More Stupid Tax Questions

[SwiftBradley]

I had a friend who made 8k last year online. He has no other income and didn't report the 8k. Is that a problem at all? Do they even tax that small amount?


Also if i make 30k this year, with no other income, what percentage can i expect to pay, living in a state with no income tax?

[SwiftBradley]

i've never paid taxes before so i don't really know what type of bite they take.

[fluff]

1) Yes they do. Your friend should technically report it and apply appropriate deduction. The tax on the 8k after that is going to be miniscule.

2) Plan on about 15% of that amount. Also, if the income is made over the year, and the tax you will owe is over $1000, you will be required to file (and pay) quarterly estimates. See IRS publication 505 for details. This isn't a problem for working stiffs because their taxes are automatically witheld from them, but for the rest of us, you have to file quarterly because the IRS wants their money as soon as possible.

[BIGRED]

Sure, the law requires it and the consequences of not reporting can be great, but I wonder how many honestly report everything they win online...

[AKJ8576769]

Doesn't depositing mysterious checks for thousands of dollars into your bank account raise any red flags from the IRS?

[JAque]

For full time online players, is the office (room at home) depreciated including PC ? Can you deduct the internet connection fees etc?


JAque

[TracyMiller]

If you have an area of your home that you use EXCLUSIVELY for business (and I suppose if you are a poker pro you can say that poker is your business), you can use the home office deduction, which flows into your Schedule C, where you report your income and expenses. As part of the home office deduction, you get to deduct a pro rata portion of your utilities, rent, depreciation on your computer, and other expenses related to your business.

The IRS looks closely at the home office expenses, because they are so heavily abused. You must use that area for NOTHING other than business. In other words, no other games or any other stuff on your poker computer. No television or other niceties in that room. For many people, it's best not to even try to use the Home Office Expenses.

[JPinAZ]

Your friend should file a return. After the standard deduction of $4750 and the personal exemption of $3050, his taxable income is only $200. Tax on that is only $21.

For 2004, the standard deduction should be around $4850 & the personal exemption should be around $3100. Tax for you would be $715 plus 15% of taxable income over $7150

[BIGRED]

[ QUOTE ]
Doesn't depositing mysterious checks for thousands of dollars into your bank account raise any red flags from the IRS?

[/ QUOTE ]

I don't know, does it??? Does IRS have tabs on everyone's checking account? So that if an average Joe makes several "big" deposits out of the ordinary, they come to Joe's house? I could see how if someone was already under suspicion or under investigation, then these kinds of deposits will raise a red flag, but if you're a regular salary man with a fixed income, what are the risk of not reporting your side income?

[Thythe]

It's a risk either way. Some people say deposits over 10 thousand trigger a flag, some people say less. No one really knows for sure. Everyone here acts all high and mighty about paying taxes, but I'm curious how many actually do. There should be a poll.