poker taxes

[theBruiser500]

I need to start paying taxes on poker and am utterly lost. I have absolutely no idea how taxes work. For instance, someone said something to me about paying estimated taxes on a quarterly basis, but I just called a tax person very briefly and they seemed to say I just pay yearly. Or, I pay for my college, can I get tax deductions for that. Or, I lost 2k flipping a coin with my friends, lost 4k in bad loans, are these tax deductible things?

Could anyone recommend some good books to me on the subject? Thanks.

[Senor Choppy]

Not sure what a good starting point is but you might want to try talking to a tax consultant who deals primarily with gambling. A friend has used these guys and seems pretty satisfied so far: http://www.rbstaxes.com/

As far as whether or not you can offset any gains from poker with losses from flipping coins with someone, the answer is yes, provided you can supply adequate documentation /images/graemlins/wink.gif

[theBruiser500]

Yes, someone suggested them to me too and they seemed very nice. But when I talked to them on the phone about my taxes I was completely lost, it seems like it would be helpful to get a background on this stuff. BTW, what sort of documentation could I provide? Like what about people that play poker live for a living, how do they provide documentation that they lost something? Also, just to clarify that 4k loan was to my dad and it turned into me giving it to him. It seems like even if that's not a valid thing to be tax deductible, I could just say I lost it gambling.

[Senor Choppy]

I'm really not the person to ask, but no one else is responding.

Everything I learned about the subject I found online. There is a ton of erroneous information out there, but if you find 10 sources with answers to a specific question and see 8 with the same answer, chances are it's accurate.

I keep a journal for online play (Statking, actually), and for B&M I do the same but also try and get any kind of receipt that confirms I was at the casino on that day and time (ATM receipts, ones from the deli, whatever). I don't think there's any set in stone standards, so basically, keep anything you might be of use for if you happened to get audited. Just saying you lost a random amount of money gambling isn't going to fly, there has to be some kind of paper trail.

Before the year is over, while you still have a chance to lower your tax burden, it would be a good idea to talk to an accountant so you aren't totally blind-sided in April.

[AceHigh]

You might be able to use these guys. At least for your federal taxes.

http://www.freetaxusa.com/

[moondogg]

Here's a quick rundown (based on my understanding, I ain't no tax lawyer):
- Generally speaking, you are required to pay either quarterly estimated tax or tax withholding on all income. If you get a salaried paycheck, they already withhold taxes; if you generate any other income that is not already withheld, you are expected to pay estimated taxes on it (because the government wants its money now instead of next year). However, if you fail to pay your estimated taxes, there is an allowable margin of error when you file your taxes next year, but if you fall outside this margin (i.e you made TOO much money gambling) you will have to pay an estimated tax penalty; see the instructions for the IRS 1040 for more info (the estimated tax penalty is at the bottom of the second page). Personnally, I just bought a house this year and my real-job income has stayed constant, so my resulting deductions will offset my gambling winnings, so I will not have to pay an estimated tax penalty.
- You reporting your gambling winnings for federal taxes, you are required to report all winning sessions as income on the Gambling Winnings line of the 1040, and then deduct all of your winning sessions as itemized deductions on 1040 Schedule A. If you do not itemize your deductions, you will be screwed; basically you have to report all winning sessions, but cannot report any offsetting losing sessions without itemizing.
- The term "session" has been heavily debated. The strictest interpretation is when you sit down at a table with chips, gamble to some extent, and then get up and leave the table (if you multitable online, this can get a little nuts). A somewhat looser interpretaion is to count anytime you site down at your computer, and play. Still looser, your net total in a day. Some have suggested anytime you cashout from a poker site, and some have even suggested anytime you withdraw from Neteller to your bank account (these last approaches are a little crazy, IMHO, and I don't think the IRS would buy them). Poker around the General and Internet forums for messages with the subject of "Taxes" for more info on sessions.
- You are allowed to deduct gambling losses, but only up to the amount of your winnings. In other words, if you win 1K gambling, and then lose 2K gambling, you are only allowed to declare losses of 1K, making a net of zero. In this case, you cannot declare the full 2K loss and apply it deduct it against your other income.

[AceHigh]

[ QUOTE ]
- The term "session" has been heavily debated. The strictest interpretation is when you sit down at a table with chips, gamble to some extent, and then get up and leave the table (if you multitable online, this can get a little nuts). A somewhat looser interpretaion is to count anytime you site down at your computer, and play. Still looser, your net total in a day. Some have suggested anytime you cashout from a poker site, and some have even suggested anytime you withdraw from Neteller to your bank account (these last approaches are a little crazy, IMHO, and I don't think the IRS would buy them). Poker around the General and Internet forums for messages with the subject of "Taxes" for more info on sessions.


