SNG tax question

[citanul]

Hi all, I'm sure this has been asked before, but I'm honestly terrible with this search function, so if anyone else has a link to a thread that helps out, that would be just as terrific as an answer.

So, for all the other poker players out there, they say that to do your taxes legitimately, you have to record your wins from each winning session, and then itemizs your losses for each losing session.

For sngs, what counts as a session? Is it each table? Is it "as long as you have one table open"?

Any help would be appreciated,

citanul

who just realized how incredibly easy it would be to figure out the "sessions" if it was just the number of tournaments played, total.

[Voltron87]

I would guess that the income you have to report is just your net income from all SNGs played?

[breezeyo]

Gambling is taxed as the amount of winnings over losses. This is not applied to SNGs but all gambling. Sports, horse racing, Ring games, slot machines, etc. I tend to go to the horse track alot to offset some of my poker winnings.

[Ghazban]

[ QUOTE ]
I would guess that the income you have to report is just your net income from all SNGs played?

[/ QUOTE ]

You can't do this. You are supposed to itemize every single session. I honestly don't know how people do it with internet poker as you can play multiple short sessions in one day, thereby adding up to hundreds (or even thousands) a year.

[Scuba Chuck]

I intend to just give my accountant my total distributions for the year. I've only contributed $100, thus all of my withdrawals are profits over that amount. That's all that Party Poker provides, is a history of contributions and distributions.

I don't know if that is correct though. Will find out next year.

[Daliman]

[ QUOTE ]
[ QUOTE ]
I would guess that the income you have to report is just your net income from all SNGs played?

[/ QUOTE ]

You can't do this. You are supposed to itemize every single session. I honestly don't know how people do it with internet poker as you can play multiple short sessions in one day, thereby adding up to hundreds (or even thousands) a year.

[/ QUOTE ]

While mostly true, the advent of the internet and multiple daily sessions will likely mean they will take profit statements, as it is nearly impossible for the IRS to get data from internet gambling sites. Land based gambling is session by session, however.

[Apathy]

my advice is simple...

MOVE TO CANADA!!

up here we don't pay taxes on gambling.

[Daliman]

[ QUOTE ]
my advice is simple...

MOVE TO CANADA!!

up here we don't pay taxes on gambling.

[/ QUOTE ]

Unless it is considered your job....

[two_dogs]

This is not correct scuba you are required to kep track of each session. I do think a session could reasonably be defined as to when you log on the site till you log off. My accountant pointed out you don't have to worry about it unless you are audited and he doesn't feel there would be a penalty as long as you could prove you weren't trying to cheat.

[sofere]

This site is somewhat helpful. The main concern is how is a "session" defined.

Tax guide (http://www.onlinepokerfaq.com/guide/us-taxes.html)

In addition, since the IRS does not provide much guidance in relation to online poker and taxes, if you make a good faith effort to pay what you think you owe, it is unlikely they will charge penalties against you.

Note: I am not a tax advisor of any kind nor am I an expert, I simply took a few tax courses in college.

[Hawkeye27]

I plan on just claiming my winnings based on my Pokertracker stats. Simply claiming a win. I'll have proof that the number I claimed is correct and I didnt try to cheat the IRS.

[Delphin]

[ QUOTE ]
I intend to just give my accountant my total distributions for the year. I've only contributed $100, thus all of my withdrawals are profits over that amount. That's all that Party Poker provides, is a history of contributions and distributions.

I don't know if that is correct though. Will find out next year.

[/ QUOTE ]

My understanding is that this is not an acceptable way to record gambling winnings and losses. But it is certainly the easiest and most verifyable way to calculate your poker income. The biggest problem is that even though you deposited only $X and withdrew $Y during the year, $Y-X isn't anywhere near your poker winnings if your account has $Z more than it did at the beginning of the year, or if you transfered $W to another player, etc. Who knows what the IRS would do if you were audited.

[Apathy]

[ QUOTE ]
[ QUOTE ]
my advice is simple...

MOVE TO CANADA!!

up here we don't pay taxes on gambling.

