Burden Of Records When Filing Taxes

[juanez]

Is this true for B&M as well? I'm totally a noob at keeping records for B&M play.

I mean, can I create an XL spreadsheet and gather all of my win/lose data myself or does the casino give you some kind of receipt if you lose and you ask for one? The IRS will just believe me and my data?

I just won a fairly large tourney (for me anyway) and the casino will generously report it to the tax man for me, so I'd like to cover my ass a little.

[moondogg]

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I thought you only had to declare your winnings if you cashed out? You should have records of your withdraws. Why isn't that enough for the IRS?

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Because they said so. The US tax code specifically states that you must record wins and losses for all sessions.

Additionally, you cannot simply state your net gambling income on your tax returns. You declare your winning sessions as gambling income, and you losing sessions as an itemized deduction. If you get audited, you had better have the documentation necessary to support these numbers.

The rules regarding this were written with B&M in mind, where a session many times is a single trip to a casino. It did not take into account the possibility of playing 10 sessions over an hour period. There has been much discussion of exactly how granular the term "session" should be online. E.g. some say playing 4 tables of the same limit/game simultaneously in a single sitting is one session). There may be some wiggle room for this argument, but that's probably as far as it will go. The general consensus seems to be that the IRS would simply not accept the idea of only counting your deposits and withdraws to/from the site.

[swami]

What would the IRS do if you only have your withdrawls and deposits. I don't think your session ends until you withdraw funds. If you go to a casino and don't cash in your chips your session has not ended. If you buy casino chips jan 1 and dont cash out until 12/31 that is one long session. I remember reading a discussion here about a court case and cashing out at a casino.

disclaimer: this is not tax advice, just my opinion

[jasonHoldEm]

[ QUOTE ]
Is this true for B&M as well? I'm totally a noob at keeping records for B&M play.

I mean, can I create an XL spreadsheet and gather all of my win/lose data myself or does the casino give you some kind of receipt if you lose and you ask for one? The IRS will just believe me and my data?

[/ QUOTE ]

Yes it applies to B&M. I'm not sure at what point the casinos give out W2-G's (I've never played live [img]/images/graemlins/blush.gif[/img] ), but I think it's for the bigger payouts (like hitting a jackpot or playing high limits or something where you're moving a lot of cash around).

I used to work as a waiter which has similar reporting requirements for your tips and there wasn't anything special about it, just a piece of paper with the info is all you need to protect yourself.

J

[Jaquen H'gar]

The purpose of having hand histories available that confirm some of your session recordings is to actually confirm you won money while playing poker. You don't want to be charged with money laundering. Think it can't happen?

I personally know of one semipro BJ player who dutifully reported earned income (~$35k) to the IRS in addition to their W-2 from the regular job. The IRS audited this person for suspicion of money laundering, i.e. they told this person that they didn't believe this much could be honestly won at a blackjack table while playing for such stakes as this person's normal income would allow. They suspected this person of laundering drug money especially since this person had a past drug possession conviction.

You think Party Poker is rolling in the dough now? What if they could go into business with drug dealers laundering their money? Taking in millions under the counter, keeping 15% for themselves, and returning the rest as "legitimate gambling income."

Of course, this begs the question: what is the feasibility of a mid-level drug dealer in the U.S. smuggling his cash to Mexico ($2-3 million/year) and depositing it to Juan Carlos. Juan then logs on Party, plays head-up against John Doe Dealer and drops 2-3 millon (-15% of course) to him to cash out through a US financial institution. You don't think the IRS will want to see some hand histories?

The U.S. tax code is vague and confusing for a reason. That's so the Man can use it against people they suspect are guilty but are having a hard time proving it. Unfortunately, some of us innocent babes get thrown out with the bathwater.

Oh, and for my friend. This person had the casinos pull playing records to confirm the income. The IRS agent's response, "Wow, I didn't know people could make money playing against a casino."

[moondogg]

[ QUOTE ]
What would the IRS do if you only have your withdrawls and deposits. I don't think your session ends until you withdraw funds. If you go to a casino and don't cash in your chips your session has not ended. If you buy casino chips jan 1 and dont cash out until 12/31 that is one long session. I remember reading a discussion here about a court case and cashing out at a casino.

disclaimer: this is not tax advice, just my opinion

[/ QUOTE ]

(Same disclaimer, I am not a lawyer or tax expert)

If you get audited, the IRS is going to claim you owe some ridulous amount. It is up to you to prove otherwise. If you do not properly record your sessions, you will not have the grounds to dispute the IRS's claims. In the end, they will figure your taxable income to be higher than it actually was. You will then have to play penalites/interest on these back taxes. Additionally, a lack of records may be interpreted as an active attempt to deceive for the purposes of not paying taxes (in other words "tax evasion").

