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Drontier 12-15-2005 05:52 PM

Clarifications about Tax
I have read many of the tax articles on here, and I just wanted to clarify some things.

1) We only have to pay taxes if our net winnings for the year is over 10k.

2) We only have to pay taxes if our net winnings (after deductions of "poker expenses") is over 10k.

3) A tax year runs from Jan 1 to Dec 31.

4) Since I am 19, and "gambling" in US law isn't of legal age yet, but I play on party where age 18 and up is ok I still have to pay gambling taxes?

5) My bank account has crossed the 10k mark this year. but I have not won a net of 10k, because I went on a -4.2k downswing shortly after. I have to/don't have to pay taxes?

Thanks to anyone that knows about these things. I have been reading the old tax articles a lot, and I seem to still be confused about these.

12-15-2005 07:39 PM

Re: Clarifications about Tax
I won't add more than what's already in the search archives, but 1) and 2) are absolutely not true in the U.S. 3) Is true for almost all individuals, and you would have to give the IRS a good reason for going off the calendar year tax year reporting.

This FAQ page will answer some of your other questions.

broiler 12-15-2005 07:41 PM

Re: Clarifications about Tax
To answer your questions as simply as possible:

1) Not necessarily. A professional will have self employment taxes. A nonprofessional player might still pay taxes at a net of $10k, if the winning sessions are high enough to cause phaseouts to kick in. A recreational player would have to play at fairly high limits in order to cause the sessions to work out in this way. Also, if your parents are still claiming you as a dependent on their return, then your will start paying taxes at a lower number.

Finally, don't confuse a tax liability with the need to file a tax return. You should file a tax return even with lower amounts of income because the statute of limitations does not begin on an unfiled tax return. There is no reason to give the IRS an unlimited time to ask questions about your income.

2) Similar to number 1, except that "poker expenses" would only apply to a professional gambler. Due to self-employment taxes, you would need to pay taxes at a much lower level of income.

3) The tax tear is the calendar year for you.

4) Your age and the legality of gambling have no impact on the taxability of your gambling winnings.

5) You should file a tax return, even if the tax that you owe at the end is zero because of the reason listed in answer 1.

Russ Fox 12-15-2005 10:16 PM

Re: Clarifications about Tax
I strongly suggest you talk to a professional tax preparer who can starighten out your errors, including:

(1) You must pay taxes on all of your income; if you earn $10 playing poker, you must include that $10 in your income.

(2) Net winnings aren't as important as your gross wins and your gross losses--unless you're a professional you can't itemize;

(4) You must pay taxes even if you're underage (or have earned income illegally)....

In any case, talk to a professional.

-- Russ Fox (EA)

kidcolin 12-16-2005 06:12 AM

Re: Clarifications about Tax
I'm pretty sure you can itemize if you're not a professional. You just can't take the standard deduction AND itemize just your poker losses. Correct?

Drontier 12-16-2005 06:28 AM

Re: Clarifications about Tax
So... just for clarification if I use Neteller as a median between my WAMU account and my Party account, what transactions can the IRS(or whoever I pay taxes to) actually see, and what part is based on the honor system?

broiler 12-16-2005 08:29 AM

Re: Clarifications about Tax
You are right. The only way to deduct gambling losses for the nonprofessional is to itemize.

broiler 12-16-2005 08:37 AM

Re: Clarifications about Tax
The IRS would have easy access to your account at WM since part of the banking regulations require them to turn over your information when properly requested.

Neteller, even though it is not an American bank, has also stated that they will also turn over your account information to the IRS, if an appropriate request is made.

The poker sites are pretty standard in saying that they will not release your information to the IRS. However, after the IRS is denied by the poker sites, they will ask you to provide the information. The only caveat here is that you would be under audit before the IRS asked you to turn over that kind of information.

Russ Fox 12-17-2005 03:35 PM

Re: Clarifications about Tax
Oops. What I should have said is that you can't "net" wins and losses unless you're a professional; not that you can't itemize.

-- Russ

Drontier 12-17-2005 05:07 PM

Re: Clarifications about Tax
under what circumstances would the IRS look at my account? I am still a dependent, I barely have any net winnings and as far as official records go I have never held even a part time job.(i worked for my aunt for a summer)

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