Taxes for pro Gamblers

What are professional gamblers in the US doing as far as taxes? How is everyone handling this? What has been done in the past and what is everyone's plan for this year? I assume most people who read this are winning poker players and maybe some sports betting (or blackjack?) pros. Any response will be helpful, but someone who's been doing for their entire source of income for a few years would be ideal.

[Easy E]

Reporting them?

[youtalkfunny]

This is my first year playing full-time (poker and sports), and I want to do everything by the book.

Is there anything I should be doing?

Keep in mind that I know nothing about taxes beyond the 1040EZ.

I don't know much, but am quite sure you should be playing estimated taxes at least quarterly rather than waiting until April 2006.

[Masquerade]

[ QUOTE ]
Reporting them?

[/ QUOTE ]

You're joking right? One of the most insane things about the taxation of poker players is that tourney winners are shafted by the casinos reporting the wins, but on an adjacent table someone could be winning pots many times greater with noone taking a cent.

[ QUOTE ]
[ QUOTE ]
Reporting them?

[/ QUOTE ]

You're joking right? One of the most insane things about the taxation of poker players is that tourney winners are shafted by the casinos reporting the wins, but on an adjacent table someone could be winning pots many times greater with noone taking a cent.

[/ QUOTE ]I doubt this is the fault of the casinos -- I don't expect they have any choice but to report the tournament winnings.

[MicroBob]

I agree that many should be doing the estimated quarterly taxes.


You should be keeping accurate daily records and you will want to file a schedule-C as a 'professional' gambler.

Although I suspect that in your first year as a 'pro' you could get away with filing as a recreational gambler ('other income' on a regular tax-form) if you really wanted to.
But if you do it this way then you don't get any deductions for 'business' expenses (new computer, poker books, even your internet costs).


Do a search in the internet-forum for more information.
This 'gambling tax' stuff is talked about ALL the freaking time.


There was a thread started by a poster named CPA in Feb or Mar I believe that was quite good and very informative.


Also: this is officially my 500th time recommending Gambler's Guide to Taxes by Walter L. Lewis.
It will give you a decent idea of what you should be doing (although it was written before the internet poker-boom...but you can figure out most of what applies to you).
The book is $12 or so I think and you should be able to order it at a Barnes & Noble (I just happened upon it on the shelves at B&N and was happy I did).


It's not the end-all-be-all of gambler-tax advice....but for those who have no clue what on earth they are supposed to do I think it is a pretty good start.

It's also handy to take a copy of it to your CPA or tax-preparer (if you choose to go to one for advice) because MANY of those guys may not be familiar with the concept of a 'professional' gambler being able to file a schedule-C like any other small-business type owner.
It's not their fault...they're just SO used to dealing with 70-year-old grandmothers who hit a slot-machine jackpot.

But if you have the Walter Lewis book with you then you can help steer him towards the stuff that applies to you and he will know that you really AREN'T making it up (saying "but I read on a poker-internet-forum that you can do it this way" certainly won't carry much weight with him...but having the book will)


these are just some suggestions...I have never gone to a CPA or anything like that. That doesn't mean I'm very knowledgeable though as my Dad is the one who prepares my taxes (he is much better at that sort of thing).


I say this to stem the inevitable tide of PM's asking me for tax-advice (I get at least 2 or 3 it seems after I make a post in a tax thread around here).
Mostly everything I know is in this post.
Asking me for tax advice is akin to asking a deaf person to tune your piano.

[Alex/Mugaaz]

I'm thinking of getting mine done this year due to complications, can someone give me an idea of avg cost? Past a cetain point I'll just go get the books and do it myself.

[bobbysteels]

so what exactly are the penalties for not reporting....

http://www.swerbo.com/archives/early_years/billy-jail.jpg

lol, thats me when i was 4 - and soon again when im 22

[Easy E]

[ QUOTE ]
[ QUOTE ]
Reporting them?

[/ QUOTE ]

You're joking right? One of the most insane things about the taxation of poker players is that tourney winners are shafted by the casinos reporting the wins, but on an adjacent table someone could be winning pots many times greater with noone taking a cent.

[/ QUOTE ]

What does one group (cash players) committing tax fraud have to do with reporting being a joke?

[Easy E]

Since you won't give me MAC analysis and you're worthless as a tax attorney, I'd like to get SOME value out of you.

/images/graemlins/laugh.gif

[Masquerade]

[ QUOTE ]
What does one group (cash players) committing tax fraud have to do with reporting being a joke?

[/ QUOTE ]

Reporting is a joke because casinos are forced to report tourneys wins but not cash game wins. It's either the player's responsibility or it isnt.

The second joke is that foreign nationals can win an infinite amount in cash games without a cent being taken and yet lose a huge chunk to the IRS if they win a tourney (eg Hachem).

