Tax Question...No , it is not if you have to pay.

[esknights]

I see some posters claim to pay taxes quarterly on their poker income. Is there some advantage to this rather then waiting till April and claiming it then? Am I missing something?

[cardcounter0]

Yes. It's called the Law. If you are self-employed, doesn't matter if you play poker or not, you are required to pay your taxes quarterly. If you wait until the end of they year, you get a nice big fine and penality.

Also, if you have a lot of secondary income (and don't have enough taxes withheld from your primary income paycheck), and owe too much in taxes at the end of the year -- you face more fines and penalities for inadequate withholding.

Talk to someone who runs a business -- they pay quarterly.

[Warik]

What if you have a regular job and poker income is just extra money?

What if you have a regular job and poker income is just extra money that exceeds your regular pay?

Surely you can't be expected to pay quarterly on a hobby when you don't know for sure what type of income to expect, right?

[cardcounter0]

"What if you have a regular job and poker income is just extra money?"

I don't think the IRS has a classification for "just extra money"

"What if you have a regular job and poker income is just extra money that exceeds your regular pay?"

What if I have a regular job and my lemonaide stand in the front yard is just extra money that exceeds my regular pay?
I better be paying my taxes quarterly, or have extra being withheld from my regular pay to cover it.

"Surely you can't be expected to pay quarterly on a hobby when you don't know for sure what type of income to expect, right?"

Wrong. And you are given leeway -- it's called an 'estimated' quartely tax. If your estimate is too far off, you get a penality. If you wait until the end of the year and pay it all at once -- you get an even bigger penality.

Hey! -- Why should I have anything withheld from my paycheck? Why don't I just claim 999 deductions, have nothing withheld from my paycheck, and then just pay everything I owe at the end of the year? -- Because I will get a huge penality.

[pzhon]

[ QUOTE ]

Surely you can't be expected to pay quarterly on a hobby when you don't know for sure what type of income to expect, right?

[/ QUOTE ]
In short, yes [you are expected to pay quarterly]. You should talk to an accountant, but there is a lot of relevant information in the 1040 instructions for line 73, where you compute your fine for underwithholding. See http://www.irs.gov/pub/irs-pdf/i1040.pdf page 58. For example, one criterion (if you make less than 150k) is whether you paid enough to cover the taxes on the previous year's income.

[ChristinaB]

[ QUOTE ]
What if you have a regular job and poker income is just extra money?

What if you have a regular job and poker income is just extra money that exceeds your regular pay?

Surely you can't be expected to pay quarterly on a hobby when you don't know for sure what type of income to expect, right?

[/ QUOTE ]

Estimated tax payments have nothing to do with being self employed or not.

Everybody is supposed to pay as you go through the year earning. If you have a job, you can usually adjust your payroll deduction to cover extra taxes owed, therefore you have no need to do the estimated tax routine.

If you are self-employed or have very high other income, you will likely need to make estimated tax payments (especially since social security has to be paid by the self-employed taxpayer).

Everybody is treated the same. If you owe over $1000 above your contributions during the year you may owe a penalty - whether you have a regular job or not.

[TimM]

[ QUOTE ]
Surely you can't be expected to pay quarterly on a hobby when you don't know for sure what type of income to expect, right?

[/ QUOTE ]

http://www.irs.gov/faqs/faq-kw160.html

[ QUOTE ]

9.5 Estimated Tax: Penalty Questions

What is the minimum amount of estimated tax that I am required to pay without incurring any penalty or interest charges?

In general, you may owe a penalty for 2003 if the total of your withholding and estimated tax payments did not equal at least the smaller of:

90% of your 2003 tax (current year tax), or
100% of your 2002 tax (prior year tax). (Your 2002 tax return must cover a 12-month period.) Your 2003 tax, for this purpose, is your Total tax for 2003. There are special rules for farmers and fishermen, and for certain higher income taxpayers.

Generally, you do not have to pay an underpayment penalty if either of the following conditions apply:

Your total tax is less than $1,000, (less withholding and credits) or
You had no tax liability last year.


[/ QUOTE ]

So there is some leeway, but once you have a big underpayment one year, you have to start making estimated payments for the next year. You should be able to adjust these payments quarter by quarter depending on how you are doing throughout the year.

[Kurn, son of Mogh]

If the amount of tax you have to pay at the end of the year is greater than 15% (IIRC) of your total tax, the IRS can require that you either increase your withholding (if you have W-2 income) or pay quarterly.

[Warik]

Interesting.

I'm going to start walking around with a hoops so I can be sure to jump through them at the end of every quarter.

