Nice win, now I have tax questions

[paland]

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yes, they do. i was recently advised that the largest group targetted for auditing in the last 3 years were those using earned income credit - low/middle-class.

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That's because under the Bush administration, MANY more people are low/middle class now. Much more than there used to be. It's a numbers game.

[mwilli31]

I live in a state where online gambling laws are a grey area at the moment, or at least the last I checked. Hypothetically speaking, let's say I'm under the age of 21, but I can legally play on Stars, Party, Pacific, etc. Anyone have any info regarding taxes for this hypothetical situation?

[TaxGoddess]

I am afraid that I cannot address Question (1) as offshore sites often don't follow US reporting requirements, and if they did most would likely not report anything until you cashed out.

Here is the basic information on Question (2) excerpted from Publication 529. The bottom line is document, document, document, for online play this would include a print out of your deposits and withdrawals from the site. Failing getting a receipt at home games, keep a log of your play, and when possible who you played with. I hope this helps [img]/images/graemlins/smile.gif[/img]

<font color="blue"> Gambling Losses Up to the Amount of Gambling Winnings
You must report the full amount of your gambling winnings for the year on line 21, Form 1040. You deduct your gambling losses for the year on line 27, Schedule A (Form 1040). You cannot deduct gambling losses that are more than your winnings.

You cannot reduce your gambling winnings by your gambling losses and report the difference. You must report the full amount of your winnings as income and claim your losses (up to the amount of winnings) as an itemized deduction. Therefore, your records should show your winnings separately from your losses.

Diary of winnings and losses. You must keep an accurate diary or similar record of your losses and winnings.

Your diary should contain at least the following information.

The date and type of your specific wager or wagering activity.

The name and address or location of the gambling establishment.

The names of other persons present with you at the gambling establishment.

The amount(s) you won or lost.

Proof of winnings and losses. In addition to your diary, you should also have other documentation. You can generally prove your winnings and losses through Form W–2G, Certain Gambling Winnings, Form 5754, Statement by Person(s) Receiving Gambling Winnings, wagering tickets, canceled checks, credit records, bank withdrawals, and statements of actual winnings or payment slips provided to you by the gambling establishment.

For specific wagering transactions, you can use the following items to support your winnings and losses. Keno: Copies of the keno tickets you purchased that were validated by the gambling establishment, copies of your casino credit records, and copies of your casino check cashing records.

Slot machines: A record of the machine number and all winnings by date and time the machine was played.

Table games (twentyone, blackjack, craps, poker, baccarat, roulette, wheel of fortune, etc.): The number of the table at which you were playing. Casino credit card data indicating whether the credit was issued in the pit or at the cashier's cage.

Bingo: A record of the number of games played, cost of tickets purchased, and amounts collected on winning tickets. Supplemental records include any receipts from the casino, parlor, etc.

Racing (horse, harness, dog, etc.): A record of the races, amounts of wagers, amounts collected on winning tickets, and amounts lost on losing tickets. Supplemental records include unredeemed tickets and payment records from the racetrack.

Lotteries: A record of ticket purchases, dates, winnings, and losses. Supplemental records include unredeemed tickets, payment slips, and winnings statements.

These recordkeeping suggestions are intended as general guidelines to help you establish your winnings and losses. They are not all-inclusive. Your tax liability depends on your particular facts and circumstances. </font>

[TaxGoddess]

Have fun at audit time if you then deposit that check in your bank account - or even cash it at your bank (where it will show up as going through your account). In an audit the Service will ask for your bank statements to look at all transactions, and then ask for documentation supporting the deposits and withdrawals listed.

[TaxGoddess]

Moondog is correct - once you end a session and are up, it is gross income. A little thing called cconstructive receipt, i.e. once the money is available to you for the taking (withdrawal) it is income.

[Wahoo91]

Tax-
Are you getting paid to peruse the forums on this topic? [img]/images/graemlins/grin.gif[/img]

Also, Tax, what are the penalties for non-reporting gambling income if discovered in an IRS audit? Is it simply taxes owed, plus penalties, plus interest? What would the penalty be for, as an example $2,500 of gambling winnings?

Do online poker site bonuses count as income? I assume it does...

Disclaimer: This is my first year playing and have not had an oppurtunity to even address this issue yet.

[TaxGoddess]

[ QUOTE ]
Tax-
Are you getting paid to peruse the forums on this topic?


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Nope - This is just for fun. I leave the enforcement to the revenue agents and visit here incognito [img]/images/graemlins/cool.gif[/img]

[ QUOTE ]
Also, Tax, what are the penalties for non-reporting gambling income if discovered in an IRS audit? Is it simply taxes owed, plus penalties, plus interest? What would the penalty be for, as an example $2,500 of gambling winnings?


[/ QUOTE ]

There are penalties and interest (which is also charged on the penalty). For an amount as low as $2500, you would most likely just be subject to penalty under IRC 6651(a) for failure to pay an amount that should have been shown on the return. This penalty maxes out at approximately 25% of the underpayment. For larger ommissions, (20% or more of income) you could also be subject to the accuracy related penalty under IRC 6662. Just remember, audits are not pleasant and the Service is steadily increasing its enforcement activities after recent years of a "kinder and gentler" persona.

[ QUOTE ]
Do online poker site bonuses count as income? I assume it does...


[/ QUOTE ]
Yes, bonuses are gross income once they are released and available for withdrawal.

Hope I could help.

Legal Disclaimer: Take anything you read here (or anywhere online) with a grain of salt. Anything I write is based on my personal opinion and in no way reflects the official position of the Service, etc., etc., ... [img]/images/graemlins/tongue.gif[/img]

[beernutz]

[ QUOTE ]
Have fun at audit time if you then deposit that check in your bank account - or even cash it at your bank (where it will show up as going through your account). In an audit the Service will ask for your bank statements to look at all transactions, and then ask for documentation supporting the deposits and withdrawals listed.

[/ QUOTE ]

I was unaware that checks cashed at your bank showed up on your account. Are you saying the bank keeps a record of these transactions and can tie them to your account? I know that when I cash a check at my bank it doesn't show up on my statement.

[TaxGoddess]

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I know that when I cash a check at my bank it doesn't show up on my statement.

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Must vary from bank to bank. All the checks I cash do show up on my statements.

[beernutz]

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I know that when I cash a check at my bank it doesn't show up on my statement.

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Must vary from bank to bank. All the checks I cash do show up on my statements.

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How does it show up? As both a deposit and a withdrawal for the same amount?