(censored) tax issues.

So I posted a question a couple of days ago about tax issues. Since that time I have discovered that there are a 'few' states where the tax code does not allow you to deduct your loses. This means that there is NO WAY to make money playing poker in these states, because you are taxed on your gross and not your net profits. This means that you owe the government ALOT of tax money.

You owe even if you are a losing player.

You cannot win enough BB/100 to come even close to the taxes you must pay on your gross earnings.

If you live in one of these states, your wages could be garnished: basicly you would become a slave taking home a small percentage of your paycheck while you are paying the taxes you owe on your 'gross poker income'.

Take a look in your PT database. For some of us that play alot of hands every day, the gross can be an insane amount of money.

Just letting people know about this. It might be a good idea too make sure that the state you live in allows you to deduct gambling losses. If it does not, you could end up in more trouble than you realize. check it out....

[numeri]

A lot of this depends on the state. For me, the tax rate is 3%, which won't be that bad.

So I'll add the extra poker winnings on top of my earnings, and tax everything 3%. That may be a significant amount of money, but not so much that I won't be able to declare a profit.

Does anyone have thoughts on bonuses? How do we deal with those? Just add them to income?

[BigBiceps]

what states?

[NateDog]

[ QUOTE ]


Does anyone have thoughts on bonuses? How do we deal with those? Just add them to income.

[/ QUOTE ]

[Catt]

It all depends on whether you are taxed on "gambling winnings" or you can make the case successfully that you play professionally, in which case you wins and losses offset. "Professionally" doesn't necessarily mean full-time or sole source of income.

[bozlax]

Before you get too worked up about this, you should probably consult a tax specialist/accountant/lawyer. Because, quite frankly, what you're suggesting is simply insane. It's like saying that a business will be taxed for gross revenue and not allowed to subtract the cost of materials.

There is simply no way that a tax board would be allowed to make such a law. Among other things, how are you supposed to calculate such a number? Go hand by hand, adding up the ones where you won a pot, and ignoring the ones you folded or any where you lost the pot? Crazy talk.

What's likely is that you aren't allowed to deduct gambling losses as a whole number, i.e. doing the hand by hand thing, but only adding up the hands where you LOST money and calling that a deduction.

[tiltaholic]

[ QUOTE ]
Before you get too worked up about this, you should probably consult a tax specialist/accountant/lawyer. Because, quite frankly, what you're suggesting is simply insane. It's like saying that a business will be taxed for gross revenue and not allowed to subtract the cost of materials.

There is simply no way that a tax board would be allowed to make such a law. Among other things, how are you supposed to calculate such a number? Go hand by hand, adding up the ones where you won a pot, and ignoring the ones you folded or any where you lost the pot? Crazy talk.

What's likely is that you aren't allowed to deduct gambling losses as a whole number, i.e. doing the hand by hand thing, but only adding up the hands where you LOST money and calling that a deduction.

[/ QUOTE ]

in massachusetts, you may not deduct gambling losses from gambling winnings.

but yes, people should consult tax professionals (and one experienced in gambling income) and not get too worked up about info posted on an internet forum.

[NateDog]

There are a gazillion tax threads in the zoo. Not that it'll help or anything.

Just to make sure I make my point clear enough.

example :

you play 600 sessions this year.

you win 300 of them at an average of $50 a peice. $15,000.
you lose 300 of them at an average of $51 a peice. $15,300.

you lost $300.
And you owe ~$500 in taxes. at (3%).

Imagine what these numbers might be for a losing 3/6 player, or a losing 30/60 player. *ug*

[KingOtter]

[ QUOTE ]
Just to make sure I make my point clear enough.

example :

you play 600 sessions this year.

you win 300 of them at an average of $50 a peice. $15,000.
you lose 300 of them at an average of $51 a peice. $15,300.

you lost $300.
And you owe ~$500 in taxes. at (3%).

Imagine what these numbers might be for a losing 3/6 player, or a losing 30/60 player. *ug*

[/ QUOTE ]

Define 'session'.

And what's to say the year isn't one big 'session'

KO

[bozlax]

[ QUOTE ]
in massachusetts, you may not deduct gambling losses from gambling winnings.

[/ QUOTE ]

Define losses and winnings...seriously. There's no way they're expecting you to go hand by hand, and then it becomes a question of what period we're talking about.

[tiltaholic]

[ QUOTE ]
[ QUOTE ]
in massachusetts, you may not deduct gambling losses from gambling winnings.

[/ QUOTE ]

Define losses and winnings...seriously. There's no way they're expecting you to go hand by hand, and then it becomes a question of what period we're talking about.

[/ QUOTE ]

seriously?

i don't really know.

however, i do know that i could define whatever i want however i want (as could you) and file accordingly but what matters is how the law or if the law (ie, tax code) defines things and whether those definitions, should they exist, apply to online poker...and of course, whether or not the state decides to audit the return.

" There's no way they're expecting you to go hand by hand, and then it becomes a question of what period we're talking about."

Sometimes, "they" aren't exactly rational. And maybe "they" favor the most money being owed as possible.

