SNG tax question

[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?

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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.

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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?

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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.

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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.