The Tax Man Cometh
 

I didn't have to pay taxes last year, and this year I've made about $60K from online poker. I haven't had to worry about income over $2K until this year.

Is it pertinent to get a CPA?

How the hell do I find one who's familiar with this, or do I have to settle for less?

From what I hear, you definitely don't want to file as a professional gambler because of the additional S.S. tax. Rather, I should list my income and then put in losses as itemized deductions?

Any extra info would be greatly appreciated. Here's a helpful link for others: Online Gambling & Taxes

Re: The Tax Man Cometh
 

Getting a CPA would be good.

Yes, if possible, you can avoid the self-employment tax by not filing as a professional. A CPA can help you determine if this is in your best interest.

What state are you in? If you're in Oregon I can refer you to someone.

Re: The Tax Man Cometh
 

I'm in Texas.
One more question, how are tournament wins reported? Is it the same column of income and losses?

Re: The Tax Man Cometh
 

You are going to get raped if you don't file as professional and get auditied.

Filing as a professional does have its advantages, however.

Re: The Tax Man Cometh
 

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You are going to get raped if you don't file as professional and get auditied.


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Re: The Tax Man Cometh
 

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Re: The Tax Man Cometh
 

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You are going to get raped if you don't file as professional and get auditied.


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What's the question?

If it is your main source of income, the IRS is going to conclude very easily that you were self-employed and should have reported the income via Schedule C.

When they see you didn't do this, you are going to owe the extra tax + penalties + interest... the penalties aren't small and the interest is at the highest rate they can justify. And this is if they conclude that you didn't do this intentionally. If they think you were intentionally evading taxes, the penalties get absolutely huge or you go to pound-you-in the ass prison.

Good luck with that one.

Re: The Tax Man Cometh
 

I thought in order to be a professional gambler you had to demonstrate that it was your primary form of income for at least 2 years...I guess I'm wrong?

edit- typos

Re: The Tax Man Cometh
 

Well i know ill probably get jumped on big time for this. But i have been filing my poker winnings in the other income section of my return for 3 years and the irs seems to be ok with that. Since i only play online and am a winning player, there are no losses to deduct(some people will really have a problem with that, but i think its reasonable and also legal under current tax code.) The IRS has gladly been accpeting my money with no problems and even sends me quarterly filing papers to make it easy to continue to pay. I think if ur not comfortable with the situation get a CPA, but the IRS is reasonable as long as you make a good faith effort to pay the taxes on the money you earn. I think if you file as unemployed or student or w/e and list your winnings in other income this is well within the boundries of the law(read the link in the first post it talks about doing this). If i ever had any substantial losses live or w/e i would deduct these.

I also doubt the IRS is going to try and make you file as a professional. They have been fighting for years to try and keep this from being possible going all the way to the supreme court.(Again the linked article section 3) For these reasons i dont think its mandatory to file as a proffessional if you dont want to(and mainly to avoid the 15.3% self employed income tax). I realize there are disadvantages to this(namely the inability to write off expenses) but i doubt there can be a huge difference one way or the other frankly. Just my 2c

Re: The Tax Man Cometh
 

Wichita did you have a primary source of income that you were also reporting? For the average person, with no state tax, reporting your winnings in a lump sum..where do you list them? What percentage does this fall under? If you are still claimed as a dependent by you single parent but you will probably make more than them in the next year this is probably a problem right?

Re: The Tax Man Cometh
 

Im not a dependant, i have no primary source of income. I list in on line 21 other income. If you read the link at the top it tells you this is an option. Im not 100% sure this is right, but i have been doing it for 3 returns with no problems. No problems with state taxes either.

edit- i realize you are supposed to add up winning and losing sessions and deduct and all that. What constitutes a session. A table,day,week,year? I have never seen the IRS specify what this is for online play. Until they do its one long session for me.

Re: The Tax Man Cometh
 

But what do you do if you get audited next year and they say you owe them $200,000 in unpaid taxes, penalties, and interest? [img]/images/graemlins/frown.gif[/img]

Just because you havn't been caught at this point doesn't mean cheating on your taxes is a smart thing to do. A lot of people here have speculated that in the next few years the IRS may start taking a closer look at poker winnings now that it has become so popular...

Re: The Tax Man Cometh
 

How am i cheating? Show me the tax code that says im cheating on my taxes...

Edit-Until the government more clearly defines a "session". Who is to say it is a day or a month or a year? Once this is clarified i will gladly do whatever it is they want me to do.

Re: The Tax Man Cometh
 

If it's your primary source of income, you are self-employed. Period. Especially if you have been doing it for years.

Not filing as such is attempting to avoid paying the SE tax. This is not going to end good when you do get audited one year. All that interest is going to add up.

Re: The Tax Man Cometh
 

SO you are telling me after fighting allowing people to file as professionals for years, fighting it all the way to the supreme court, now they require it? Do you have a link to any information on this?

What if i am a fulltime student?

Re: The Tax Man Cometh
 

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SO you are telling me after fighting allowing people to file as professionals for years, fighting it all the way to the supreme court, now they require it? Do you have a link to any information on this?

