Taxable: All income or only withdrawn?

[waffle]

I'm going to support myself by playing poker for a while. I plan on hiring a professional that specializes w/ gambling to help me with my taxes, but I've got a quick question while I am still planning things out. I live in the US. (BTW, any recommendations for a professional are welcomed. I have a few already but more can't hurt.)

Am I to pay taxes on ALL money I make playing poker as soon as it I win it, including money that just sits in my bankroll? This is just capital to me, not income. Or am I to pay taxes on only what I remove from my bankroll and put in my checking account to spend?

Assume I pay ~33% in taxes (federal income tax + self employment tax, etc)

In the first scenario - I might win $10,000 in a month, pay $3,333 in taxes, and I'd have $6,666 left over. I'd withdraw $3,333 to my checking account, and add $3,333 to my bankroll.

In the second scenario - I'd win $10,000 in a month, keep $5,000 to my bankroll, and cash out $5,000. Of the $5,000 I cashed out, I'd pay $1650 (this is 33% of $5,000) in taxes and keep $3,350 for myself.

It's the first scenario, right? /images/graemlins/frown.gif

[Niediam]

It is taxable income as soon as your poker session ends.

[Vern]

[ QUOTE ]
It is taxable income as soon as your poker session ends.

[/ QUOTE ]
While I agree with this position and this is how I file my taxes but I have a questions: What if a site closes and takes your funds? Are those gambling losses or criminal losses? In the former, you could declare a loss, in the latter, you really cannot.

Vern

[Schwartzy61]

Any money you make is taxable. You should just think of your poker bankroll as being in a virtual banking account. It doesn't matter whether you withdraw it or not. People get direct deposit from their jobs, they could say that as long as they don't withdraw it, it isn't income, come on.

As far as you thinking it's "capital." Any increase in capital in your business is either a contribution or a money making endeavor. When the local sandwich shop sells a hoagie, the profit from that can be added to capital, or the owner can withdraw it. Either way it's taxable income.

As far as the poker site closing and taking your money, you could probably claim an unexpected casualty/theft loss of the money. The guy you would hire would certainly be able to point you in the right direction should that happen. But I'm sure as long as you didn't lose it as like a fine for criminal activity or something similar you would be able to count that as a loss.

[Niediam]

I would assume (aka I don't know and am just guessing) that the IRS would say criminal losses as it gives them more money and it does really seem like gambling loses to me ... assuming the IRS knows about the stolen money.

[MicroBob]

I think that I would say that putting my money in the poker-site was a 'gamble' in the first place.

So i would report it as a gambling loss.

[BusterStacks]

So wait, what if I win 500$, it's taxable... then I lose 500$, and win 500$ again, do I pay taxes on winning 500 twice even though I only net 500? How does that work.

[Niediam]

I'm not sure the IRS would agree with that logic. /images/graemlins/smile.gif

You would probably be fine if you just never told the IRS that the solen money ever existed - not that I'd ever reccamend tax evasion.

[Niediam]

There are about a million threads on this. /images/graemlins/smile.gif But to put it very simply for the recreational gambler...

You must declare every winning session you have as income and then if you with to deduct loses you must itemize your deductions (therefore you no longer can take the standard deduction).

[BusterStacks]

sounds pretty complicated, maybe i should just stick to not paying taxes.

[Schwartzy61]

[ QUOTE ]
sounds pretty complicated, maybe i should just stick to not paying taxes.

[/ QUOTE ]

Worked out well for Al Capone, no?

[Jeffage]

It's not very complicated: pay about $250 for an accountant to do this for you and set up quarterly tax payments. It's much easier that way. If you're making serious money, you should definitely pay your taxes...too risky not to.

Jeff

[Scuba Chuck]

[ QUOTE ]
sounds pretty complicated, maybe i should just stick to not paying taxes.



[/ QUOTE ]

I would bet the lionshare of this forum share this attitude.

[IlliniRyRy]

What if you're a US citizen but you spent a year abroad and made money online and withdrew it to a foreign bank account, would you still have to pay taxes on it in the US?

[mistrpug]

[ QUOTE ]
What if you're a US citizen but you spent a year abroad and made money online and withdrew it to a foreign bank account, would you still have to pay taxes on it in the US?

[/ QUOTE ]

yes.

[seabass74]

Jeffage et al... what's serious money??? online, I'm only a small winner for the year but much more in home games/casinos where I get cash... I just spend it on toys etc. I'm up about 14k for the year but only a small percentage of that gets deposited into my bank account... I was planning on just not paying taxes on it unless it becomes a large percentage of my total income... my goal for the year is +28k but the majority of that will be very easy to hide from the irs.

[waffle]

[ QUOTE ]
sounds pretty complicated, maybe i should just stick to not paying taxes.

[/ QUOTE ]

I have personally known a person who got busted for tax evasion. It was not a pretty thing. It took many years but the IRS eventually froze this person's bank account and then took his house. I recommend paying them.

[PokerBob]

[ QUOTE ]
my goal for the year is +28k but the majority of that will be very easy to hide from the irs.

[/ QUOTE ]

IMO this is -EV. Big.

[StacysMom]

The best advice I have is try to pay taxes on what u earn. If u do so in good faith, all that will happen is the IRS may request more money, not jail time. Personally, I dont report my bankroll,or keep per session stats, but i do report all money that I take off line and put into checking/savings. I try to keep 500BB's online, and withdraw excess. If I ever get audited it will not be as if i was stashing an abnormally large sum onine, just the 500BB's. Im confident that this is acceptable, and with so many ppl not paying taxes on gambling, my system of seems well within good faith.

[xLukex]

This is my first year playing, and I expect to make a few thousand. Anyways, I write down what I take to my bank account, and obviously have a running total of what I have in each site/Neteller. I thought it was acceptable to just pay taxes on that put together, not what I made each sesssion. That just doesn't make sense...

[WhiteWolf]

This site (http://www.onlinepokerfaq.com/guide/us-taxes.html) has a lot of info on US tax laws re: gambling income. Make sure you run all this info past your tax pro however.

[xLukex]

[ QUOTE ]
This site (http://www.onlinepokerfaq.com/guide/us-taxes.html) has a lot of info on US tax laws re: gambling income. Make sure you run all this info past your tax pro however.

[/ QUOTE ]

I love how none of this is set in stone.