Tax return question
 

Due to me being in school most of my life, and my dad enjoying the tax break from having a dependent, I will be filing a return the first time next year.

The salary I get from my job will be easy enough to calculate, but I have a question regarding poker winnings...

I anticipate being in the black on poker for the year, but I know that the typical way to report is to write your total winnings in, then deduct your total losses. Would it be problematic to simply declare your profit as income, and list no losses as a deduction?

I apologize for such a noobish question, and I'm sure I'm probably overlooking a basic mathematical concept in the process, but I think one of you can answer it better than I can research it.

Re: Tax return question
 

might lose you some loot

Re: Tax return question
 

No. You cannot list the net winnings. You must list the gross winnings and the gross losses separately (which if you add them together give you your net winnings anyway).

On a related note, you probably won't want to claim the standard deduction if you are reporting gambling winnings, otherwise you cannot deduct your losses.

TT [img]/images/graemlins/club.gif[/img]

Re: Tax return question
 

Interesting...I will have to look into what deductions I took on my paycheck(I recall it was as many as possible) to avoid that problem.

Also...it will all depend on whether or not my profit for the year is significant enough to report...I mean, would it be an issue to not report $500 or so?

Re: Tax return question
 

The deductions on your paycheck have nothing to do with itemized deductions you take on your tax return. The standard deduction for 2005 is $5,000, so if your total itemized deductions (including your gambling losses) are less than that then you can't itemize.

Re: Tax return question
 

I see...

Methinks I should buy a Tax for Dummies book or something, just so I don't feel quite so lost.

Thanks for the help on this.

Re: Tax return question
 

Would it be problematic to simply declare your profit as income, and list no losses as a deduction?

IRS publication 529 specifically forbids reporting the net of wins and losses as income. All wins must be reported as income on form 1040 and all losses must be reported as an itemized deduction on Schedule A.

Re: Tax return question
 

Unless you've got large winnings that generated an IRS form(s), you may not have a problem.

<ul type="square"> [img]/images/graemlins/wink.gif[/img][/list]
(I am not a CPA or tax advisor, but I did spend a couple of nights in a Holiday Inn last week.)

Re: Tax return question
 

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The deductions on your paycheck have nothing to do with itemized deductions you take on your tax return. The standard deduction for 2005 is $5,000, so if your total itemized deductions (including your gambling losses) are less than that then you can't itemize.

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I was told it was 7K as of 2005. I don't know if my information is correct, just pointing it out.

TT [img]/images/graemlins/club.gif[/img]

Re: Tax return question
 

I had that thought, actually...but I don't want to get audited my first time out of the box. Any thoughts along these lines from folks who are wise in the ways of the evil tax?

Re: Tax return question
 

$5,000 single or married filing separate, $10,000 married filing joint, $7,300 head of household

http://www.irs.gov/publications/p501/ar02.html#d0e6188

Re: Tax return question
 

chance of audit is 0.1%

Re: Tax return question
 

[ QUOTE ]
chance of audit is 0.1%

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"Never tell me the odds." - Han Solo [img]/images/graemlins/grin.gif[/img]

Re: Tax return question
 

nobody's going to notice $500...

Re: Tax return question
 

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chance of audit is 0.1%

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chance of being dealt AA is 0.45% less than 5 times as great.

Re: Tax return question
 

Subtract rake and losing lottery tickets too!

Re: Tax return question
 

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Subtract rake

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no

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and losing lottery tickets too!

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yes

Re: Tax return question
 

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Would it be problematic to simply declare your profit as income, and list no losses as a deduction?

IRS publication 529 specifically forbids reporting the net of wins and losses as income. All wins must be reported as income on form 1040 and all losses must be reported as an itemized deduction on Schedule A.

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The above is the legalese. Congress REALLY screws gamblers. In theory, if you make relatively little money or just don't have many deductions so that you don't itemize, Congress has proclaimed that you cannot deduct any loses at all, and must declare all wins of every sort. So in theory if you play 30 tournaments for $100 each in a year and take in $3000 in winnings, you are expected to declare $3000 in income and you cannot offset the $3000 in loses. You broke even for the year, but are expected to pay income tax on $3000. The ONLY way to legally deduct loses is to itemize on schedule A, or quit your real job and become a professional gambler and move it all into schedule C.

And people wonder why folks cheat on their taxes. This is one of those rules that doesn't pass common-sense fairness tests. Write your congresscritter and demand they fix this.

Re: Tax return question
 

If you're reporting less than $100,000 in income *and* it's mostly W2 income (wages, salaries &amp; tips) you have slightly less chance of being audited than of being eaten by a shark.

Re: Tax return question
 

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If you're reporting less than $100,000 in income *and* it's mostly W2 income (wages, salaries &amp; tips) you have slightly less chance of being audited than of being eaten by a shark.