[/ QUOTE ]

I think a pretty good arguement can be made for the cashout approach. Isn't that what defines the beginning and end of a B&M casino's session, when you cashin and cashout?

After all, the IRS is concerned with Revenue/Income and for online players we don't receive income until we cashout. Online players aren't walking around with there profits when they sign off, we need don't have immediate access to the cash. It's can be argue it's not much different than owning a stock where the price fluctuates but you only pay taxes based on you profit/loss.

[goofball]

the first problem that comes to mind is that you do have access to the cash when you logout. some analogies: say you are a very high limit player and instead of getting c-notes you get 5k chips, can you now make the argument that you don't have "cash" and as such that income doesn't exist? also, I have an investment account with ameritrade. I don't have immediate access to that cash/assets either. if i have cash in the accoun there's a delay between when i request it and when teh cash shows up in my bank account. if i have it in stocks there's even mroe of a delay since i have to first sell the stock.

[AceHigh]

I don't know. I'm just saying there somes leeway there. Obviously the IRS doesn't expect you to count every bet. If you net $3000 in a month, would it matter to the IRS whether every session was a winning session or not?

I would guess the IRS is most concerned about getting the income numbers correct.

I'm not a tax lawyer, and I'm not telling you how to fill out you tax forms.

[goofball]

[ QUOTE ]
I would guess the IRS is most concerned about getting the income numbers correct.

[/ QUOTE ]

the IRS is interested in milking you for every cent they can.

[mistrpug]

[ QUOTE ]
- Generally speaking, you are required to pay either quarterly estimated tax or tax withholding on all income. If you get a salaried paycheck, they already withhold taxes; if you generate any other income that is not already withheld, you are expected to pay estimated taxes on it (because the government wants its money now instead of next year). However, if you fail to pay your estimated taxes, there is an allowable margin of error when you file your taxes next year, but if you fall outside this margin (i.e you made TOO much money gambling) you will have to pay an estimated tax penalty; see the instructions for the IRS 1040 for more info (the estimated tax penalty is at the bottom of the second page). Personnally, I just bought a house this year and my real-job income has stayed constant, so my resulting deductions will offset my gambling winnings, so I will not have to pay an estimated tax penalty.

[/ QUOTE ]

I was planning on having my non-poker employee withhold extra moeny from my paycheck every week to cover gambling winnings. Do you (or does anybody) know if this is ok?

[theBruiser500]

That woudl be crazy if I had to record every session I played, or even every day. As it is now I think I will have to do it by when I cash out of pokerstars because I haven't kept records. Also getting worried on the deductions, I bought a new computer and a couple flat screen monitors for poker but I don't have a receit, will I not be able to use it as a deduction now?

Say I make $2000 and tax is 20% of that (so $400 in taxes). If I have $100 that can be deducted from my taxes does that mean I'm now taxed $300, or I'm taxed $2000-$100= 20% * $1900?

thanks for the help

[mistrpug]

[ QUOTE ]
That woudl be crazy if I had to record every session I played, or even every day. As it is now I think I will have to do it by when I cash out of pokerstars because I haven't kept records. Also getting worried on the deductions, I bought a new computer and a couple flat screen monitors for poker but I don't have a receit, will I not be able to use it as a deduction now?

Say I make $2000 and tax is 20% of that (so $400 in taxes). If I have $100 that can be deducted from my taxes does that mean I'm now taxed $300, or I'm taxed $2000-$100= 20% * $1900?

thanks for the help

[/ QUOTE ]

You're way off man. First off, you don't be able to deduct that stuff unless you file as a business (which the IRS is very tough about so I've heard). As a part time player, just forget that idea.

If you do have deductions, they are subtracted from your gross, not what you pay.

So say you itemize decuctions. First off, you're f'd in that you can't take off the standard deduction of $5000. If you got say $100 of deductions somewhere (taxes paid at the state and local level are deductable for example) you'd deduct that from your total income and you'd have to pay the taxes of that. So in your example, you'd pay taxes on $1900 instead of $2000. And think more along the lines of 25% than 20%.

Sorry if I ruined your day.

[AceHigh]

[ QUOTE ]
the IRS is interested in milking you for every cent they can.

[/ QUOTE ]

But the don't need all the itemized details do they? They just need the correct numbers.

With stocks, the IRS has access to your trades that they can confirm your information. With poker, there is no paper trail for the IRS to follow, so if your numbers match your electronic transfers, that will probably keep them happy.