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Link to me showing them fighting a winning player who's primary income is gambling from filing as self-employed.

I do know they fought losing players from trying to file as a professional for obvious reasons. I've never seen them do the contrary.

The IRS wants you to file as self-employed if that's what you are. In fact, they will require it. There is no way getting audited and having 3 years of your only income being "Gambling" that they are going to let you slide.

Re: The Tax Man Cometh
 

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What if i am a fulltime student?

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You may be able to get away with not filing as professional if you can show you are a fulltime student. Still they are going to want you to inflate your AGI like hell by doing wins/losses separate and losses under your deductions.

But a non-student, who plays full-time for a living is not going to get away with not filing as SE.

Re: The Tax Man Cometh
 

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Just because you havn't been caught at this point doesn't mean cheating on your taxes is a smart thing to do. A lot of people here have speculated that in the next few years the IRS may start taking a closer look at poker winnings now that it has become so popular...

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This is very true. Just because you haven't been caught doesn't mean you aren't cheating on your taxes. Tons of people cheat and don't get caught for a long time, if ever. That doesn't mean they weren't cheating.

Re: The Tax Man Cometh
 

"So you ask, why not declare myself a "professional" gambler. A few years ago that would not have been possible. Luckily a gambler named Robert P. Groetzinger fought the IRS on this issue. In a case that made it to the Supreme Court, the court held that you can legally be a professional gambler."

Taken from the link in the first post. It doesnt sound like they require you to file as a professional it sounds like the fought people wanting to do this and lost. Why then would they now require people to do this. Find me a link to where the irs states you are required to file as a professional. I dont think especially with the lack of IRS literature on online poker that i am cheating on my taxes filing how i have been.

Re: The Tax Man Cometh
 

Give me a link to the case, I want to read the specifics.

From the IRS website:

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You are self-employed if any of the following apply to you:

* You carry on a trade or business as a sole proprietor;
* You are a member of a partnership or limited liability company that files a Form 1065, U.S. Return of Partnership, that carries on a trade or business; or
* You are otherwise in business for yourself.

You are also self-employed if you have a part-time business, in addition to your regular job.

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This is exactly what you are.

Also, from the page on SE tax:

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You must pay SE tax and file Schedule SE (Form 1040) if either of the following applies.

* Your net earnings from self-employment (excluding church employee income ) were $400 or more.
* You had church employee income of $108.28 or more


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Anybody attempting to play poker for a living is obviously self-employed, no? You can't really dispute that fact. Otherwise, what are you... unemployed? Why don't you try to collect unemployment too?

Even if you are a student, I think you qualify under the part-time business as being self-employed with regards to that income.

My view on this comes from talking to my finacial advisor who has an MBA in Finance and is also a CPA; I've also done my own research on the issue and concluded the same as she did. I recently talked to a second financial advisor for a different reason to get a second opinion on retirement plans and she concluded the same as the first one I went to as far as self-employed status.


Everyone should really spring for the money for a good financial planner if you are making decent money from poker. They should be able to advise you on these matters instead of listening to an internet message board. But I highly doubt you are going to find one that think what you are doing is OK (unless, they have low morals, which some shady ones do).

Trust me, I'd love to not file as self-employed. It'd save me about $15-20k a year, but I'd rather not do something illegal.

Re: The Tax Man Cometh
 

Also from the IRS website:

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Trade or business. A trade or business is generally an activity carried on for a livelihood or in good faith to make a profit. The facts and circumstances of each case determine whether or not an activity is a trade or business. The regularity of activities and transactions and the production of income are important elements. You do not need to actually make a profit to be in a trade or business as long as you have a profit motive. You do need, however, to make ongoing efforts to further the interests of your business.

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Re: The Tax Man Cometh
 

irs laughs at me and says "hobby loss"

Re: The Tax Man Cometh
 

How much does a CPA cost? I appreciate all the info.

Re: The Tax Man Cometh
 

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If it's your primary source of income, you are self-employed. Period. Especially if you have been doing it for years.

Not filing as such is attempting to avoid paying the SE tax. This is not going to end good when you do get audited one year. All that interest is going to add up.

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There is no requirement for fulltime players to file under Schedule C. If they're only making about 50K per year or less, they're usually better off filing a normal return and listing their losses as an itemized deduction. They don't have to pay SE tax if they do this. On the line for employment, they can list "none" or "retired" if they want to.

If they're making over 50K per year, in most cases they're better off filing under Schedule C and paying the SE tax because of the additional business related deductions that are allowed on Schedule C.

Re: The Tax Man Cometh
 

It's better for me not to file Schedule C. Still, I have to and that's why I do.

You pretty much are required to if you do this for a living. Anyone here have a good financial advisor tell them otherwise? I'd be interested if they did, because I'm yet to find one.

Re: The Tax Man Cometh
 

The first thing you need to do is atleast use some common sense. Nobody is going to argue that its clear what a 'session' is but its obviously not a month or a year. Is it a day? Probably not but maybe the IRS won't bend you over if it appears you are trying to be cooperative.

