Tax ? - Setting up an S Corp

[TXTiger]

I met with a CPA last week about paying taxes on internet poker winnings. He did not really have any experience with internet poker. He suggested that I set up an S Corp (my own business). Doing this would allow me to get the usual working from home small business write offs. And it will also allow me to avoid paying self employment tax on some of my winnings. I was wondering what you guys thought about this. If you just claim your winnings under other income do you still pay the self employment tax on it? How do you full time internet poker players file? This year I will have income from a traditional job as well as poker winnings. I recently quit so it's poker winnings from here on out. How does the S Corp idea sound to you?

[TheNutz]

Get a new CPA, S Corp all income flows directly through to you on either a K-1, 10-99, or some other form (can't remember third).

You then have to pay SE taxes on amount required up to cap on social security.. I have never met a CPA who told me to setup an S-Corp to avoid paying SE taxes.

The only way this would be possible is if you were to have payroll and pay yourself a salary, you then have to match your FICA/SS/Med and withhold state and federal deposits making monthly deposits to the IRS. More of a pain in the ass then just getting a simple business license.

Only benefit I see of having a corporation is if you were doing it offshore, did your CPA tell you there is also a 1% tax on all INCOME generated by the corporation regardless of whether you can deduct the income as an expense or not?

You really need a new CPA...

Regards,
Ryan Lanane
Marketing Director
NutzPoker.com

[elwoodblues]

If playing online poker for money is illegal, setting up an S Corp to avoid paying taxes on the illegal income would be a bad idea. While the legality of online poker at the national level is questionable, it is probably illegal in every state.

This sounds like a REALLY bad idea.

[astroglide]

there is no tax advantage to filing under a business (llc, s-corp, c-corp, whatever) if you file legally.

[TXTiger]

"You then have to pay SE taxes on amount required up to cap on social security.. I have never met a CPA who told me to setup an S-Corp to avoid paying SE taxes.

The only way this would be possible is if you were to have payroll and pay yourself a salary, you then have to match your FICA/SS/Med and withhold state and federal deposits making monthly deposits to the IRS. More of a pain in the ass then just getting a simple business license. "


What I was told is that you must pay yourself a reasonable salary, after that you can take money out of your business without paying SE tax. You do have to pay all of the taxes you mentioned on the salary. But if your salary is small in relation to the amount of money you make, then you save a lot by not paying SE tax on the rest. The payments to the IRS are quarterly, and that form is simple. All of this info is what I got from the CPA, I don't claim to be a tax expert so feel free to tell me where you think this is wrong.

Does anyone have a suggestion as to the best way to file and pay the least taxes legally. I do married filing joint so I could just list it as other income. Does that sound good/bad.

I did think about the legality issues, but not while I was talking to the CPA. If I form an S Corp then I will basically be creating a legal document that says my income comes from internet poker. Maybe that would be a bad thing to do, not sure.

Any other suggestions are welcomed.

[astroglide]

there is nothing unclear about this: what your cpa has proposed is 100% illegal. if you are a recreational player, there is only 1 way to file: add all of your winning sessions up, and report it as income. add all of your losing sessions up, and deduct them. you must do these separately, and cannot sum them together. look here for further, reputable guidance.

[TXTiger]

"there is no tax advantage to filing under a business (llc, s-corp, c-corp, whatever) if you file legally."

This would allow me to write off several things, since I'm working from home. % of Mortgage, DSl, computer equipment, etc... I don't think you can itemize theses things without setting up a business. Am I wrong about that? What would be your recommended method of filing. Paying SE tax on everything would suck.

[TXTiger]

"if you are a recreational player, there is only 1 way to file:"

I now get 100% of my income from poker.

[TheNutz]

No need for a corporation to deduct those expenses.. You can do it using your name as the income I believe, worst case scenario pay $10.00 go to your city recorder/circuit clerk and get a business license.. I.E. DBA

Mine from 1996 is stil framed, lmfao ..

And yes, taxes suck, SE taxes suck worse as you pay them on your income from the business BEFORE any other write offs you may have that are not business related. Get ready for a world of fun, and seriously get a real CPA. You are looking for real trouble if you don't with some of the ideas this guy has put into your head.

Or spend 2K - go to Antigua, open an off shore bank account and send all money through there.. use your debit card to withdrawl and it is untraceable. Or is it?

Then you are looking at serious trouble if you get caught doing this.. although what your CPA is telling you to do is not far from it.

Regards,
Ryan Lanane
Marketing Director
NutzPoker.com

[astroglide]

you can itemize these things if you file as a professional, but you will have to pay social security, etc