The following is strictly the opinion of a retired accountant and tax preparer and should not be considered legal advice. Others may have a different opinion based on their interpretation of the IRS's current regulations. Any opinion not based directly on those regulations should be considered meaningless unless the person offering the advice agrees to cover any penalties that advice may generate!
Any income a person receives as a result of their bass tournament activities is considered taxable by the IRS. This can include cash or merchandise won in tournaments, received from sponsors, paid for endorsements, or any other related activity. Done correctly, the individual will receive a Form 1099-Misc. from all organizations who pay $600 or more to that person. Prize money should be reported in Box #3 of that form, and other income may be reported in Box #7. Regardless if the money earned is reported on such a form or not, ALL INCOME should be reported on the Form 1040, Schedule C.
Any expenses directly incurred in the activity is then reported in the expense section of the schedule. This can include entry fees, travel costs, expense tied to the operation of then angler's boat, expenses for lures and tackle. Insurance cost for the boat and liability are usually deductible. A person who is actively engaged in the venture may also deduct self-employed health insurance costs.
Depreciation of assets having a life of more than one year, such as the cost of the boat, rods and reels, and electronics, can also be written off based on their useful life. Depending on the amount of income, certain assets may be expensed in the year of purchase based on IRC Section 179. The sale or disposition of these assets is reported as a sale of business property and should be reported on Schedule D of the same tax return.
Upon completion of the Schedule C, any net income is taxed based upon whether the individual is actively or passively engaged in the operation of the business. Those persons who are actively engaged will pay both income tax and self-employment (social security) taxes on that income. Those persons who are performing the activity passively (aka a hobby) should not be taxed for self-employment purposes. An individual who is subject to SE taxes may also deduct losses from the activity against other income if the taxpayer is fully liable for those losses. Losses from the conduct of a hobby generally are not deductible.
Any income or losses may or may not be subject to state or other taxes as well.
It is my opinion that anyone who has won $70,000 in any kind of tournament should immediately contact a professional tax preparer for advice on their specific circumstances. DO NOT wait until after the tax year has ended! As a matter of fact, it would be my suggestion that anyone who is fishing in tournaments should spend the time to learn what their responsibilities are for reporting their income and expenses.