Another Tax Post

[bigwoodbeats]

I'm an 18 year old college student who started playing online poker recently. I have won around $7,000 profit, but have no intention of making poker my career obviously. Unfortunately I have no records of indiviudal sessions. I do, however cashout frequently to my checking account via Firepay (and often deposit money into my Firepay account from the checking account). Basically my question is, how much do you realistically need to win to get any attention from the IRS. I am very skeptical that they would track down some poor 18 year old and tax his relatively small winnings, but I also don't want to get arrested for tax evasion.

So if I were to make $10,000 would I get taxed? How about $50,000? How about $200,000? I know this has been covered before, but I have never seen a mention of the amount of money neccessary to draw attention from the IRS. Thanks for your help

[snowbank]

If you make about $10,000, you'll barely get taxed anything. Not worth going to jail for the small amount of tax you would pay.

[kurosh]

I searched and there's too many tax threads to find the answer so forgive me for a little hijacking. I'm also an 18 year old college student but I've made a bit less. I've only withdrawn about $500 to my checking account from neteller. Do I have to worry about taxes at all? And if I do, how do I go about it?

[TomCollins]

Just report 7000 as "other income" on your tax return. Its not going to be taxed much, and you'll sleep better.

[Bill Smith]

[ QUOTE ]
I searched and there's too many tax threads to find the answer so forgive me for a little hijacking. I'm also an 18 year old college student but I've made a bit less. I've only withdrawn about $500 to my checking account from neteller. Do I have to worry about taxes at all? And if I do, how do I go about it?

[/ QUOTE ]

If I remember correctly, up to $650 / year can come from miscellaneous income, gifts, etc... before it needs to be reported to the IRS. Don't quote me on that, however.

[slickterp]

poker winnings fall under Gambling Income and Expenses on federal tax returns and anything over $600 MUST be reported. anything above $5000 is subject to about %25 tax (if you won it in a B&M they would (or should) withhold it). that said, my advice would be to have the service send you a check as opposed to direct deposit into checking (more trackable). this way you may be able to cash the check at a check cashing service and avoid tax implications due to the fact that all online poker sites operate outside the US (may make it hard to cash a check though). however, i would think that it would be easier and more cost efficient to pay the tax on your winnings and avoid the future costs if you are caught avoiding taxes.

[Big TR]

Pay taxes on the $7k. It's not worth it if you are ever caught. If you only make $7k all year, you will only pay a minimal amount of taxes.

Bill, I think the amount you are thinking about is $600 and relates to 1099 reporting. If you provide services for a company and are paid more than $600, that company has to file a 1099 with the feds telling them how much they paid you. This makes sure that you report the money. We all know that none of the websites are going to send the feds a 1099 for your cashouts. But you should just pay the taxes. It's silly not to.

[Leavenfish]

I was asked a question and didn't know the answer so perhaps one of you might.

A friend started playing this year, made about $300 in deposits before he started playing sanely, won about $900...so that's a net of about $600. But he says he hasn't kept records of the 3 $100 deposits. I would think he could find that as a transfer from his bank to Netteller (I think that's the one)on his statments. But if he were to withdraw the full $900...does he only report $600?

Me, I've never withdrawn, just letting it accumulate so I didn't know what to say.

---Leavenfish

[slickterp]

i believe he just claims the 600. he should be able to get bank statements documenting payments to netteller or wherever he deposits to. i also don't think the IRS is going to bust his balls about the minimum amount to claim.

[spider]

Well, I can't comment on your odds of getting caught. But I would point out that you want to take a long term view and think about the risk to your livelihood in four years when you will have degree and are about to take a good paying job.

That said, you are potentially in an area where you get screwed by the tax code because the default way of paying taxes here is to report total winnings as income, and deduct total losses as an itemized deduction (Schedule A). The problem is that if you don't have other itemized deductions, you are going to implicitly lose around $5,000 (because standard deduction is about $5,000) of your losses. IOW, for tax purposes your winnings will be your net profit of $7,000 + implicitly non-deductible losses of $5,000 = $12,000. If this is your only source of income, I think your tax would be approx 10% of $4,000, or $400. (Don't quote me there, that's very back of the envelope, and I'm sure you have other income).

My non-expert opinion is you should look at filing a Schedule C -- that will let you fully deduct losses, though you would also pay social security taxes of 15%.

In any event, at a minimum you should do some research, and beyond that you should really consider talking to an accountant.

[slickterp]

the problem is, you can only deduct gambling losses w/ receipts, and i don't see how you are going to be able to do that for online poker.

[josh1122]

I also don't mean to hijack the thread but I'm confused on one thing having to do with taxes: will the taxes cover my whole bankroll of winnings (i.e. 10,000), or will they cover just the amount I've cashed out (i.e. 3,500)?

[slickterp]

i believe it only counts for what you cash out, just as casino chips are worth money, but are not actually money. so if you won 15,000 at the bellagio or some such, you could keep the chips and cash them in later, but wouldn't be taxed until you did cash them.

[Anadrol 50]

If you withdrawl cash from a neteller card, would the IRS ever have any knowledge of this transaction ?

[michfan]

He has to pay taxes on all of his winnings. Does not matter if he has cashed out or not.

[Reef]

don't college students who make under 10K / year get all of it back anyway? At least, in Hawaii, I do through tax returns.

[nykenny]

[ QUOTE ]
i believe he just claims the 600. he should be able to get bank statements documenting payments to netteller or wherever he deposits to. i also don't think the IRS is going to bust his balls about the minimum amount to claim.

[/ QUOTE ]

i made $350 selling lemonade last summer. do i have to report it?

