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#51
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Well over 6 figures already, and yes I am going to get anally raped by the tax man. I wasn't going to hire a tax professional, but I'm thinking if he can save me a few thousand some how it will be more than worth it.
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#52
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There's no question about paying taxes. I've already hired a CPA. And he's handling my estimated tax payments. But he agreed with me, that it doesn't make any sense to file as self-employed, as I'll have to take an additional tax hit.
Regarding the "unemployed" comment, I was half-joking, but somewhat serious. Is it not possible to be unemployed and lucky? I "hit it big" a few times at the poker tables and made $100K. I'll report taxes on all of it, BUT I'm still unemployed....don't have any job to speak of. |
#53
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This doesn't sound right. Here's an extremely simplified example to demonstrate the point. Someone please correct me if I'm wrong or clarify this.
With no other job, I have winnings of $300K playing poker and losses of $100K, for a net of $200K. The first $100K is taxed at 30%, and the second $100K is taxed at 40%. Scenario A) I file as a pro: - I only report my net income of $200K. I pay $70K in income tax (30% x 100 + 40% x 100). - I also pay some additional percentage for medicare/social security that is less than 15%, given the cap people are mentioning. - I write off expenses (below $10K for me). Scenario B) I don't file as a pro: - I report all $300K of winnings. THEN, I report my losses as itemized deductions. This reduces my taxable income back to $200K, CORRECT? So I'm stil only paying $70K in income tax. - I don't have to pay med/SS tax. - I don't write-off expenses (though my CPA says there are still a few I can write-off). I realize writing-off expenses comes before you calculate your tax due...just adding those to be complete. -fooz |
#54
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[ QUOTE ]
Regarding the "unemployed" comment, I was half-joking, but somewhat serious. Is it not possible to be unemployed and lucky? I "hit it big" a few times at the poker tables and made $100K. I'll report taxes on all of it, BUT I'm still unemployed....don't have any job to speak of. [/ QUOTE ] This is something I've looked a lot into and its hard to find anything definitive. There is a small bit in the R.B.S. Tax Guide for Gamblers about this. They mention a client who upon an audit was forced by the IRS to file as a professional. But they also mention there is nothing specific in IRS literature that says gambling for a living must be taxed as a business. It seems like another gray area and would likely be decided on a case by case basis if it ever came down to an audit. -ActionBob |
#55
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Thinking out loud here, but I wonder if a disadvantage to going the unemployed route would occur when you attempted to make large purchases like a house for instance.
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#56
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Thinking out loud here, but I wonder if a disadvantage to going the unemployed route would occur when you attempted to make large purchases like a house for instance. [/ QUOTE ] It *probably* wouldn't make too much of a difference for most in this matter because if one plays poker for a living you'll end up likely having to get a no-doc mortgage anyway. -ActionBob |
#57
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So filing as a pro you face an additional 15% self employment tax, but you get to write-off all business-related expenses. But if you're making $100K+, that means you would have to have more than $15K in expenses for it to be worth it. Right? I don't see why anyone pulling significant dough would file as a pro. [/ QUOTE ] You can put 25% of your net income (in 2005 up to $42,000 ($168,000 net earnings)) pretax into an SEP IRA. If you take full advantage of this feature, it should more than make up for any disadvantages of filing as a non pro (the extra SS tax is deductible against your income tax, so it's less than 5% extra and only up to $80 something thousand). But I imagine way too many pros fail to take advantage of this tax break. |
#58
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Kind of off topic I guess...but has there been any issues with filing online gambling winnings? I mean, isn't online gambling considered illegal in the US? Or is that based on what state you're in?
Wondering if anyone has ever been picked up because of this. |
#59
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People don't get in trouble for listing the source of their income even if they are 100% and put down 'crack dealer'...
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#60
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The 3 out of 5 rule would never be used against you if you are claiming income. This rule is only applied to people who report losses on a business activity. The IRS has no interest in allowing people to not claim income that they are attempting to claim.
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