poker incorporated: not your typical tax post

[joseki]

I'm not sure if this is the best forum for this issue, but most of the tax-related posts found in a search were here, so...

I've heard of blackjack teams incorporating. I wonder if it is possible to set up a poker corp. Anybody have any experience with this?

Why would anyone care, you ask? I can think of a few reasons:

1. Filing taxes with significant poker winnings is a tricky business, and moving the tax liablity to a corporation seems like a good idea.

2. Players filing as professional gamblers pay something like 15% for self-employment tax. Much of that might be avoided by receiving a small salary from a corp and collecting the remainder as distributions.

3. "Small business owner" has a better ring to it than "gambler".

Anyway, just wondering if anyone else has put any thought into this.

[astroglide]

this is your typical tax post. search the [censored] archives, it's been covered. and it doesn't help any with taxes if you're doing it legally.

[citanul]

to fill in a blank really quick, since this really is just the same tax question:

you can't get around the self employment tax, someone has to pay that tax, be it you or the corporation. so like, if you get a salary, the corporation would withhold from you your income tax and social security stuff (the self employment tax) just like if you had a real job.

besides bookkeeping, there are very very very few reasons to move to a corporation instead of just filing the self employed gambler paperwork with the IRS.

so to answer by number:

1) the paperwork would be trickier even if you incorporated, since the self employed stuff would be basically a subset of the corporation's tax sheet.

2) as was mentioned, you can't avoid that tax in any legal fashion.

3) meh. to who? the irs don't care. you can tell the girls at the bar that you are a professional penis stunt double or something if you're worried about what to tell them.

citanul

so yes, people have put a lot of thought into it, it's been asked a million times before, and use the search function.

[joseki]

I guess I'll keep looking through old threads, but nearly every thread returned by the search function is some phrasing of the question, "Do I have to pay taxes". That is not what i'm interested in. If you're so certain that this has been hashed and rehashed, perhaps you could point me to the thread or provide more focused search parameters (an author, approximate date, forum, etc.).

I understand that you are happy with filing as a professional gambler, but it is not the same as incorporating. While you may have maxed your FICA contribution with some other income source, most have not, and avoiding these payments (legally, I might ad) would be very nice for many. Incorporating also moves the the tax liablity to the corporation, thus sheltering your assests from possible fines/interest/etc. if any unintented errors, from you or your CPA (believe it or not, CPA's make mistakes), show up down the line.

Basically, claiming status as a professional gambler is expensive or unavailable to many, and is based on ambiguous language that is often challenged by the IRS. I'm sure you are aware of the problems with the alternative of claiming per-session winnings and deducting losses. Thus, the impetus for another, LEGAL, method for dealing with this issue.

[astroglide]

http://www.rbstaxes.com/book.htm

it is described in detail in this inexpensive short guide

[NoChance]

I really think it would be helpfull if 2+2 had it's own tax section with FAQ and stuff so people could discuss this stuff in there and things would be easier to find. I think paying taxes is a huge part of Poker and it really isn't covered very well anywhere.

Also, I think it would be popular all year long, not just close to April 15th. People ask tons of questions on how to play quarterly taxes as well. It needs more attention with all this poker boom.

$0.02

[joseki]

FYI, salary is subject to self-imployiment tax, distributions are not. Paying distributions to the shareholders of a corporation is a legal way of, uh, distributing profits. I am not making this up and it is not illegal and it could save you some cash and I'm sorry if I've wasted your time with old ideas.

[FishBurger]

[ QUOTE ]
FYI, salary is subject to self-imployiment tax, distributions are not. Paying distributions to the shareholders of a corporation is a legal way of, uh, distributing profits. I am not making this up and it is not illegal and it could save you some cash and I'm sorry if I've wasted your time with old ideas.

[/ QUOTE ]

I don't have anything to add, but if you find a way to do this, please post it here. I would certainly be interested in how this is done.

[astroglide]

you would have to defend what your criterion was for setting your "reasonable salary" as well as justification as to what constitutes a dividend. the bullet is that your gambling losses can't be deducted or written off as a capital loss. it is a gambling loss for the individual stockholders and as an individual you cannot deduct below zero.

your standard operating procedure for minimum taxation would then be to incorporate, presumably by yourself. declare gambling is your business. set an arbitrary salary. set an arbitrary amount of dividends. be prepared to somehow defend these choices.

every time you book a losing session, the loss transfers to you the corporate partners as individuals and they can't deduct it because they have no individual wins. the only way i can see around that would be to book enough wins as an individual to exactly zero out your losses, and apply all of your "extra wins" (bear in mind this has to square out by SESSION results too, not just dollar amounts) to the corporation and pay out via dividends to avoid taxation.

then you have to file as a recreational player on your personal taxes (not pro because you're not defendably playing with an expectation of profit), bump up your AGI and qualify to lose a bunch of deductions. for all this you get an undefendable mess in the case of an audit, and quite possibly even if you structure the amounts perfectly so that your personal wins equal your personal losses (an obviously frauduldent shell game) you may not even have saved anything on your taxes compared to a non-incorporated professional gambler filing.

sound good? i'd love to hear about a successful audit of a corporate gambling shell.

[maurile]

[ QUOTE ]
the bullet is that your gambling losses can't be deducted or written off as a capital loss. it is a gambling loss for the individual stockholders and as an individual you cannot deduct below zero.

[/ QUOTE ]
If it's the corporation's operating capital at risk, not the shareholder's personal capital, why wouldn't the losses go to the corporation?

Without looking anything up, I'm pretty certain that the income taxes Harrah's, Inc. pays are reduced by any losing sessions it has at the blackjack tables. (Its individual shareholders, on the other hand, do not get to claim those losses on their personal returns.)

Why would joseki's corporation be any different?

(I'm not arguing with you. There may well be a good answer to that question. It's just that I can't think of what it would be, so I'm asking.)