[benkath1]

OK, I live in CO and one of my best friends Dad is an accountant and also in my monthly poker game. I asked him about taxes and online poker and what I should do and look foreward to. I think he is kind of excited about it and wants to help me become a 'professional gambler'. Anyway, he told me if I don't receive a 1099G from the poker sites, I don't have to worry about anything.

Now, if I do, I've got to 'clean' up some money by writing off some losses, but that's another story all together.

My question is this: Has anyone been issued a 1099G?

bozlax, I know you are a stay at home dad and I'm sure you play a lot and by your responses, I assume you are a steady winner. Do you know of anyone been "taxed" by a poker site?

[ QUOTE ]
[ QUOTE ]
Just to make sure I make my point clear enough.

example :

you play 600 sessions this year.

you win 300 of them at an average of $50 a peice. $15,000.
you lose 300 of them at an average of $51 a peice. $15,300.

you lost $300.
And you owe ~$500 in taxes. at (3%).

Imagine what these numbers might be for a losing 3/6 player, or a losing 30/60 player. *ug*

[/ QUOTE ]

Define 'session'.

And what's to say the year isn't one big 'session'

KO

[/ QUOTE ]

A session is defined just as you think it is. Its the time you sit at a table without changing limits. This strange sounding stuff I described about having to pay taxes on a $300 dollar loss IS correct. You cannot just 'decide' what a session is or 'play' with the numbers. If you live in the wrong area, you are just screwed!

Welp, I live in Illinois. Illinois does not allow for itemized deductions of gambling loses. THIS SUCKS. I was getting pretty good at poker, too.
I can't make enough money playing poker to pay the taxes on the gross, so I guess unless I can figure out a way to cheat, I have to stop playing. So unfair....

[DeathDonkey]

Online poker sites don't issue such forms as they are not US entities.

[ QUOTE ]
Now, if I do, I've got to 'clean' up some money by writing off some losses, but that's another story all together.

[/ QUOTE ]

The way you phrase this it is so illegal its not even funny. The information in this thread is painfully wrong or incomplete. Everyone who cares go buy The Gambler's Guide to Taxes.

-DeathDonkey

[SkiGuyGT]

I don't know much about state taxes except Oregon's, which are almost the same as federal, but I know the federal code can make it very difficult and unfair(in my mind) to stay in compliance.

Basically if you can't show that you are a professional gambler, all your winnings are included in income. You are supposed to keep accurate logs of every session (or hand? I've heard it both ways). Then your losses are deducted as itemized deductions.

This may not sound so bad, but if you do a lot of playing, your going to end up with a huge amount of income before your itemized deductions (AGI). This will cause you to loose a lot of other deductions that have AGI limitations. For tax deductions such as exemptions, there is a limitation after you make $100,000 where you lose your exemptions. So for a poker player this could cause a huge increase in tax liability. Not to mention you lose the $5000-9000 standard deduction that may have benefited you.

But you might be able to get some awesome loan with a $1,000,000 of income, even though you netted $18!

So if your going to have gambling income, especially poker, on your tax return you want to be a poker professional. Then you will include all your income and expenses on a schedule C, and the net will flow over to you return. The main condition you need to substantiate is that you play poker with an expectation for profit. Now quite a few people who gamble expect to earn a profit, so the courts may require some sort of evidence.

There is also no way you can deduct gambling losses in excess of gambling winnings, the IRS is very strict on that. So if you have a losing year of poker, you cannot deduct your net loss.

But in reality the IRS, and the states, are not going to know about your gambling income unless you receive 1099G's, or W2G's or whatnot. I believe that at this point in time you really only receive one for making a $10,000+ cash out in the casinos. But that could always change in the future. I have seen print out reports from local Indian casinos around here that list the gross winnings and gross losses for slot players. It would not be hard at all for the IRS to receive this, and they probably already sapena the information if they need it. Also the IRS might get this type of information in the future, just as they get W2 information from employers.

[bozlax]

[ QUOTE ]
My question is this: Has anyone been issued a 1099G?

bozlax, I know you are a stay at home dad and I'm sure you play a lot and by your responses, I assume you are a steady winner. Do you know of anyone been "taxed" by a poker site?

[/ QUOTE ]

I do not. AFAIK, the online poker sites won't produce a 1099G for two reasons: one, they aren't US entities, and don't operate under US law (a big reason that a number of jurisdictions have declared online gambling illegal). Two, it's an unfair imposition upon them, as "real" casinos aren't required to report every cash-out, only those of a certain size (do you give Foxwoods your name and SSN when buying $100 in chips for the 2/4 game, and cashing out the $227 a couple of hours later?).

The IRS is, of course, interested in gleaning every penny possible from the American taxpayer. Their problem, in a cash society, is that not every transaction can be traced. So, a lot of the tax codes depend on voluntary compliance (I'll just let that hang in the air). A lot of the codes are also intentionally vague, and it's left to the IRS case-worker and the taxpayer's attorney to negotiate what exactly applies on a case-by-case basis.

[bozlax]

So, I checked with my tax guy, and I trust him to the fullest extent permitted by law. He says that, in fact, there are cracker-barrel (my characterization, not his) states that do not follow Federal guidelines* when it comes to taxing gambling income, and that you are not allowed to deduct losses. Lucky for me CA isn't one of them (or it would be if I were playing with anything buy Sklansky bucks).

