Serious tax problem.. Need advice.

[Stork]

OK, thanks.

[TheHammer24]

My question is...how much have you made in poker winnings over these years? There are two ways to file gambling winnings to the IRS. As a professional gambler and separtely from winning and losses on a normal form. The latter really punishes you. As a result, the IRS may have figured out the 60,000 dollars via the latter of the two options. I think I read this at onlinepokerfaq.com, but I don't remember.

[jeffs]

free advice from a public forum mmmmmm.... with the irs sniffing up your butt mmmmm.... ya you better take the advice and get the hell out of Dodge! cause you are a marked man! go into a cash business and live with a roomate so no bills are in your name.

[sumdumguy]

[ QUOTE ]
The law in Canada is not sketchy... so if you just play on the side your poker winnings are not taxable even if they dwarf your primary source of income.

[/ QUOTE ]
The law is not sketchy.. even if you played on the side, it is taxable. The question is whether your gambling profits are: a. income, or b. windfall.

[TorontoCFE]

Sometimes it is in your favour to consider your poker earnings as business income. In Canada, business income is deductible against all other income. That means that if you happen to have alosing year and have other income from employment or property, you now have a deduction to allow you to reduce the taxes you pay on your other income. Of course, reporting losses greatly increases your chance of an audit, but if you are on sound tax ground, then you gain a nice way to lessen the pain of losses at the tables. Even if you report a win, then don't forget that if you are in the business of poker, then you get to deduct a portion of your rent/mortgage related to the space used to play poker in (if online). That might wipe out the tax liability for small winners and eep you on the right side of the law.

The quick and dirty tax advice I have been throwing out to clients in terms of tax strategies (in case anyone is unsure how reporting does not mean the government will take 1/2 your money) All numbers are rough:

If your sole source of income is poker:
1. If you lost for the year, report it anyways - you can then create a loss that can be used to offset not only poker but OTHER INCOME in future years.
2. If you won:
The 1st 10k or so is taxfree (by way of personal exemptions) so there is no harm in reporting it and you build a track record.
3. The next 40k you declare and pay about 20% tax on it.
earnings reported - 50k, tax - 10K.
4. The next 30k you earn - set up a CCPC (private corporation) with yourself, spouse and kids as shareholders.
You then pay yourself, spouse and kids up to 10k each (all taxfree). the balance you pay out as salry to yourself, making sure you put up to 18% into an RRSP.
Earnings - 80k. Total Tax (with spouse and 1 kid)- 7k plus about 5k in payroll taxes that you will get the benefit of in the form of pension and employment insurance.
5. Above 80k - add in loans from your poker corporation to you, increase the dividends to your spouse and kids and work on tax shelters. Regular por tax advice required.
Tax will be 20-30% on the amount over 80k.

The cost of paying taxes doesn't have to be high - you can esaily earn 100k and pay less than 10k in tax. Worth the peace of mind to me.

That being said, I'm advising a guy now who isn't going to pay tax on 50k of the 100k he eanred last year. We're arguing tht since it came from a few big tourny wins and he is a regualr ring palyer and not tourny player, it is taxfree since he is in the business of ring poker and not tourney poker.
The issue is still "cluody" enough to go both ways.
You just don't want to be on the wrong side of it when it brightens up. They can go after you retroactively.

[knock knock]

THAT IS NOT REALISTIC

1. you can't ever drive a car, much less own one (you could get pulled over)

2. you can't ever own a house or anything substantial. (sure you can rent under someone elses name.. but how long will that last?)

3. you can't ever have a job that isn't under the table. (you could keep up poker.. but what if that fails?)

4. you can never have another bank account or credit card or anything along those lines including retirement, stocks, social security, insurance (health and otherwise)

5. something bad could happen. ie. you get arrested for a bar fight, or you are in some kind of accident where you go to the hospital.


eventually something WILL happen to you... and you WILL get caught