[/ QUOTE ]

Unless it is considered your job....

[/ QUOTE ]

So if poker was my only source of income I would have to report it as income and pay tax on it in Canada? Are you sure of this?

What about if I make more money playing poker then at my job but play only part-time do I have to pay tax on that?

It was my understanding that in Canada you must report income earned by gambling but not pay taxes on it. Is this untrue?

[skipperbob]

Hey Guys: In order to "prove" your position to the I.R.S., just show them the Piece-of-Crap" cars you drive and introduce them to a couple of your ex-wives /images/graemlins/grin.gif

[KenProspero]

Not an expert so don't rely on this -- but ....

It seems to me that the more information you collect the better you are.

For example, I've seen spread sheets here where people track every SnG they enter, so that they can calculate RoI, etc. If you're collecting this data anyway, I'd think you're ok. If you're not ..... Why aren't you?

Is it terribly difficult set up a little template, reflecting Date, Site, Entry Cost, Results and Winnings on any spreadsheet?

It's really only a few seconds time and an extra window open on your 'puter.

[sofere]

I don't think keeping track is the main concern as most people who post on this site keep pretty good records (of course this is mainly for bragging purposes, but it serves other functions).

The problem comes with the definition of a "session" of play. Technically, one must declare all of your poker winnings ( gross winnings not netted against losses ) for each winning session as income. The losses for each losing session must be itemized.

Therefore the definition of what a "session" is could have drastic consequences on one's taxes. In general, the more you can lump in a session, the better (in other words, the more you can net losses against winnings, the better).

[rohjoh]

Just read the link above, and for someone that makes a decent income outside of poker, the extra income they make in poker could cost them more than they win...

For example if you make a mid to low 6 figure income, and then make $10,000 playing poker, the IRS does not look at it like $10,000 in profit, they look at it as total winnings, minus total loses. So, you may have won $130,000 and lost $120,000 to get to that $10,000 figure. Now you factor in a $200,000 a year income, and you are looking at some serious tax implications with AMT, and being in the highest tax bracket. Your income went from $200,00 to $330,000, and even though you will be taxed on the difference, the IRS still looks at total income of $330,000 for things like AMT. Once you hit AMT a lot of the normal deductions go out the window. This does not even mention the 15% the state of California is going to want! For those that plan to just report there profit, if you get audited, you may be in for a suprise.
Below is a quote from the website.

"The bad news is, the $130,000 you must declare in gross income is going to cost you. First of all, while you can deduct the $120,000 losses, your other deductions will be limited. For example, medical deductions are allowed only so far as they exceed 7.5% of your income, so you have just lost 7.5% of $130,000 = $9,750 in medical deductions. Even deductions like mortgage interest phase out as your income gets higher. You might find you owe the dreaded AMT (alternative minimum tax). You may also lose eligibility to make deductible contributions to IRAs, or to contribute to a Roth IRA at all. All this for winning just $10,000 during the year."

[Scuba Chuck]

Rohjoh, yuk, the bearer of bad news.

OK, so let's say I'm audited. I've played 6,000 SnGs in 2005. I average a little under $10 a game, but let's just use $10. That's $60,000 in net income. It cost me $198,000 to win $258,000.

So you're saying that the IRS is gonna tax me on $258,000 in winnings?

Then my next question is, how do they know how many 'sesions' I've played except through what I report. For example, why couldn't I just report 12 sessions per year? Party Poker doesn't provide this info to me. How can anyone, including the IRS, prove how many sessions I've played?

[sofere]

This is also why the question of how a session is defined is so important.

Say you play 10 SNGs a day at the $33s and have a 40% ITM, 30% ROI. You'll place in 4 of them.

$33 * 10 * 30% = $100 profit
$33 * 10 = $330 Total Buy ins
$100 + $330 = $430Total winnings in the 4 games (gross of buy-in)
$33 * 4 = $132 = buy-in for winning sessions
Gain in winning sessions = $430 - $132 = $298.

