Poker and Taxes....This is why there is so much confusion

[cardspeak]

Thanks, CPA for the post.

I've been wondering about this issue, too. Saying it's "particularly harsh" to have to treat any session win as pure income and all one's session losses as only itemized deductions is an understatement. It's brutal. I wonder how this can be the position of the IRS. It strikes me as malicious. Certainly the IRS can't be that ignorant about how gambling actually works.

One's net win, before expenses, is the only real basis for calling it income. Why don't they just rule that every time you win a hand, that's income? Every time you lose a hand that's a potential itemized deduction that you, of course, have to defend with lots of records and which they can deny as inadequate for no particular reason. Since, in IRS land, one is guilty until proven innocent it would be a nightmare for the audited taxpayer. The only reason they don't require all winning hands be considered income is it's impractical, but the principle is the same.

How are players, especially on-line, dealing with this? The evidence of your transactions are all flowing through your bank. What is your true net win rate if you have to pay taxes as if you never lose?

Frankly, this whole issue pisses me off. Even the excellent input you provide, CPA, about how one could have a wider basis for claiming they are a poker professional, still puts one in the uncomfortable position of not knowing whether the IRS will buy it. If they don't, watch out. Given the bizarre position they take on what is income, I wouldn't expect understanding. They seem to be taking a breathtakingly obtuse position simply to bleed people.


Has anyone on this forum ever had to defend themselves with the IRS? What was your actual experience? I wonder if there aren't thousands of poker players who will be getting a very rude surprise sometime in the next 5 years when the IRS finally gets around to auditing them. I hope I'm not one of them.