Rake Kickback & Taxes???

[Ralph Wiggum]

I'm considering signing up for Empire or Intertops poker so I can make back some of the considerable amount of rake that I'm contributing to Party (well it's only 2/4, but still). I was wondering if I take the kickback from my rake, then do I need to pay taxes on this?

[Gramps]

Yes, you should clearly pay taxes on your rake rebate. Let's say that you got your rake rebate right away - less was taken from each pot you won. You'd pay taxes on those extra winnings.

The fact that you get it in one lump sum at the end of the month doesn't change things.

[djack]

The real question is how you account for them.

[dogmeat]

Hey, you are a bright guy, what makes you think ANY money you make is NOT taxable?
If you live in the US you need to account for (and pay taxes) on any income, but I have to assume you knew this.

Dogmeat /images/graemlins/spade.gif

[Nightwish]

Ummmm.....you list it as income? How else can you possibly account for it?

[Ralph Wiggum]

Rake is the fee that we pay Party (or whomever) a fee for their service to host poker games. Receiving a rebate is getting a refund on a percentage of that fee, which was originally our money. I guess I was looking at a rake rebate not as extra income, but as a refund of a service fee that I used my own money to pay for (which I think wouldn't be taxed).

Basically, I feel like I bought a membership at a gym to use their facilities, but now they've decided to return a portion of my membership fee. That wouldn't be income, even though I've just received some money that I didn't have before.

Do I have an argument or am I just crazy?

[beginner]

That makes sense, I would not declare it along with my winnings. Anything that is a rebate is not income.

[djack]

While I might agree with that, I think it's unlikely that you can get the IRS to agree.

[Gramps]

Unfortunately, in the IRS's eyes, you'd be considered just crazy. With the gym membership analogy, you're not putting money in to make more money - you're just making a purchase and getting a discount off that purchase in the form of a rebate - the sum of your actions is that you purchased your gym membership for price paid - rebate.

Say I run a pizza business and my expenses are $4,000 per month, while I bring in $6,000 per month - a net of $2,000 per month. Due to competition in the pepperoni business, I'm now offered a $250 per month discount on the price of pepperoni, which will be paid in the form a rebate. Well...my expenses are now $3,750 per month. I now make $2,250 per month. As a sole proprietor, I have to pay taxes on that income.

Same thing with Party and rake. Your reduction in rake expense just means an increase in your net poker income (if you file as a professional), or...I guess if you file as a non-professional, it'd probably just count as another win that you can deduct your losses against...but I don't know the mechanics of that exactly...

The IRS has heard every sort of creative argument possible. They're not very receptive to them, and neither are tax courts. Rake rebate is income, just pay tax on it and it'll be all good (except for the fact that you had to pay tax).

[Luv2DriveTT]

[ QUOTE ]
Anything that is a rebate is not income.

[/ QUOTE ]

Are you sure about that? I think a rebate is considered income by the IRS. But then again, what do I know... I'm being audited. /images/graemlins/confused.gif

[CollegePlayer]

[ QUOTE ]
I'm considering signing up for Empire or Intertops poker so I can make back some of the considerable amount of rake that I'm contributing to Party (well it's only 2/4, but still). I was wondering if I take the kickback from my rake, then do I need to pay taxes on this?

[/ QUOTE ]
grow a pair Mary