Paying taxes on winnings if under 21

[LikesToLose]

The tax forms do not ask what kind of gambling it is, nor does the IRS care. Assuming he is over 18, just consider it lottery tickets.

[BoatLover88]

I guess I meant how should he report and/or with what form. By that I mean as a business professional (self proprietor) or as a professional gambler, other income, etc. We are young and don't know much on how to properly report these things yet [img]/images/graemlins/frown.gif[/img]

[Sponger15SB]

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In California the legal age to gamble is 18 (the legal age to gamble in a casino which serves alcohol is 21). Many states are like this? I think if anything is illegal, it's the online gambling-- Most states have state lotteries that are 18 to buy tickets for!

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milk is that why the age is 21+. damn, and i always thought i was stuck at chumash cause those corn eating bastards got them to lower the age limit somehow. well maybe i'll go to customer service at commerece and see if i can put in a complaint for them to stop selling alcohol?

[BoatLover88]

Do I need to move to Cali or Canada now. Doh!

[WC64]

I have a degree in accounting and am currently studying for the CPA Exam in which it talks about gambling winnings. He has to report these winnings on the 1040 I believe but I can look to make sure. I know there is an exception for those people who are professional gamblers and I can do a little research on this through my CPA materials and let you know. The only bad thing about claiming it on the 1040 is that if he doesnt itemize his deductions he cannot subtract the amount of money he paid to get into tourneys.

[JPinAZ]

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How many damn crack dealers file their taxes on income?

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Remember, they didn't get Al Capone for being a mobster, they got him for tax evasion.

[BoatLover88]

Thanks for checking.

[Jimbo]

He does not want to file as a professional. In fact with only one year of history I doubt the IRS will allow it at all. The general requirement to file as a Pro ( or as a hobby for profit) is to be profitable in three out of the last five years. You may ask, "But what about your first year or two?" I dunno, ask the IRS for a ruling, it is only their general giudeline, not mine. [img]/images/graemlins/smile.gif[/img] In addition even if they would accept his professional status he would then be subject to double FICA and Medicare taxes as well as quarterly filings, estimated taxes and who knows what else. If he only won net $20 grand he is almost certainly better off filing the 1040, adding up all his verifiable (and allowable) expenses. Then if it exceeds his standard deduction, all is well and good, then he may itemize. If they do not then it sucks but thems the breaks.

EDITED BELOW:

His age is not a factor, whether or not he is breaking the law is not a factor (to the IRS), but what I would worry about personally is being an affilliate. I suspect in the future many people will regret that particular decision.

Jimbo

[fsuplayer]

[ QUOTE ]
He does not want to file as a professional. In fact with only one year of history I doubt the IRS will allow it at all. The general requirement to file as a Pro ( or as a hobby for profit) is to be profitable in three out of the last five years.

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This is not true. I just visited my CPA for the first time since I am 21 and I am filing as a professional. I started playing in January.

fsuplayer

[Carl_William]

If it bothers your friend's conscience then he should try to pay. But as Ben Franklin said, "It is our patriotic duty to minimize out taxes.” Or maybe Thomas Jefferson said that. Anyway: so maybe your friend would be doing Ben a favor by keeping his taxes to a minimum, i.e., zero. There are a few ways to do that, but you must be careful when you do this.

In the past, I have met two poker players whose lives were made miserable because the IRS nabbed them for not paying taxes on their poker winnings. They had to pay back taxes to the IRS on a monthly basis for many years. In both cases these guys were nicked because they stashed their poker tournament winnings in the player’s bank at casinos in California (one guy was really bitter). Evidently these incidents occurred before tournament winning players had to fill out tax forms on the spot. These tax cheating players suspect that someone at the casinos reported them to the IRS.

I have heard about the technique that many people use to minimize there taxes after they make a big win while betting horses at the track (that is pay no taxes). The ticket owner accomplishes this by hiring a so called “Ten-Percenter.” As you might suspect, the so-called “Ten-Percenter” is hired by the ticket owner to: (1) cash the winning ticket; (2) return the cash to the ticket owner. For this task, the “Ten-Percenter” is paid a previously agreed amount for his services (Ten-Percenter’s are usually men). Sometimes it is 10%. I have been told that there are always a few Ten-Percenter’s to be found at the horse race tracks – just ask around – or ask a groom: they always know.

But one must be very careful about the Ten-per centers – some of them try to keep all of the cash. An incident like this occurred at the Los Alamitos Race Track in Cypress, CA about 7 years ago. A coach for a major league baseball team was in the area because his team was playing the Anaheim Angels. While in the area, he won an exotic bet worth over 25K, and to minimize taxes he hired a Ten_Percenter who somehow kept it all. So be careful when using Ten-Per centers – watch them closely.

A common technique used by Ten-Percenters is to accumulate losing bettor’s tickets which are discarded at the horse race tracks by other bettors. By judiciously saving these tickets; properly organizing them; the Ten-Percenter can balance the winning tickets he cashed with the losing tickets that he picked up off the ground. This is the common method used by Ten-Percenters to defend them when challenged by the IRS.