It seems quite different to me. In a tournament the casino collects the money and makes the payouts. In a cash game, the money goes to the middle of the table and back (less a rake) without actually passing through the casino's hands.

[mackthefork]

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Quote:
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What does one group (cash players) committing tax fraud have to do with reporting being a joke?


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Reporting is a joke because casinos are forced to report tourneys wins but not cash game wins. It's either the player's responsibility or it isnt.

The second joke is that foreign nationals can win an infinite amount in cash games without a cent being taken and yet lose a huge chunk to the IRS if they win a tourney (eg Hachem).

[/ QUOTE ]

[ QUOTE ]
Walker v. M.N.R. [1951] Exch. Ct.
Facts:
• farmer who attended horse races, earnings from owning horses and gained through betting
Issue:
• do gambling activities constitute a business?
Held:
• crucial point is was he betting for a hobby, pure amusement or systematically carrying on with a view to making money?
• Factors are he had an interest in several race horsed, had inside information from jockeys etc., for 10yrs he systematically attended all races, this constitutes a business or calling and monies are therefore taxable


[/ QUOTE ]

[ QUOTE ]
MNR vs Harry Edgar Morden

it was held:-

Held:
• to be taxable the gambling gain must be derived from carrying on a “business”
• casual winnings or occasional race bets are not subject to tax
• test is to look at intention, to conduct enterprise of a commercial character or to entertain himself (Lala Indra Sen)
• here no evidence that during years in question it was of commercial character
• while his bets were high sometimes and gains substantial no evidence of carrying on a business (was a hobby)
• appeal dismissed


In this case the facts included the following:-

• his gambling activities up to 1948 were so organized and occupied that if continued through years in question it would have been income from a business
• submitted that in years in question his gambling was only occasional and nothing more than hobby


[/ QUOTE ]

[ QUOTE ]
Sch.D CI/CII: Betting and gambling - when gambling winnings assessable

It does not follow from the cases in IM132 that surpluses made from betting opportunities provided by a trade are always severable from that trade and not assessable. In Burdge v Pyne 45TC320 the proprietor of a registered club, which provided facilities including a card room for gambling, won considerable sums of money from three-card brag which he played regularly with members in the card room. Pennycuick J stated

`... the Appellant was carrying on the business of a club: upon the club's premises he habitually played the game of three card brag with other members of the club: and at that game he was invariably successful. ... Given those facts, it seems to me that the Commissioners came to the right conclusion in finding that the winnings of the Appellant from three-card brag did represent a receipt by him in carrying on the business of the club. He owned the club; he carried on this game upon the club premises as such; and, moreover, it was members of the club in whose company he played the game and from whom, it appears, he invariably won money. I see no reason to think that that particular activity on the part of a club proprietor is not an activity in the course of carrying on the business of the club, and consequently winnings from that activity fall into the receipts of the club for the purpose of ascertaining the profits of its business.




The Appellant] ... contended that these winnings should be treated as the fruit of a private activity ... outside the business of the club, and accordingly should not be taken into account in computing the profits of the club.'

He went on to distinguish Graham v Green (see IM132) because

`... here there is a trade whereas there the person charged was not carrying on any trade at all.'

Of Down v Compston (see IM132) he said

`in that case the vocation afforded in some sense the opportunity for making the bets, in that Mr. Compston would not have had companions on his rounds against whom to bet if he had not been a professional golfer, but the bets did not arise out of his vocation. Again it seems to me that that case is wholly distinguishable [because] in the present case the club was not merely the occasion which enabled the Appellant to play private games of cards. The playing of cards was part of the activities of the club, and his winnings from those cards, it seems to me, arose in the full sense out of the carrying on of the club.'

A little confusing I know, but basically what it means is that if you run a card club (private poker game) from which you profit and you win money by playing in those games the money that you win is deemed to be part of the business and taxable. Does this mean that Barry Hearn will be hit with a big tax bill if he happened to fluke winning The Poker Million? That's a very difficult question to answer but he would probably have less of a defence than Mr Poker Player who had nothing to do with the organising of the event.





[/ QUOTE ]

As far as I can ascertain online pros should be paying taxes on profits in the UK, maybe if they had jobs they could reasonably argue against the presence of a profit motive, however if they were regular players I doubt even that.

Regards Mack

[Masquerade]

[ QUOTE ]
It seems quite different to me. In a tournament the casino collects the money and makes the payouts. In a cash game, the money goes to the middle of the table and back (less a rake) without actually passing through the casino's hands.

[/ QUOTE ]

What's the difference between the house taking a rake from a pot and giving the pot to the winner, or taking a rake from an entry fee and giving the payouts to the winners? In both cases the pot/prize fund is not owned by the casino.

