Taxes For A Young Player

[Tron]

Well... I'm only 18 years old, and I've never filed taxes before. I hadn't planned on running into this problem when I started playing poker online, I was just playing around at the $0.25-$0.50 tables and not expecting to make any significant amounts of money. However, after an incredible week in the MTTs, I just cashed out ~$1,200 and realized that this is something I should probably be thinking about.

I'm in college right now and I'm still financially dependent upon my parents. I don't plan on making very much playing this year, maybe ~$3,000 maximum. Again, I've never had to worry about taxes before, so pretty much any information I can get will be very, very useful.

Since I have no idea what I'm doing, I'm sure I've left out information that would affect the answers I get. Any information you need to give an informed answer, just ask.

Thank you all very much, I really, really appreciate it.

[snowbank]

I'm actually doing some tax returns for a tax project right now. My advice is to lose all of the money so that you won't have anything to report. This tax stuff is stressin me out.

[snowbank]

Seriously though, you are supposed to report it. Since it's only about $3,000, and you are a dependent, if that's your only income I don't think you'll end up having to pay any taxes.

[Tron]

Thank you, but I'm clueless, how do I go about doing this? I'm guessing I won't have to do my own taxes this year since I'm still dependent, so do I just tell my parents "Hey, I made $3,271 playing poker this year, make sure you put that on your taxes?"

[uw_madtown]

[ QUOTE ]
Thank you, but I'm clueless, how do I go about doing this? I'm guessing I won't have to do my own taxes this year since I'm still dependent, so do I just tell my parents "Hey, I made $3,271 playing poker this year, make sure you put that on your taxes?"

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I can't tell you what you're supposed to do, but I can tell you that it's definitely not this.

Who does your parents' taxes? I'd say your best bet is to tell your parents the situation and then have them consult some tax people. Hopefully someone else on here can give you fairly decent advice and you can also relay that to whoever is handling your parents' taxes.

[Tron]

[ QUOTE ]
Who does your parents' taxes? I'd say your best bet is to tell your parents the situation and then have them consult some tax people. Hopefully someone else on here can give you fairly decent advice and you can also relay that to whoever is handling your parents' taxes.

[/ QUOTE ]

I have no idea. I'm going home for Winter break on Thursday, and I'm hoping I have something solid to tell them. Anyone?

[kurosh]

I'm in the exact same situation as you except I've made around 6k-8k.

[mmbt0ne]

As a full time student here in Georgia I know I've made well over 3k in a year working at various jobs and not had to pay a cent of income tax. Hell, I made 13k last semester as an intern, and got almost all of that income tax back in my rebate check.

I wouldn't worry too much about having to pay out a lot of taxes, but the forms should be pretty easy to decipher. I was pretty scared when I went to fill mine out for the first time, but it seemed to be explained pretty well on the forms.

I'm definitely no tax expert by any means, but those are my experiences. Hope it helps some.

[Awesemo]

I am in the same situation as you as well. I started in January and have made about $7000. I saw in another post that accurate records of each session of poker must kept, and for taxes you must report your total winnings and your total losses separately. Is this true, and if it is, does anyone know what to do if you don't have records like this?

[snowbank]

"Hell, I made 13k last semester as an intern"

Damn. What type of internship was that?

[Grisgra]

$3000? And you're only 18?

Please. Between the amount of money you've spent on poker books and your computer (which you need to play) and the amount of money you've probably lost on other gambling ventures (hitting the casinos, etc.) you've probably broken even. Yes, I'm SURE of it. I doubt you need to report squat. (Hell, not even sure it was legal for you to play online before you hit 18 anyway.)

Those of us pulling more in than 3k have a little more to be worried about, natch, but 3k? And you're 18? The IRS isn't going to be pounding down your door anytime soon, and like I said, don't forget about all those incidental expenses.

Not that I'm telling you to break the law -- just that you probably don't have an actual 3k in *winnings*. (I'm guessing that the separate tracking of wins/losses is probably only for those that do it For A Living. Hopefully?)

[_2000Flushes]

[ QUOTE ]
$3000? And you're only 18?

Please. Between the amount of money you've spent on poker books and your computer (which you need to play) and the amount of money you've probably lost on other gambling ventures (hitting the casinos, etc.) you've probably broken even. Yes, I'm SURE of it. I doubt you need to report squat. (Hell, not even sure it was legal for you to play online before you hit 18 anyway.)

Those of us pulling more in than 3k have a little more to be worried about, natch, but 3k? And you're 18? The IRS isn't going to be pounding down your door anytime soon, and like I said, don't forget about all those incidental expenses.

Not that I'm telling you to break the law -- just that you probably don't have an actual 3k in *winnings*. (I'm guessing that the separate tracking of wins/losses is probably only for those that do it For A Living. Hopefully?)