Yes, this has been discussed to death on this site. Here and here are two coversations I was able to find. A lot of views were tossed around, but it seems like the concensus of lawyers, CPAs, and IRS employees is that a session is a time at a table, chips are considered income as soon as you leave the table (and not when you cash them or withdrawl from the site), sessions don't really span days/weeks/months, etc. Basically, common sense. You, I, and they all know what a session is. We might be able to nitpick issues like multitabling, but the core issue in the same. People may say that only recording deposits/withdraws is fine, and that conceptually "it's all one big session", and that chips are not income until you exchange them for cash, but the IRS does not really care about cute rationalizations.

Remember, IRS audits are not democratic, innocent-until-proven-guilty cakewalks. You are guilty until proven innocent; you are required to pay whatever they say you owe unless you can prove otherwise. Taking shortcuts may seem like a good idea if you think you aren't going to get audited, but if you DO get audited, your are screwed, period.

[Jaquen H'gar]

[ QUOTE ]
Yes it applies to B&M. I'm not sure at what point the casinos give out W2-G's (I've never played live [img]/images/graemlins/blush.gif[/img] ), but I think it's for the bigger payouts (like hitting a jackpot or playing high limits or something where you're moving a lot of cash around).


J

[/ QUOTE ]

The law seems to change but a W-2 is generated for something like a $1200 slot jackpot or something close to that level.

As for your comment re moving a lot of cash around or playing at high limits, these are not W-2's that are filed to the IRS. These are CTR's - Cash Transaction Reports - that are sent to the Treasury Dept, not to the IRS per se. (of course, the IRS can access these [img]/images/graemlins/frown.gif[/img])

These CTR's are required anytime a series of buy-ins or cash-outs exceed $10,000 IN CASH within a given 24 hour period. These are required of any business, not just of casinos. This is how the government tracks "big money" and is their major weapon against money laundering.

[Jaquen H'gar]

[ QUOTE ]


If you get audited, the IRS is going to claim you owe some ridulous amount. It is up to you to prove otherwise. If you do not properly record your sessions, you will not have the grounds to dispute the IRS's claims.

[/ QUOTE ]

Absolutely correct. The burden of proof is on the TAXPAYER.

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Remember, IRS audits are not democratic, innocent-until-proven-guilty cakewalks. You are guilty until proven innocent; you are required to pay whatever they say you owe unless you can prove otherwise.

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Just a slight correction. In most audits, the IRS initial amount they claim you owe is sort of like an opening bid. They don't want to go to arbitration/court any more than you do, not because they fear they will lose (they won't), they don't want to waste the time. Thus, this figure is negotiable but certainly not down to zero [img]/images/graemlins/grin.gif[/img] The more paperwork you can throw at them and the more you give the impression that your sh#t is together, the more likely they are to compromise.

My personal example:
IRS: Jaquen, good buddy, you owe us $7,377.
Me: I don't think so. Deal with my accountant.
IRS: For making us go to the trouble of collecting OUR money from you, the interest is climbing, we want it now.
Me: ok, maybe you have a point but I'm thinking $700 tax owed is more accurate and I have some records to back me up.
IRS: give us $1100 and we'll go away happy.
Me: deal.

Of course, the above will be couched in legalese out the a$$.

[turnipmonster]

something I haven't been able to find is how you would record and prove a B&M loss. in other words, say hypothetically I happened to win money on party poker and then I go take 10k out of the bank and lose it all playing craps. surely people do things like this all the time. do I need to get casino receipts if I buy chips or something? surely it is not enough to just say, look, I withdrew that money then lost it playing craps. is it?

--turnipmonster

[Jaquen H'gar]

[ QUOTE ]
something I haven't been able to find is how you would record and prove a B&M loss. in other words, say hypothetically I happened to win money on party poker and then I go take 10k out of the bank and lose it all playing craps. surely people do things like this all the time. do I need to get casino receipts if I buy chips or something? surely it is not enough to just say, look, I withdrew that money then lost it playing craps. is it?

--turnipmonster

[/ QUOTE ]

If you want the casino to record your action, it's easy enough. Buy-in with a player's card at any table game and be sure to color up when you leave. The casino will record the time played, your average bet, and the amount bought in and left with to the best of their abilities. In a poker room at a casino, you can give them your players' card and they will record the time and game played but not whether you won or loss. They don't care whether you win or lose unlike at BJ/craps, they only care what you contribute to the rake.

You can request a record at end of the year from the casino and they usually furnish one without question, especially if it involves thousands of dollars. I would consider requesting one anyway since the IRS can obtain a copy of this so it's nice to know what the IRS is seeing about your gambling.

Now, on the opposite hand, take me for instance. I don't play large amounts at poker but I do play heavy green/black action at BJ with an EV of around $120/hour. Unfortunately, one doesn't last long playing extended hours at this level so alternate ID's are a reality, not to hide winnings from the gov't but to hide them from the casinos. A bad side effect is that I can't request a playing history for the IRS because the name on the player's account doesn't match mine.