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Wrong, especially if you have income from other sources such as gambling winnings. Additionally if you ever have more than 10,000 AT ONE TIME in an offshore business or account (such as Neteller) you must notify the IRS. This is currently an insta-audit, not pleasant (I know from experience. The IRS and I have a history together, generally I lose).


TT

Re: Tax return question
 

What do you mean by you must notify the IRS in that $10,000 situation. Like that instant, or just in your IRS report for that year?

Re: Tax return question
 

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Additionally if you ever have more than 10,000 AT ONE TIME in an offshore business or account (such as Neteller) you must notify the IRS.

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This is true if your total out of country money is over 10k, right? Not just 10k at one spot. If you have 5k in Neteller, 3k at Party, and 3k at Stars, I think this qualifies. I could be wrong, but I've been careful to stay below 10k total just to be on the safe side.

Re: Tax return question
 

[ QUOTE ]
If you're reporting less than $100,000 in income *and* it's mostly W2 income (wages, salaries &amp; tips) you have slightly less chance of being audited than of being eaten by a shark.

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Odds of shark attack if you are in the US one in ten million. Odss of being audited by the IRS with an income of between $25K and $100K are about one in one hundred.

Jimbo

Re: Tax return question
 

Are the wins online or in a casino?

If in a casino, and no tax form, I would be inclined to believe I never won anything.

Re: Tax return question
 

[ QUOTE ]
Are the wins online or in a casino?

If in a casino, and no tax form, I would be inclined to believe I never won anything.

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

Re: Tax return question
 

I'm told (by pokerstars and Party) that they do not report any information to any governments regarding customer transactions. Is this a moot point if I'm using netteller and/or depositing cashouts directly to my checking account (so the IRS would be able to track easily)?

Seperate scenario: I cashout for less than $10k from an on-line site via check which I cash at some place other than my personal bank. Appear to be a safe way to cash out and not be accounted for???

Re: Tax return question
 

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Seperate scenario: I cashout for less than $10k from an on-line site via check which I cash at some place other than my personal bank. Appear to be a safe way to cash out and not be accounted for???

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Ever try to cash a check at a bank where you don't have an account? Unless it's a branch of the bank it's drawn on, I doubt you'll be successful.

Re: Tax return question
 

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If you're reporting less than $100,000 in income *and* it's mostly W2 income (wages, salaries &amp; tips) you have slightly less chance of being audited than of being eaten by a shark.

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Odds of shark attack if you are in the US one in ten million. Odss of being audited by the IRS with an income of between $25K and $100K are about one in one hundred.

Jimbo

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You probably have a better chance of being audited if you itemize. That schedule A is where people get cute. I know that claiming Moving expenses is a red flag.

Re: Tax return question
 

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I'm told (by pokerstars and Party) that they do not report any information to any governments regarding customer transactions. Is this a moot point if I'm using netteller and/or depositing cashouts directly to my checking account (so the IRS would be able to track easily)?

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I'm pretty sure this doesn't matter if you are audited. I've read (but I'm not sure) that the IRS can simply require you to provide the documentation. So even if the site won't give it to the IRS, the IRS can demand the records from you and you will have to get them from the site. Not positive on that, but it's what I've read and it makes sense.

Re: Tax return question
 

I'll agree my reply was incomplete, but I stand by the concept.

The IRS, like any federal agency, is understaffed and underfunded. In their goal to maximize collections, they focus a huge amount of attention on the places they *know* there is unreported income: cash businesses.

The OP is filing his first tax return. Its doutful he's in an income range that will attract attention.

With respect to the $10K in an offshore account comment. Unless he transferred that much to NETeller from his US bank, or brought enough back to his account, there is no paper trail to trigger the audit.

Re: Tax return question
 

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Additionally if you ever have more than 10,000 AT ONE TIME in an offshore business or account (such as Neteller) you must notify the IRS.

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I think the reporting we're talking about is actually to the Department of Treasury (TD F 90-22.1). Also, "business or account" is somewhat ambiguous - the Treasury Department rules only apply to "bank accounts, securities accounts, or other financial accounts." For example, if you loaned $50,000 to Toyota in the normal course of business, I don't think that is reportable.

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This is true if your total out of country money is over 10k, right? Not just 10k at one spot. If you have 5k in Neteller, 3k at Party, and 3k at Stars, I think this qualifies. I could be wrong, but I've been careful to stay below 10k total just to be on the safe side.

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Yes, aggregate out-of-country funds, but pay close attention to the definition of financial account.

The penalties for non-timely filing are "strict" penalties as a result of some changes in the American Jobs Creation Act in 2004. That means that (supposedly) there is no relief for "reasonable cause" (ignorance/reliance on professionals, etc.).