Anyone over 6 figures actually filing as a Pro?

[broiler]

The IRS always uses "facts and circumstances" to determine if a person should file as a professional. You will never find any specifics or criteria that will push a person over the ledge to qualify as a professional. The example of making $100k as a sole source of income is probably going to fall into the professional category.

The IRS is very aggressive with regard to anything reported as other income on a tax return. I can't think of any situation where the IRS would not try to collect SE tax on $100k of net gambling winnings, except in a jackpot situation. I would also add that multiple years of net gambling income would also hurt the case to keep the income as non-professional.

[david050173]

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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

[/ QUOTE ]
A bunch of things
a) deductions get phased out after a certain amount (low 100Ks of income)
b) if you are in lower range, you might lose other deductions that are phased out with income (child care, student loans,..)
c) AMT - I have no idea if they allow gambling losses

[MicroBob]

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Kind of off topic I guess...but has there been any issues with filing online gambling winnings?

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i think one guy in north dakota got nailed via this for sports-bets he made where he was jsut trying to file truthfully. judge pretty much threw it out.


But,..as I understand it (and I don't know about the ND case...if they have a special exception in their state taxes perhaps):
1 - you HAVE to file taxes on your income
2 - you have a right to not incriminate yourself if you commit a crime (5th amendment).

therefore....the government can NOT come after you for an illegal activity just because you paid taxes on it.
They just can't use it against you...because you are not 'voluntarily' saying what you do for income. you HAVE to.

if they could prosecute you for it then that would contradict your 5th amendment rights.

[dogmeat]

Yes, yes and yes to your question about how far you can take expenses. The deductions on cars and travel are very generous if you file as a professional. For me, I can take the car, computer, travel expenses (hotel, some meals, tolls, parking, insurance etc.) home office space use, professional books and journals, bank expenses, internet costs - it's pretty easy to get your gross income down to a reasonable amount. So far, I've hand no problems, and from everything I've read, it's all legal. DISCLAIMER - WTF do I know............you're on your own.

Dogmeat [img]/images/graemlins/spade.gif[/img]