Loss in losing sessions = $33 * 6 = $198.

<font color="red"> $33 * 10 * 30% = $100 profit
$33 * 10 = $330 Total Buy ins
$100 + $330 = $430Total winnings in the 4 games (gross of buy-in)
$33 * 4 = $132 = buy-in for winning sessions
Gain in winning sessions = $430 - $132 = $298.

Loss in losing sessions = $33 * 6 = $198. </font>

If each SNG counts as a session, and you play 10 SNGs a day, 300 days out of the year...Your Adjusted Gross Income would go up $89,400 while your itemized poker deductions would be $59,400.

If you counted each day as a session, your Adjusted Gross Income would go up only $30,000 (assuming zero variance per day).

This could cause a HUGE impact on your deduction threshholds and retirement plan contribution threshholds. Not to mention the fact that if you took the standard deduction before, you would no longer be able to take it and your taxable income would go up accordingly.

[Delphin]

[ QUOTE ]
Rohjoh, yuk, the bearer of bad news.

OK, so let's say I'm audited. I've played 6,000 SnGs in 2005. I average a little under $10 a game, but let's just use $10. That's $60,000 in net income. It cost me $198,000 to win $258,000.

So you're saying that the IRS is gonna tax me on $258,000 in winnings?

[/ QUOTE ]

No, but you have to declare the $258k winnings as income. Then you can deduct the $198k in losses and only have to pay tax on the $60k profit you made. The problem is that the extra income causes side effects which may make your taxes more complicated.

[ QUOTE ]
Then my next question is, how do they know how many 'sesions' I've played except through what I report. For example, why couldn't I just report 12 sessions per year? Party Poker doesn't provide this info to me. How can anyone, including the IRS, prove how many sessions I've played?

[/ QUOTE ]

They know because you report it. And if you get audited, you have to prove to the IRS that what you reported is accurate. They don't have to prove that it isn't, only that you can't prove it is.

[Daliman]

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Rohjoh, yuk, the bearer of bad news.

OK, so let's say I'm audited. I've played 6,000 SnGs in 2005. I average a little under $10 a game, but let's just use $10. That's $60,000 in net income. It cost me $198,000 to win $258,000.

So you're saying that the IRS is gonna tax me on $258,000 in winnings?

[/ QUOTE ]

No, but you have to declare the $258k winnings as income. Then you can deduct the $198k in losses and only have to pay tax on the $60k profit you made. The problem is that the extra income causes side effects which may make your taxes more complicated.

[ QUOTE ]
Then my next question is, how do they know how many 'sesions' I've played except through what I report. For example, why couldn't I just report 12 sessions per year? Party Poker doesn't provide this info to me. How can anyone, including the IRS, prove how many sessions I've played?

[/ QUOTE ]

They know because you report it. And if you get audited, you have to prove to the IRS that what you reported is accurate. They don't have to prove that it isn't, only that you can't prove it is.

[/ QUOTE ]

While this all seems somewhat correct, there are a couple points I'd like to bring up...

#1 Considering the fact that the IRS can't say that every single pot you drag is counted as income, then losses are deducted from that, I think they'd have a similar hard time with a good lawyer saying the SNG entry fee is like putting $$$ in the pot. When I buy in at a table for $215 in a cash game, if I leave with $400, they can't say I made $400 income. I think they'd be hard pressed to say that if I bought into a SNG with the same $215 and got 3rd place for $400 that it's $400 worth of income.
2. I'm pretty sure you can get around the whole gross winnings as income by filing as a professional gambler. Then everything is plus/minused for total income before a final figure is set for claiming purposes.

[KenProspero]

What do you mean by itemizing losses?

[rohjoh]

I am just going to stay logged into Party Poker for the rest of the year, then I can just say I was on one long poker session. Think they will buy it?

[SumZero]

[ QUOTE ]
So if poker was my only source of income I would have to report it as income and pay tax on it in Canada? Are you sure of this?

What about if I make more money playing poker then at my job but play only part-time do I have to pay tax on that?