Kenny

[nykenny]

[ QUOTE ]
He has to pay taxes on all of his winnings. Does not matter if he has cashed out or not.

[/ QUOTE ]

don't be silly. Party Poker can go bankrupt and run with all his money in the account tomorrow. is he still considered a winner of all that amount? if he didn't get the money, then he shouldn't be paying.

that being said, the IRS do make you pay taxes on capital gain on investment, even if you don't cash out. but i believe that is much different from gambling gains.

i also don't believe filing all winning (all bets won) as a whole and deduct losing sessions (or bets lost) from it is a fair protocol. gambling isn't like working: you get paid, and you incur expenses.

just my opinion,

Kenny

[spider]

I know this has come up in the other threads, but cash-out is completely irrelevant.

If you make $40,000 in wages, but leave $20,000 in the bank, are you only going to report $20,000 in wages to the IRS? Good luck if you do...

[spider]

[ QUOTE ]
don't be silly. Party Poker can go bankrupt and run with all his money in the account tomorrow. is he still considered a winner of all that amount? if he didn't get the money, then he shouldn't be paying.

[/ QUOTE ]
In that event, you would claim a casualty deduction (Sch A) to offset this.

[ QUOTE ]
that being said, the IRS do make you pay taxes on capital gain on investment, even if you don't cash out. but i believe that is much different from gambling gains.

[/ QUOTE ]
You have this exactly backwards (although mutual funds are sort of a hybrid case, if that's what you are thinking about).

[ QUOTE ]
i also don't believe filing all winning (all bets won) as a whole and deduct losing sessions (or bets lost) from it is a fair protocol. gambling isn't like working: you get paid, and you incur expenses.

[/ QUOTE ]
The current setup is defitely unfair, stupid, etc. but that's a whole different topic.

[slickterp]

cashing out does matter. when it's in your account, anything above what you deposited is not money until you cash it out and make it money.

[bigwoodbeats]

[ QUOTE ]
IOW, for tax purposes your winnings will be your net profit of $7,000 + implicitly non-deductible losses of $5,000 = $12,000. If this is your only source of income, I think your tax would be approx 10% of $4,000, or $400. (Don't quote me there, that's very back of the envelope, and I'm sure you have other income).


[/ QUOTE ]


Well actually I dont work (besides for a summer job I had that made me less than $2,000 total). I'm having a little bit of trouble understanding how taxes work. So lets say I officially have $12,000 in winnings (since losses don't count as dedeuctibles) how much of that 12,000 do I have to pay for taxes?

[Doubling12]

Almost no one reports gambling winnings the way they are supposed to be reported. Every "session" (an undefined term used by the IRS) is supposed to be tracked separately. If you go to the casino 50 times, win $1000 X 25 for +$25,000 on winning sessions, and lose 25 X $1000 for -$25,000, *you have to report all of this!*

The 25,000 would be listed, and the 25,000 loss would be an itemized deduction. You *cannot* net them. If you do not make enough (outside of poker) to justify itemizing, then this can be quite expensive (you have to give up your "free" deduction to itemize).

There is a tax advice book written by Jean Scott - it tells you everything you need to know. I read it in case I ever have a winning year.

[slickterp]

that's actually exactly why cashing out does matter. when you get paid, someone gives youmoney. no one gives you your poker earnings until you cash out. no transaction has occured to give you actual money. since you haven't taken possesion of the money, it's not your income yet, and it's not taxable. when it's in your checking account, you have taken possesion and it's now your money. you don't get taxed on money that's owed to you (which any winnings held in an gambling account essentially are), just on the money you actually collect.

[slickterp]

also ture. generally, a student will get all their taxes back up to a certain point, but it differs by state (i know MA used to be about 8K).

[Leavenfish]

Two thoughts:

1. Bush may try to run a "National Sales Tax" down our throat in lieu of an 'income tax' so keeping your earnings in cyberspace till then might be an option...might take some time though.

2. I've heard of people who have NetTeller, who get a NetTeller Debit card sent to them. Then they go to a qualified ATM, withdraw their winning up to the limit you can for each ATM transaction...and no one is the wiser. But then, that's just what I've heard. I'm not advocating it by any means...honest...

--Leavenfish

[Bill Smith]

[ QUOTE ]
2. I've heard of people who have NetTeller, who get a NetTeller Debit card sent to them. Then they go to a qualified ATM, withdraw their winning up to the limit you can for each ATM transaction...and no one is the wiser. But then, that's just what I've heard. I'm not advocating it by any means...honest...

[/ QUOTE ]

If you were actually audited, I would have to assume the IRS could run a credit history and see these transactions.

[Bob T.]

For what it is worth, my accountant, who is also an online poker player beleives that cashing out does matter. He says that the IRS defines a 'session' by when you cash-in, and cashout. Usually in a live cardroom, you do this the same day, or maybe the same weekend. But in an online cardroom, it is different, because you might not make a cashin or cashout transaction even once a month.

This makes the record keeping a lot easier, because at the end of the year, you can get a transaction history from each site that you play at, and you have all the information that you need to complete your taxes.

I also think that it makes sense, because you might play on several thousand tables, during the course of a year, and the arithmatic nightmare of sorting all of that out, would almost guarantee that there would be errors, but to just sum up the cash transactions for a year, would make the entire process a lot cleaner, and more accurate.

[josh1122]

So when reporting my "sessions", I would use the transaction history from the site (each cashout/deposit being one session) as opposed to a session history from something like pokertracker that would give all of my individual table sessions? Am I interpreting this correctly?