But the important thing here really isn't what you or I think a session may be. It's what the IRS will think. If you get audited there is no way they are going to let your 'year session' theory work. They will find that you owe more taxes. They will find that you owe interest. They will penalize you. Now what do you do? Fight it? You can try but you have two problems. 1) You will have a hard time winning as it appears you didn't even try to comply with the law and 2) even if somehow you win your attorny fees will at a minimum be sevearl thousand dollars.

Here is a link to an article by Russ Fox (a CPA, poker player, and 2+2er) which may help with figuring out what a session is...

http://www.gambling-law-us.com/Artic...ng-Session.htm

Re: The Tax Man Cometh
 

To file as a pro dont you have to have won in 3 of the last 5 years?
The problem regarding a session is its the IRS's (or atleast tax court) opinion that really matters.Even if they had defined a session in the past, the world of online poker would have changed that definition anyway.

Re: The Tax Man Cometh
 

anyone else think this is just retarded? Can we please put together some sort of bill to change this, I don't see why it's not just net profit.

Re: The Tax Man Cometh
 

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To file as a pro dont you have to have won in 3 of the last 5 years?

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I have read similiar statements time and time again but never once has anybody cited an official souce...

Can any verify or deny this for a fact?

Re: The Tax Man Cometh
 

Getting congress to pass a bill isn't exactly the easiest thing in the world. [img]/images/graemlins/smile.gif[/img]

I'd assume that part of the reason that the law is so anti-gamblers as it is considered a 'sin tax'.

Re: The Tax Man Cometh
 

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To file as a pro dont you have to have won in 3 of the last 5 years?

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This is only necessary if you are going to be reporting a net loss this year. Basically, the IRS doesn't want to let people report a gambling loss unless they can prove that they're professionals.

Re: The Tax Man Cometh
 

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How am i cheating? Show me the tax code that says im cheating on my taxes...

Edit-Until the government more clearly defines a "session". Who is to say it is a day or a month or a year? Once this is clarified i will gladly do whatever it is they want me to do.

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Wow. You do realize what will happen if you get audited, right? If the case gets to tax court the way you have presented it, the IRS will ask for a summary judgment in their favor.....and they will get it.

Re: The Tax Man Cometh
 

Everything Metetron has said is right on target. I have worked with a financial advisor and CPA as well.

Krishan

Re: The Tax Man Cometh
 

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Since i only play online and am a winning player, there are no losses to deduct(some people will really have a problem with that, but i think its reasonable and also legal under current tax code.)

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You are quite wrong.

Page 12 of Publication 529 of the IRS Tax code:

"You cannot reduce your gambling winnings by your gambling losses and report the difference. You must report the full ammount of your winnings as income and claim your losses (up to the ammount of winngings) as an itemized deduction."

You can not legally claim net wins.

Re: The Tax Man Cometh
 

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You are going to get raped if you don't file as professional and get auditied.

Filing as a professional does have its advantages, however.

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Yes, definitely file as a professional. Don't fool yourself into thinking that because you may be a full time student or something else (you didn't specify) that your $60K income almost all from poker can somehow be qualified as casual income.

They can penalize you big time for avoiding FICA taxes too. Start doing it right from the start, you won't regret it. There are grey areas between professional and casual - but you are not in one - you are a professional.

Re: The Tax Man Cometh
 

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But what do you do if you get audited next year and they say you owe them $200,000 in unpaid taxes, penalties, and interest? [img]/images/graemlins/frown.gif[/img]

Just because you havn't been caught at this point doesn't mean cheating on your taxes is a smart thing to do. A lot of people here have speculated that in the next few years the IRS may start taking a closer look at poker winnings now that it has become so popular...

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If they audit him and force him to report winning sessions as income and losing as deductions, the main difference is going to be that he'll lose the standed deduction which will add less than $2000 to his tax liability. Let's not blow this out of proportion. I think for online poker, a good case can be made that a year's play is a "session". Not reporting winnings not cahsed out is much riskier. That could result in substantial additional income, interest and penalties if they rule against you.

Re: The Tax Man Cometh
 

Be careful... this thread already has a lot of incorrect information. You definitely cannot decide that a whole year of play counts as one session. I've written a couple of short articles with references and quotes from the IRS:
http://www.onlinepokerfaq.com/guide/tax-sessions.html
http://www.onlinepokerfaq.com/guide/...fessional.html

-Toad

Re: The Tax Man Cometh
 

So...if you had a $100K in winning sessions and $50K n losing sessions does that mean your income is $100K and you're in that tax bracket? That seems pretty harsh. BTW, yes I am a student.

Re: The Tax Man Cometh
 

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So...if you had a $100K in winning sessions and $50K n losing sessions does that mean your income is $100K and you're in that tax bracket?

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Yup. And if you itemize, you can deduct the $50k.


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That seems pretty harsh.

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It is.

Re: The Tax Man Cometh
 

No, this is not correct. Your tax bracket is determined by your taxable income, which comes after your itemized deductions. The tax rules for gamblers are bad, but not that bad.