Tax Question : Claim Total Winnings or Cashout?

[midnight24]

Say for example, total profit for the year was 35,000. But say you only cash out $30,000 directly into your bank account and the remaining $5,000 remains in your bankroll on the poker site. What income are you supposed to claim come tax day?

[Kurn, son of Mogh]

First of all, you can't just claim your net. That's expressly forbidden in IRS Pub 529 (how many times have I written this?)

You have to claim winning sessions as income and losing sessions as itemized deductions.

There is also a school of thought that suggests you can claim deposits as losses and cashouts as wins, but that gets disputed and I've heard several cogent arguments on both sides.

Best idea is to hire a good accountant who is familiar with these things.

[Zetack]

[ QUOTE ]
Say for example, total profit for the year was 35,000. But say you only cash out $30,000 directly into your bank account and the remaining $5,000 remains in your bankroll on the poker site. What income are you supposed to claim come tax day?

[/ QUOTE ]

Both are wrong. Listen to Kurn.

As a side note, when you figure out how its supposed to work, you aren't going to be happy.

--Zetack

[lehighguy]

Each session, that's freaking impossible. I have 15 min sessions when I log on.

[RiverDood]

Everyone's IRS experience is different, and I've never had to deal with them on poker income.

But I did get audited years ago on a different Schedule C source of side income. Here's what I came away with:

-- if you're dealing with a dispute involving more than $1,000 in income, don't expect your auditor to have any sympathy with your arguments that doing the records right was a hassle. Collecting taxes is a hassle. This man is paid to put hassles into your life and make them stay there.

-- if you're dealing with less than $1,000 in income and the rest of your taxes are clean, you may be able to get the auditor to decide that your off-the-cuff presentation is "reasonable." Not perfect, but reasonable enough that they'll let you go with a warning to be more careful next time.

This is not a hard and fast cutoff. There may be auditors who want to put you through the wringer for every penny. There may be auditors who will cut you more slack. And of course only 1% or 2% of all tax returns get audited.

But there's every reason to think that the IRS over the next few years will want to take a close look at poker income. If you're making in the multi-thousands, you're asking for a nasty, nasty audit experience if you don't come in with the kind of records that the IRS wants.

[mlagoo]

[ QUOTE ]
Each session, that's freaking impossible. I have 15 min sessions when I log on.

[/ QUOTE ]

yeah, these were my thoughts.

for instance, ive only made about 2k playing SNGs this year. not talking big money here. but if i claim all my winnings, technically, as income, i'm talking like $12000 (actual money received from tourneys), whereas my tournament entries were about $10000. this seems kind of screwed up, and could potentially change my income bracket (i'm a student now). i dont want that =/

[ QUOTE ]
Each session, that's freaking impossible. I have 15 min sessions when I log on.

[/ QUOTE ]

If you've got a spread sheet prog., you could easily keep each session there and at the end of the year, or when you're curious, look at the bottom line.

[tubalkain]

[ QUOTE ]
First of all, you can't just claim your net. That's expressly forbidden in IRS Pub 529 (how many times have I written this?)

You have to claim winning sessions as income and losing sessions as itemized deductions.

There is also a school of thought that suggests you can claim deposits as losses and cashouts as wins, but that gets disputed and I've heard several cogent arguments on both sides.

Best idea is to hire a good accountant who is familiar with these things.

[/ QUOTE ]

Who knew a Klingon could become something as distasteful as a tax expert?

[lehighguy]

I play on a lot of sites that don't have pocker tracker support.

I have no records for the last year except my cash out and neteller stuff.

Since I don't play online I don't know what record keeping assist the online sites offer.

I just got a PM from someone asking me for a copy of my spreadsheet. I told him I don't need one but my past experience with spreadsheet made me think it would be an easy way to keep the records. I offered to set up an example sheet for him.

I'll now make the offer for anyone. Remember now, it's been some time since I've used the things and as good as I used to think I was, there are always more knowledgeable/better and the newer progs do things I used to wish for.

Buy hey, it'll be worth exactly what you pay for it. zip.