It was my understanding that in Canada you must report income earned by gambling but not pay taxes on it. Is this untrue?

[/ QUOTE ]

So in general search the web for more information. There is a FAQ out there in general as all this is a frequent thread on r.g.p.

In Canada IIRC the rule isn't if you are professional or not (which in the US effects if you can declare net winnings, in the US professional is good for your taxes), but rather if you are involved in running the gambling. So a casino or casino owner needs to pay taxes on gambling winnings. It is debatable if a prop would have to pay income on their winnings in Canada. There was a case where a person who gambled for a living was tried to make to pay taxes on his winnings but IIRC the courts reversed it.

But if you are in doubt, get a tax accountant!

[Scuba Chuck]

You log out from PP? /images/graemlins/cool.gif

[Scuba Chuck]

[ QUOTE ]
I'm pretty sure you can get around the whole gross winnings as income by filing as a professional gambler. Then everything is plus/minused for total income before a final figure is set for claiming purposes.

[/ QUOTE ]

Is there some sort of minimal requirements to file as a "professional gambler"?

[Daliman]

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I'm pretty sure you can get around the whole gross winnings as income by filing as a professional gambler. Then everything is plus/minused for total income before a final figure is set for claiming purposes.

[/ QUOTE ]

Is there some sort of minimal requirements to file as a "professional gambler"?

[/ QUOTE ]

I don't believe so, You ujust have to show a profit in 2 out of three years, and you have to be able to show you have a skill that allows you to win, i.e. you can't be a slot pro.

[reecelights]

Most of the advice I've read (including some an article about a past IRS audit of a gambler) say that if you have a substantial amount of income from a non-gambling source,, the IRS is less likely to accept "Gambler" as your profession.

http://forumserver.twoplustwo.com/favlinker.php?Cat=&amp;Entry=64781&amp;F_Board=inet&amp;Thread =1595179&amp;partnumber=&amp;postmarker=

I only play about 20 hours a week and generated about 20 times the income at my day job, so I'm certain I cannot get away with calling myself a professional gambler.

Incidentally, last year was my first playing. This year my "day job" is only about 2.5 times more income (appropriate, since I usually work about a 50 hour week).

[sofere]

Losses get put into your itemized deductions rather than netted against winnings.

[bball904]

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
I'm pretty sure you can get around the whole gross winnings as income by filing as a professional gambler. Then everything is plus/minused for total income before a final figure is set for claiming purposes.

[/ QUOTE ]

Is there some sort of minimal requirements to file as a "professional gambler"?

[/ QUOTE ]

I don't believe so, You ujust have to show a profit in 2 out of three years, and you have to be able to show you have a skill that allows you to win, i.e. you can't be a slot pro.

[/ QUOTE ]

Filing as a professional makes the calculation easy, but it also makes you self-employed and requires you to pay self-employment taxes. Not a good idea if the only reason to do it is to make the record keeping easier.

My plan is to record the total of winning days as income and the total of my losing days as deductions for 2004. I am filing as a professional in 2005.

[r2p]

If you use Poker Tracker you can essentially get a breakdown by SNG of your entry fee and winnings which I would assume provide enough documentation for the IRS as it is date &amp; time specific.

RichP

[Mez]

Does everyone here plan to report any income from gambling? I have a day job and don't plan to. The sites don't send W9s, right?

[Scuba Chuck]

How do you intend to report rake back?

[bball904]

[ QUOTE ]
How do you intend to report rake back?

[/ QUOTE ]

I consider rake back and bonus dollars as winnings. I'd feel hard pressed to try and explain it any other way if audited.

[Scuba Chuck]

Another interesting current thread in the zoo.

http://forumserver.twoplustwo.com/showflat.php?Cat=&amp;Number=1736330&amp;page=1&amp;view=colla psed&amp;sb=5&amp;o=&amp;fpart=all&amp;vc=1

[sofere]

I did not have a large amount of winnings in 2004 as I was just starting and larning, so this year I will not report winnings on my return. However, I am expecting (hoping) to have much larger net winnings this year and will report them.