[cardcounter0]

Like I said in my first post -- Talk to someone who runs a business or is self-employed. They will be glad to tell you all about all the "hoops". Probably have a good chance to hear a horror story or two when they missed a hoop also.

[curtains]

Everyone always mentions these penatlies, but never have I heard a good idea of how large the penalties are. Does anyone know?

[ChristinaB]

[ QUOTE ]

Everyone always mentions these penatlies, but never have I heard a good idea of how large the penalties are. Does anyone know?

[/ QUOTE ]

The penalties are sort of like an interest charge. If your June 15th estimated payment is missed you will basically pay a 9% annual rate (for the 10 months 6/15 to 4/15) on the amount you underpaid. Repeat calculation for all the various quarters underpaid. Plus you can usually avoid penalties if your estimated tax paid is equal to your previous years liability, or if you owed no taxes last year.

[cardcounter0]

Depends on how the IRS sees the error:

Failure-to-pay penalty:
You may have to pay a penalty of 1/2 of 1% of your unpaid taxes for each month or part of a month after the due date that the tax is not paid. This penalty cannot be more than 25% of your unpaid tax. (Guess what? The IRS will notify you of the problem, the exact day the full 25% is due.)

Failure-to-follow-rules or regulations:
The penalty is equal to 20% of the underpayment.

Fraud:
If there is any underpayment of tax on your return due to fraud, a penalty of 75% of the underpayment due to fraud will be added to your tax.

And then they sometimes tack on a fee of $100 or $50 per statement that contains the errors.

In the case of fraud, criminal (re: jail time) charges could also apply.

[oscark]

XXXX. Ok, so I now realize I screwed up by not paying estimated taxes. It looks like the deadlines to do so were April 15th and June 15th. Now what?

[cardcounter0]

Call a CPA?

[MicroBob]

wouldn't that be JULY 15th...not june 15th??


also....is this applicable for ALL internet gamblers??
i thought it just made a difference if you filed as a 'professional' gambler via schedule-c or whatever it is. that is the whole self-employment thing.

if you are gambling as 'recreation' and not for 'income' then you just do it on your annual filing i thought.


note - i don't really know diddly-squat about taxes. this was just my understanding.

[ChristinaB]

[ QUOTE ]
wouldn't that be JULY 15th...not june 15th??


also....is this applicable for ALL internet gamblers??
i thought it just made a difference if you filed as a 'professional' gambler via schedule-c or whatever it is. that is the whole self-employment thing.

if you are gambling as 'recreation' and not for 'income' then you just do it on your annual filing i thought.


note - i don't really know diddly-squat about taxes. this was just my understanding.

[/ QUOTE ]

The deadlines are not every 3 months:
April 15
June 15
Sept 15
Jan 15
as you can see, for 2nd & 3rd Qtr your deadline is before the quarter ends. They do it Apr 15 to be consistent with annual tax day, and they do it Jan 15, so that you will already know your full years income. Half the time you pay before quarter end, the other half you pay after quarter end - so it averages out to the end of each quarter throughout the year (did you think you would just get extra days for nothiing? /images/graemlins/tongue.gif)

Again, estimated taxes are for everyone (gamblers, non-gamblers, professionals, fishy lucky winners, employed, self-employed). All that matters is that you are not having enougn withheld elsewhere (like on your paycheck) to make you responsible for paying it.

[ChristinaB]

[ QUOTE ]
Depends on how the IRS sees the error:

Failure-to-pay penalty:
You may have to pay a penalty of 1/2 of 1% of your unpaid taxes for each month or part of a month after the due date that the tax is not paid. This penalty cannot be more than 25% of your unpaid tax. (Guess what? The IRS will notify you of the problem, the exact day the full 25% is due.)

Failure-to-follow-rules or regulations:
The penalty is equal to 20% of the underpayment.

Fraud:
If there is any underpayment of tax on your return due to fraud, a penalty of 75% of the underpayment due to fraud will be added to your tax.

And then they sometimes tack on a fee of $100 or $50 per statement that contains the errors.

In the case of fraud, criminal (re: jail time) charges could also apply.

[/ QUOTE ]

By the time you owe 25%, you are over 4 years delinquent. The thrust of this thread was more in terms of neglectful uninformed oversight as opposed to outright tax evasion or fraud. If you are acting truly criminally, then the gloves are off as far as the IRS is concerned. I don't think any of the posters asking questions in this thread fall into that category.

[esknights]

Is MicroBob correct about taxes if playing just for recreation. They can then just be filed annually or what is the deal?

[MicroBob]

christina already answered this question right after i asked it.
it's at the bottom of her post.