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Did this guy run over your dog or something? There's no need to be so condescending.

-2kF

[snowbank]

"you've probably broken even. Yes, I'm SURE of it"

As far as taxes go, you haven't broken even. You probably won't end up paying anything. Just talk to your parents and/or talk to the person who's going to do their taxes.

[sthief09]

if you're financially dependent upon your parents, then just don't cash out. build up your roll. like the others said, it's basically your job. you're in the 0% tax bracket

but again, seriously, I wish I built my roll up from the beginning. I pissed away probably 6-8 grand this year. the more you keep now, the more you can win later

[sthief09]

[ QUOTE ]
[ QUOTE ]
$3000? And you're only 18?

Please. Between the amount of money you've spent on poker books and your computer (which you need to play) and the amount of money you've probably lost on other gambling ventures (hitting the casinos, etc.) you've probably broken even. Yes, I'm SURE of it. I doubt you need to report squat. (Hell, not even sure it was legal for you to play online before you hit 18 anyway.)

Those of us pulling more in than 3k have a little more to be worried about, natch, but 3k? And you're 18? The IRS isn't going to be pounding down your door anytime soon, and like I said, don't forget about all those incidental expenses.

Not that I'm telling you to break the law -- just that you probably don't have an actual 3k in *winnings*. (I'm guessing that the separate tracking of wins/losses is probably only for those that do it For A Living. Hopefully?)

[/ QUOTE ]


Did this guy run over your dog or something? There's no need to be so condescending.

-2kF

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ehhh I don't know if he was necessarily condescending the kid... I think he was just "hinting" for him to "lose" some of that 3k at an 18+ casino and spend the rest on "business expenses" like a computer and some books. I still don't think he has anything to worry about though. he's in the 0% tax bracket. I know nothing about this stuff though, just what I read here

and as snowbank said, even if someone breaks even or loses, it doesn't make him tax-exempt

[sthief09]

[ QUOTE ]
Thank you, but I'm clueless, how do I go about doing this? I'm guessing I won't have to do my own taxes this year since I'm still dependent, so do I just tell my parents "Hey, I made $3,271 playing poker this year, make sure you put that on your taxes?"

[/ QUOTE ]


if you intend on playing online poker, you should start keeping track of every session. it'll save you a lot of stress of making up sessions down the road

[Grisgra]

[quoteehhh I don't know if he was necessarily condescending the kid... I think he was just "hinting" for him to "lose" some of that 3k at an 18+ casino and spend the rest on "business expenses" like a computer and some books.
. . .
and as snowbank said, even if someone breaks even or loses, it doesn't make him tax-exempt

[/ QUOTE ]

sthief smart /images/graemlins/smile.gif.

But how the hell can you not be tax-exempt if you lose money?

[ChoicestHops]

Since you aren't 21, is it a good idea to do taxes for your gambling earnings?

[snowbank]

"Since you aren't 21, is it a good idea to do taxes for your gambling earnings?"

That's a real good point. However, since he won't lose his dependency exemption for only making 3K, you may not have to report that on your parents return. I could be wrong though, as I am by no means anything close to a professional on the subject.

[ChoicestHops]

I ask this because I've read that you aren't supposed to specify that your winnings are from the internet. If you are under 21, reporting your winnings is basically telling them where you got it.

[snowbank]

"If you are under 21, reporting your winnings is basically telling them where you got it."

There are places you can play at 18. Indian reservations being one. I see your point though. I think it was discussed in another thread about it's "illegal" but not enforced.

[FeelGoodAboutHood]

Couldn't you just report your deposits and withdrawals as "sessions" that's what I'm planning on doing. Is that wrong?

[Tron]

Okay, here's what I've decided to do...

I just cancelled the cashout of ~$1,200 I had going from PokerRoom to my FirePay account. I've decided to keep that money in my PokerRoom account and continue to build up my bankroll so I'll be able to move on to bigger and better things, namely, sites besides PokerRoom (by buying a dedicated computer for poker, I'm on a Mac right now).

I'll also stop being lazy and start taking detailed records.

I think that this will delay the tax situation for a while, but I wonder, will I be okay to cash out maybe $200 or $300 a month for, ahem, "college expenses?"

[Gramps]

For less than $100 you can do this properly and not worry about any issues if you were to get audited somewhere down the line (and they can go back a number of years on that).

Go to www.turbotax.com (http://www.turbotax.com) (or some other tax software site). Sign up and do your federal and state taxes there, it's really simple (and the time you save vs. filling out various forms you can spend playing poker and earning $$).

File as a professional, it's business income. If you haven't recorded you daily wins/losses...maybe you can print out your deposits/withdrawals/balance difference from year start to year and and do wins/losses that way - I don't know. Do what you think is correct (for your net +$3k). Print records of your deposits/withdrawals for your records.

