater deductions lowering the tax bill overall if you have a net loss) but the irs will reclassify it as hobby income and disqualify your business deductions if you are not able to show profit 3 out of 5 years or otherwise prove it is an actually business versus just a hobby. In other words the IRS wins more if you're classified as hobby (b/c they get to tax you on everything over your raw costs+allowable hobby deductions) and you win more if you're classifed as a business (b/c you can deduct all of your losses, even those above and beyond your income).Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7253074264607624153.post-42089392071936170232010-08-21T11:43:02.077-04:002010-08-21T11:43:02.077-04:00A reader posted a question for me anonymously abou...A reader posted a question for me anonymously about the trip fees, so I wanted to answer it in case anyone else had the same question. It was:<br /><br />Further to your post-script in which you indicate that you charge members a certain amount of money as: "compensation for the time we put into researching, putting together, and leading these great trips", it would be useful for members to have a breakdown of the hourly wage you pay yourself for performing this internet research. $5 per trip? $5 per day of research? $5 an hour? $20 an hour? Members of your travel group are entitled to know the amount of this self-payment that is built into the trip fee.<br /><br />The answer is that there is no set hourly wage. Typically I calculate what my total trip expenses will be (airfare, hotel, meals, etc) so that I can be there to play tour guide for the group, guesstimate how many members are likely to sign up and use that to try out different price points on paper to see how it would break down (if 1 member signs up then x% of my fees will be covered, if 2 members sign up then y% will be covered, if 3…etc), and then finally choose a price point that likely to be a good spot where most of my trip fees as organizer are covered but yet doesn’t escalate the trip fee to a level where members would feel they were not getting a good value for what was included. Your time (that you don’t have to spend planning itineraries or tracking down reservations or researching restaurants, or arguing with airline reps if they get something wrong or there is weather problems, etc) is valuable (as is mine) and only you can speak to what it’s worth for you to have all those things taken care of for you. That ‘value’ you place on those services is the ‘magic’ price point I try to find and set the trip fee too. Too low and lots of people sign up for trips but I can’t afford to actually attend as your organizer (while members travel a few trips a year, as the organizer I am on every trip and that would get expensive quickly) and provide services; too high and my price would be covered but nobody would sign up to come with me and that would be lonely indeed. In short, my job as organizer is to plan out these trips and price them out to make it work for both sides. Your job as the member is to decide if you have the time and finances to travel on these trips and whether the price point of any given trip is a good value for you. I think we’ve got a great model b/c I’m not a travel agent, so I don’t have to earn a living doing this and can therefore price trips lower than a company that has to do precisely that, saving members money. At the same time I’m able to bring a lot of expertise to the table after doing this for two years and take a lot of the hassle out of the typical process you’d go through to do this all yourself and since I’m personally involved and attending the trip it’s a much more hands on experience than if you went to an actual expensive travel agent. Win-win for everyone.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7253074264607624153.post-29487607139869063432010-08-21T11:41:38.829-04:002010-08-21T11:41:38.829-04:00I apologize Mr. or Mrs. anonymous- I assumed you w...I apologize Mr. or Mrs. anonymous- I assumed you were a member of the travel group and so I answered the question for the group (sent to the group) and assumed you would get the reply as well. It seems that's not the case. I'll be happy to answer the question for you here as well in a comment below.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-7253074264607624153.post-69781285164683413042010-08-21T10:56:14.672-04:002010-08-21T10:56:14.672-04:00Comments deleted? That's disappointing. The ...Comments deleted? That's disappointing. The questions that I asked regarding the amount of your compensation and whether income was reported to the IRS were valid and uncontroversial. If you're seeking to be a reputable tour provider for folks, this is the sort of information that you need to provide, period.Anonymousnoreply@blogger.com