Further clarification: to separate your winnings from your losses, look at your 1099. Only winnings are reported on a 1099, not losses. I've asked for clarification as to what the IRS expects one to do if one does not receive a 1099.

* The IRS allows you to deduct gambling losses but only to the extent of gambling wins, i.e. you can't deduct a net loss from gambling.

The obvious way out of this injustice for those of us who live in one of the above mentioned states is to file as a professional. From what I have read, you must work at it 'full time', to be considered a professional. I guess that means 40 hrs a week. Do any of you file as a professional ? I was thinking that maybe you could include your 'study time' and such as 'working'. Someone here knows, im sure.

[bozlax]

There's a specific set of IRS requirements for one to be considered a "professional" gambler, that are actually far less concrete than "plays 40 hours of poker a week." That also may not get you out of the situation you're in with your state, since they've already demonstrated their disdain for the IRS's opinion in this matter. You should seriously consider consulting with a local accountant/lawyer if this has your panties in this much of a bunch.

[deception5]

[ QUOTE ]
There's a specific set of IRS requirements for one to be considered a "professional" gambler, that are actually far less concrete than "plays 40 hours of poker a week

[/ QUOTE ]

Anyone happen to know what these are?

Im not sure about other states, but in Illinois the problem is that the base income that you must report on your state 1040 is the amout you report on your federal 1040 as your AGI. Your AGI does not include your deductions, hence it is a very inflated version of your income. On the federal form you are allowed to deduct gambling losses from your AGI ( although there are still drawbacks to this, as most of you know ). You are not allowed this deduction in the state of Illinois. Thus, you are taxed for an amount of money that you never actually had. However, I believe this problem may corrected if you file as a professional gambler, since your AGI is correct after filling out a schedule C, meaning that you would not have to hugely inflated number as your gross income from which IL ( OH and MA, also I think. Im sure there are more ) wants taxes.

[trainslayer]

[ QUOTE ]
Two, it's an unfair imposition upon them, as "real" casinos aren't required to report every cash-out, only those of a certain size (do you give Foxwoods your name and SSN when buying $100 in chips for the 2/4 game, and cashing out the $227 a couple of hours later?).


[/ QUOTE ]

Please don't compare B&M casinos w/online ones as if they are the same. I don't know how many times I've read a defense of PT, HUD's, etc. that they are two completely different types of games and the rules and principles are respectively different as well. (This does NOT mean that I am against our tools of the trade.)

[bozlax]

I'm not comparing anything to anything. I'm presenting the arguments that would be employed by the online casinos should the IRS request that they file 1099s.

[trainslayer]

[ QUOTE ]
I'm not comparing anything to anything. I'm presenting the arguments that would be employed by the online casinos should the IRS request that they file 1099s.

[/ QUOTE ]

Yes, I knew that's what you were doing. The statement in parentheses is what gave me pause...like you might would agree with that reasoning. And even if you do, no offense intended.

[Bankuri]

[ QUOTE ]

Yes, I knew that's what you were doing. The statement in parentheses is what gave me pause...like you might would agree with that reasoning. And even if you do, no offense intended.

[/ QUOTE ]

But in order to play poker at Foxwoods you are required to be a member of their frequent player program, which indeed tracks your winnings per session and number of sessions you play at the casino (if it doesn't, it easily could be made to). This is correlated to your name and is, for all intents and purposes, the same as giving them your SSN. I am sure they do this to make the IRS tax paperwork easier for themselves.

[Marquis]

It's all one big session. /images/graemlins/smirk.gif

[trainslayer]

[ QUOTE ]
It's all one big session.

[/ QUOTE ]

you ain't gotta convince me. uncle sam will probably need a stronger argument tho. /images/graemlins/grin.gif

[bozlax]

Really? I've never been asked for name, ssn, to join anything, or anything like that in SoCal or in Vegas (in all honesty, I've never played at Foxwoods). Do you get a 1099 at the end of the year from Foxwoods?

[bozlax]

[ QUOTE ]
Yes, I knew that's what you were doing. The statement in parentheses is what gave me pause...like you might would agree with that reasoning. And even if you do, no offense intended.

[/ QUOTE ]

No offense taken. Sorry if my reply was a little short...it was late.

Uh, whether I agree or not is irrelevant. And, it would be the lesser of the two arguments, should the IRS ever request compliance from the Internet cardrooms, assuming the cardrooms even bothered to reply (which I suspect the IRS knows they wouldn't, and couldn't be compelled to, and so wouldn't risk the embarassment of asking).

[Bankuri]

I haven't actually been down there yet to play poker, but if you look at their website you will see that you must join their rewards program to play poker there. I doubt you actually put your ssn down on the form, but you do put your name and address on it. I am guessing it helps them if they need to send people 1099's because of winnings, but I don't imagine they actually give a 1099 to everyone in the rewards program. The less-cynical (well, perhaps it is really the more cynical) part of me thinks it is mostly to get you into their marketing system.

I am sure someone on the board plays at Foxwoods and knows more details?