Getting your money out....

[Cream Soda]

Hey guys, I recently won a bit of money in a tourny and I plan on paying taxes on it an all that good stuff, but my question is what if I withdrawl like 40k to my bank account? Would I pay taxes on it now? Would the IRS get suspicious right now? Or would they wait and see if I pay the taxes on it next year? Thanks for any help you guys can give.

[emonrad87]

Why the hell would you pay taxes on it now?

[Cream Soda]

I don't know lol. Don't some people have to pay quarterly or something?

[GrannyMae]

if you are thinking of moving 40k at one time, i would strongly suggest you talk to a CPA and get professional advice on how to do it and how to report it.

best few hundred you will ever spend.

[TM1212]

Granny's right, when you said 40k had to look twice. Don't Risk gettin in trouble. Then again you could always open an off shore bank account, not that I'm saying its right, but its an option.

[cardcounter0]

Yes. That will be in March.

[Cream Soda]

Yea the main thing is not getting in trouble, I will gladly (as glad as you can be when giving the IRS your money) pay the taxes. 40K-50k is about what I want to move out of my account, but I assume multiple 8-10k withdrawls probably wouldnt be any differant because they would pick up on that quickly im guessing. Anyone here ever withdrawl like 10k or more at a time? If so can you give me some insight? Thanks again for the replies guys.

[GrannyMae]

if you do it in increments, this could look worse. that's why i suggested talking to a CPA. advice here is great, but you need someone who knows the laws of your state and the state of the rest of your financial picture. moving 40k is not uncommon with poker players online, but if you do this the wrong way you run the risk of looking like a money launderer, not a legit tourney winner.

[Tboner7]

What's a CPA?

[TomR]

I'm a CPA and I totally agree with Granny. Talk to a CPA who does personal income taxes. It will be money well spent. With that much in winnings you are going to need some tax planning advice so you don't end up in bad shape at the end of the year. A CPA can help make sure you pay the correct amount at the correct time and should have advice to minimize your total taxes.

I don't do personal taxes, except my own, so I am not qualified to give the advice you need.

[Cream Soda]

It really sounds like getting a CPA is the way to go here. Do I just look in the yellow pages to find one? Will any CPA that does personal taxes due, or should I try to find "the best one around"? Also, I'm only 20 and the legal gambling age in the USA is 21 I believe, will I get in any trouble from the IRS because of this? Thanks guys.

[TobDog]

Gambling is 18+ in most locations, if you are old enough to play in the site and your local laws don't prohibit it, you are legal. Anyway, the IRS doesn't care if your gains are legit or not, they just want their %, you coulkdbe shaking down hookers and dealing drugs, and that $ is taxable, of course I'm not sure how you would document or justify your deductions on your business though /images/graemlins/grin.gif.

[TomR]

I doubt you need the best around, they are going to charge hundreds of dollars per hour.

I would suggest trying to get a recommendation from family or friends who have their returns prepared by a CPA or that might know a CPA or lawyer who could recommend someone. If you absolutely cannot find someone through a recommendation than the yellow pages would be a decent place to start. I would certainly ask what experience they have with gambling income. Whoever you find, make sure that you get an estimate of their total fees before they start charging you.

[GrannyMae]

Do I just look in the yellow pages to find one?

no no

you are MUCH better off using a CPA that knows gambling. it is well worth the extra if there even is an extra

these people are the best in the business because that know the business.

http://www.rbstaxes.com/

[StellarWind]

Some advice to get you started:

1. Your first quarterly payment of 2005 estimated income tax is due April 15 assuming you follow a normal tax year. Not making a payment could lead to an eventual penalty. I say "could" because there are sometimes ways to delay the payment and avoid a penalty. Much depends on your personal situation. Get professional help before you try that.

2. Don't forget state and local taxes.

3. Don't waste time. If this is far more money online than you need for playing purposes, then get it home quickly. Hidden financial problems can show up at an unregulated offshore site at any time. Don't risk losing so much money for no reason.

4. Assemble all the evidence that you can to document how you won the money. It's your defense in case questions come up.

5. Your US tax obligations were created when you won the money. How and when you cash out will not affect what you owe the IRS.