[Masquerade]

[ QUOTE ]


As far as I can ascertain online pros should be paying taxes on profits in the UK, maybe if they had jobs they could reasonably argue against the presence of a profit motive, however if they were regular players I doubt even that.

Regards Mack

[/ QUOTE ]

Taxation of gambling was abolished in 2001 in the UK so citations before then are irrelevant. You're simply wrong.

[chisness]

masquerade, what's the deal for a dual UK/US citizen for online winnings?

[lastsamurai]

If you need to find loses to off set your winnings go to a local race track and look for losing tickets. You could offset your loses as much as you win.

Keep in mind...In the virgin islands...they dont tax you on gambling or capital gains in the stock market....

[ QUOTE ]
[ QUOTE ]


As far as I can ascertain online pros should be paying taxes on profits in the UK, maybe if they had jobs they could reasonably argue against the presence of a profit motive, however if they were regular players I doubt even that.

Regards Mack

[/ QUOTE ]

Taxation of gambling was abolished in 2001 in the UK so citations before then are irrelevant. You're simply wrong.

[/ QUOTE ]Isn't the theory that for every gambling gain there will be a corresponding gambling loss so they all offset each other? If everyone claimed all their income and losses it would be a wash for the government (basically).

[mackthefork]

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Quote:
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As far as I can ascertain online pros should be paying taxes on profits in the UK, maybe if they had jobs they could reasonably argue against the presence of a profit motive, however if they were regular players I doubt even that.

Regards Mack


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Taxation of gambling was abolished in 2001 in the UK so citations before then are irrelevant. You're simply wrong.

[/ QUOTE ]

I hope so, I doubt it though, recreational gambling is somewhat different than professional gambling. I need to see a case of the revenue deciding that a full time internet pro is not in a trade beofre I will be happy.

Also what was actually abolished in 2001 was betting duty, it was designed to help the book making indusrty grow, and enable them to easily give more to the turf and lower margins at the same time. Cases like the ones I mentioned are decided on our badges of trade, they are used to decide if someone is in the act of a trade based on;

- The subject matter of the realisation;
- The length of the period of ownership;
- The frequency or number of similar transactions by the same person;
- Supplementary work on or in connection with the property realised;
- The circumstances that were responsible for the realisation; and
- Motive.

I will remain convinced a full time pro would be liable to income tax under Sch D until I see evidence of the opposite.

Regards Mack

[youtalkfunny]

[ QUOTE ]
If you need to find loses to off set your winnings go to a local race track and look for losing tickets. You could offset your loses as much as you win.

[/ QUOTE ]

If you ever get audited, please let me know. I'd like to be there, to see the looks on their faces when you produce bundles of tickets that have dirty footprints on them. /images/graemlins/smile.gif

(My mother saves all her losing lotto tickets, beacuse if she ever wins $200,000,000 she might need a $100 write-off.)

[Jeffage]

An account should be able to set up quarterly taxes (vouchers, pre-addressed envelopes, adjustments, everything) for less than $300.

Jeff

[Easy E]

and yet lose a huge chunk to the IRS if they win a tourney (eg Hachem).

Isn't there an IRS mechinism to get a refund as a foreigner?

I agree with your point about the joke of taxing/not taxing, in general

[drewjustdrew]

[ QUOTE ]
[ QUOTE ]
If you need to find loses to off set your winnings go to a local race track and look for losing tickets. You could offset your loses as much as you win.

[/ QUOTE ]

If you ever get audited, please let me know. I'd like to be there, to see the looks on their faces when you produce bundles of tickets that have dirty footprints on them. /images/graemlins/smile.gif

(My mother saves all her losing lotto tickets, beacuse if she ever wins $200,000,000 she might need a $100 write-off.)

[/ QUOTE ]

I think the IRS would look for some race wins in your records that indicate similar betting amounts to your newfound losses. I don't think they will buy the "worlds unluckiest horse bettor" argument.

[Temp Hutter]

[ QUOTE ]
What are professional gamblers in the US doing as far as taxes? How is everyone handling this? What has been done in the past and what is everyone's plan for this year? I assume most people who read this are winning poker players and maybe some sports betting (or blackjack?) pros. Any response will be helpful, but someone who's been doing for their entire source of income for a few years would be ideal.

[/ QUOTE ]

Whether you consider yourself a professional and report your income (less expenses) on a schedule C (and pay self employment taxes) or you report gambling winnings as other income on the front of the 1040 - the best advice I have is to report the income and pay the taxes. You will sleep better at night.

[lastsamurai]

read this article from ed miller

web page (http://www.twoplustwo.com/magazine/current/miller0905.html)

Also find a good CPA