With the IRS it is always best to err on the side of caution. If you earn more than a few thousand in a year, I would highly recommend reporting it. Think of it as getting a job that pays under the table. If its a minimal amount, the IRS probably won't care enough to flag you, but if your making a decent amount there is a chance you could get audited. I would gladly pay a percentage of my winnings rather than take the chance of getting the rectal exam that is an audit. The key is finding out how to legally pay as little as possible.

And remember, the IRS has access to a lot more information than you are aware of. If you like to spend money and buy a bunch of nice things after making 20-30k in a year of poker, they are going to wonder where that extra money came from and you could get flagged.

[Scuba Chuck]

Has anyone read this?

http://www.gamblingtaxguide.com/

[Scuba Chuck]

I am pasting the following from a post in the zoo, who's handle is CPA. Which is his profession, BTW.

Below is a list of factors (Profit Motive factors determining if you have a trade or business) that the IRS may consider. No one factor is more important than another. And if you fail one factor, that doesn't mean you are not a professional.

Like so many other areas of tax law, this is gray and debatable. That is why the determination is up to you and your tax accountant.

The factors that indicate the likelihood of a profit motive. Words like "large" and "substantial" are relative:


• abandoning activity when inability to generate profit ascertained;

• annual increases in net income from activity;

• devoting effort to the activity;

• devoting significant amounts of time to the activity;

• devoting substantial money to the activity;

• exercising care in carrying on the activity;

• expectation of large profits if activity successful;

• generation of profits;

• having or developing expertise with respect to the activity;

• investigating the profit potential of the activity;

• maintaining detailed records;

• operating the activity in a businesslike manner;

• previous profitable operation of similar activity;

• relative significance of the expected amount of profits when compared to other sources not generating substantial income;

[Daliman]

[ QUOTE ]
Has anyone read this?

http://www.gamblingtaxguide.com/

[/ QUOTE ]

I have it. Lots of good info in it.

[Mez]

sofere -

I think i made ~$3-4K in 2005 playing poker online. I prolly lost somewhere about half that much in other live casino games. In 05, I made much more than that through work (mostly options). It wouldn't affect my lifestyle in anyway.

I guess the big quesiton for me is if Party/UB/Stars report player winnings to the IRS like B&amp;M casinos do. Anyone know that???

[Scuba Chuck]

If you have that book, then is the following of any interest as well?

http://www.rbstaxes.com/

[sofere]

No, as all internet gambling websites are offshore, they do not report anything to the IRS. You will not get any tax information from them. However this does not mean that you are not required by law to declare that income.

If you get audited, there is the presumption of guilty until proven innocent. The IRS has many methods of finding out if you made money that wasn't declared (looking at bank records, purchases, credit card bill, etc.)

For $3-4k of taxable income, it is unlikely that the IRS will pursue you, but again, I would err on the side of caution, report it on my taxes and pay the extra $1000 for peace of mind.

[UncleDuke]

[ QUOTE ]
Has anyone read this?

http://www.gamblingtaxguide.com/


[/ QUOTE ]

This book has some good info, and it's worth getting, but it does leave some questions the internet poker player would have unanswered.

I had the same question about whether we were obliged to treat each sng as a separate "session" or not. It's clearly hugely to our disadvantage to do so, but I really don't know whether the IRS would consider aggregating a day's sngs into one session allowable or not. I like the idea and think it's reasonable, but if the rules were truly reasonable, we'd be allowed to simply report net gambling income rather than splitting out winning sessions from losing ones.

[EdgePort]

Hello,

I recently talked to my tax accountant about this for Canada. He basically said that in my case, as it is not my full-time job and I am making under what I do make at my full-time job it is not taxable. But if I were to become a professional gambler, I would have to declare it as income and pay tax on it.

He said the confusing part would be when you are working still and you are making more or about the same playing poker. He said that in one of these cases, he would recommend reporting it as it would be the safer thing to do. He also said that not reporting it would probably be just fine as long as you were not making a lot more from poker than you are from your job.