Your standard deduction is close to $5k...so even if your parents claim you as a dependent, you get close to $5k tax-free - which means you should pay zero tax.

So...you're investing close to $100 to save the worry/risk of not filing a tax return and maybe having to worry about that in the future. Probably +$EV in the long run.

I'm not a tax pro or anything - Just trying to show that dealing with poker winnings and taxes isn't as bad as most people think.

[Kenrick]

It's hard to believe this amount of winnings wouldn't be considered typical "gambling" winnings and not "professional" winnings. If you're still a dependent, or even if you're not, last I checked you wouldn't have to even legally file *at all* if you made less than five or six k for the year.

I know a guy who was unemployed most of last year and then had H&R Block do his 5k or so in taxes. He said he didn't get anything back. He should have gotten all of his taxes back as well as probably $300 or so from the Earned Income Credit. (This is a good example of liberals paying people to be poor, btw. /images/graemlins/smile.gif).

Bottom line is, if you make squat, no one really cares. Who's going to give you a hard time for "getting lucky" at online poker?

[young nut]

I have made a little over 2k in the past few months, but I haven't cashed any money out of my poker accounts during the tax year. If I don't cash any of it out do I even have to declare it? Let say I make it up to 15k before tax season. I wait til after tax season to cash out 5k of it. Is that when I have to declare the money or is it the moment I earn the money?

[Tron]

In a weak moment of off-topicness...

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The f---ing Holiday Bowl

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I'm guessing Cal, right?

[Gramps]

Yeah, I was there when they outgained USC 2 to 1 but got worked on special teams and lost.

At least I like complaining about getting snubbed by the BCS a lot better than complaining about only getting 2 or 3 wins and the head coach being awful. I'll take getting snubbed this year and locking up Tedford for a while.

I'll still be partying in SD come the 30th...even if I'm muttering "f--- Texas and the Big 12 coaches" under my breath...

[driller]

Unless you are afraid to tell your parents, tell them and let them discuss it with the person who does their taxes.

If you don't want to tell them, then really if its only $3000 I wouldn't worry about it.

Technically unless you declare yourself a professional, you are supposed to report your gross winnings and then deduct your gross losses on schedule A. If you don't itemize, you can't deduct your losses, but you do get the standard deduction, which changes every year, but is probably around $5000. You get the standard deduction even if your parents claim you as a dependent. So even if you never file, you won't be in any trouble because you won't owe any taxes.

[driller]

I think this is a good question. Technically you are supposed to report by session. But for online players this clashes with the concept that most of us are on a cash basis. That is we don't report income until we actually receive the cash (or equivalent) and we report expenses when we actually pay them. These last two things are used all the time by tax professionals to reduce their clients income tax liability. Defer income into the next tax year, pre-pay some expenses like interest this year instead of next year are two examples.

For this reason I think you could make a reasonable argument that all you have to report for online poker are your deposits and withdrawals.

[mistrpug]

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Since it's only about $3,000, and you are a dependent, if that's your only income I don't think you'll end up having to pay any taxes.

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The reason people with "normal" income don't have to pay taxes on small ammounts is that the standard deduction is greater than their income. However, when you declare gambling income, you're supposed to declare all your winnings sessions as earnings, and deduct your losing session as gambling losses. To do this, you have to itemize deductions, meaning you don't get a standard deduction.

My advice to you is that if you've been cashing out, declare it as extra earned income (and play dumb if the IRS questions you. You're 18 and pretty much have no income, they can't really do anything to you). If you're just building a bankroll, don't declare it yet. When you're ready to cashout and declare it, include all your past winnings as one winning session for that year. If you're questioned, just say you won a tounrament or something.

[mistrpug]

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For this reason I think you could make a reasonable argument that all you have to report for online poker are your deposits and withdrawals.

[/ QUOTE ]

I'm not necessarily saying this is wrong, but if you search for some old tax threads on this site, you'll see that the general concensus is that you cannot declare just deposits and cashouts.

[driller]

I agree with you. The trouble with all of these threads is that until someone actually tests it in tax court, no one (including a professional) really knows.

If you have stocks with a broker, you have to pay taxes on your gains as of the time you sell your stock, not when you withdraw funds from your account. If the IRS considered your PartyPoker account like your brokerage account, then using deposits and withdrawals would not work.

However from a book keeping point of view it would be so much simpler. Of course the problem with using Schedule A deductions is that if you have a lot of winning sessions (even if balanced out by losing ones) you drive your gross income way up. At that point I guess the only thing to do would be to go the Schedule C route.

I wonder what day traders do? Their tax returns must look like War and Peace.

[Tron]

Forgot to thank everyone for the advice on this thread... So, thanks everyone!