6. Get legal advice (IMO lawyer, not CPA) on whether you are legally obligated to report your offshore gambling accounts as foreign financial accounts on your 1040. The point is you have exceeded the $10000 reporting threshold. My nonexpert opinion is that poker room/casino accounts do not meet the legal definition of financial accounts and do not need to be reported. But I would ask a lawyer before putting that theory to the test. Having the lawyer's opinion in writing may protect you from prosecution if the IRS disagrees. It shows a good faith effort to obey the law.

7. Neteller almost certainly is a foreign financial account subject to reporting on your 1040. Think very carefully before you allow the combined balance of your Neteller and similar foreign financial accounts to be $10000 or more for even a moment. Moving all the money at once could be a serious error.

8. Assume you might be audited and make sure the rest of your life is clean and well-documented.

[BigBluffer]

As far as paying quarterly estimated taxes, I believe there is a safe haven rule that allows you to legally avoid that. Let me assume that you won this $40,000 in 2005. That is when it would be taxable income, not when you actually withdraw it, whenever that may be.

The safe haven I'm thinking about is this: if your taxable income in 2004 was less than your taxable income in 2005, then as long as you have withheld AT LEAST as much federal taxes in 2005 as you paid in total taxes in 2004, you are not required to make quarterly estimated payments. You can pay the balance of your taxes due for 2005 when you file your 2005 return on April 15, 2006.

For example, suppose you worked in 2004 and your taxable income was 20,000 and your total tax liability (not your refund or payment due when you filed your return) was $2,000. Now in 2005 your income is the $20,000 from work plus the $40,000 poker winnings for a total of $60,000. As long as you have at least $2,000 withheld from your paycheck in 2005, you are not required to make quarterly estimated payments.

This is the way it was several years ago when I did a lot of tax returns. Things may have changed, so you definitely want to check it out with someone who is up on the current law. The above is not to be construed to be legal advice, and you should not rely on it without seeking further advice. But it's a start. /images/graemlins/grin.gif

[Nightwish]

[ QUOTE ]
Yes. That will be in March.

[/ QUOTE ]
No. April.

[Cream Soda]

I talked to a CPA about the money today and he said I don't have to pay taxes on it because it's outside the USA and because they aren't sending a 10-99 form. Of course this is completely wrong even I, someone who knows completely nothing about taxes knows that I'm gonna have to pay taxes on this. Maybe moving 40-50k at one time isn't a good idea. Is a better option to make multiple 4-5k withdrawls and pay taxes quarterly? Or just make small withdrawls and report it for next years taxes? Also, I don't have a "real" job, does this change anything? Could I claim to be a professional or claim this as a small bussiness? Any help would be aprreciated since you guys do give better advice then any CPA lol. Thanks.

[moondogg]

You have to figure out whether you are required to pay quarterly estimated taxes. As a general rule, you must always pay them, but there are certain cases where you don't (for instance, I think if you have a salaried job, your income has not increased significantly, and you did not owe a significant amount last April). Go through the instructions and worksheets for estimated taxes on the 1040. If it says you have to pay estimated taxes every quarter, pay them every quarter (or you will get stiffed with a large penalty at the end of the year).

And I hope you lit that CPA's desk on fire before you left.

[detroitplayer]

I'm not sure, but I think it depends on if you are keeping your books on a cash or accrual basis.

[StellarWind]

[ QUOTE ]
Maybe moving 40-50k at one time isn't a good idea. Is a better option to make multiple 4-5k withdrawls and pay taxes quarterly? Or just make small withdrawls and report it for next years taxes?

[/ QUOTE ]
The tax you owe, when you owe it, and whether you should make quarterly payments have nothing to do with how or when you withdraw the money. You acquired taxable income the instant you won. Even if you never cash out you owe taxes for the year you won the money.

[ QUOTE ]
Also, I don't have a "real" job, does this change anything? Could I claim to be a professional or claim this as a small bussiness?

[/ QUOTE ]
I don't know your situation. But if you don't think of yourself as a pro I doubt the IRS will either. Being unemployed and hitting a jackpot (is that what you did?) is not enough to turn a recreational poker player into a pro.

Besides, I think you should be assembling evidence that you are *not* a pro. Gambling winnings are not subject to social security tax including the employer's share. Pros do have to pay social security tax. What deductions does an online player have that could offset that?