[okayplayer]

[ QUOTE ]

could someone explain this so that an idiot like me can understand it please? if a filing pro makes 50k for the year but has a networth of 20k, he only had to pay taxes on the 20k putting him in what sort of tax bracket? at most he would only have to pay the IRS like 10k since his networth is only 20k?

[/ QUOTE ]

What do you mean by net worth? Are you saying you make 50k and then have 30k of expenses? Or are you saying that you have assets worth 20k? Basically, it is real simple:

Pro: you just take your "net" profit at the end of the year, and pay taxes on it. You will be taxed an add'l ~7%+ for SS and medicare that an employer normally would pick up. This caps out around 88k or so (the medicare, which is part of the 15% (~2.9%) has no cap). But, you are able to deduct any "business" related expenses, and also contribute to a retirement plan (look into a SEP-IRA if you haven't).

Someone who files their poker income as "gambling winnings": You add all your "session" wins (the IRS is a little vague, but basically, it corresponds to when you sit down at a table and then leave - you can easily do this by exporting PT data to Excel and filtering), and that is added to your gross income. You can then use all your "session" losses as deductions. You cannot use poker expenses as deductions either.

I hope this answers your question.