SNG tax question

[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]

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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.

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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]

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my advice is simple...

MOVE TO CANADA!!

up here we don't pay taxes on gambling.

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Unless it is considered your job....

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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 [img]/images/graemlins/grin.gif[/img]

[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]

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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.

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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.