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  #1  
Old 12-07-2005, 02:10 PM
ginko ginko is offline
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Default More boring tax questions

Hi guys, heres my story. I'm 20 and I live with my GF and sister, I support them both. I have cashed out about 25k throughout this year, and its spent. I have 15k in my poker account. Which is cheaper for me, filing as a pro, or just filing gambling winnings? If I file as a pro I have to pay state tax+federal tax+ social security. Is that going to be more or less than the 28% tax I'd have to pay if I reported it as gambling winnings.


Also, do I have to report tax on my money in the poker account? I think if you do that its very silly, because it will slow me down from moving up limits, I'm gonna pay tax's on it when I do cash it out anyways, and if I lose it all, I payed tax's on money that is no longer there.

My plan is to just pay tax's on what I have cashed out, and pay tax's on the rest when I cash them out. My budget is very tight so paying an extra 5k for tax will hurt me very very bad. Or can they throw me in jail for 20 years over 15k(5k in tax's)?


Any help/advice is greatly appreciated, thanks guys.
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  #2  
Old 12-07-2005, 02:22 PM
cardcounter0 cardcounter0 is offline
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Default Re: More boring tax questions

I got the same plan. See I sold a bunch of stock for a huge profit, and plan on buying a bunch of stock in another company with the money. If I pay taxes on all this money I made on the stock sale, then I won't have as much money to buy this other companies stock, and won't make as much when the stock goes up. That sucks. And if the stock goes down, or the company goes broke, then I would have paid tax on money I don't have anymore! That is crazy. So I'm just going to tell the IRS to screw off this year. They won't throw me in jail or anything, will they?
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  #3  
Old 12-07-2005, 02:34 PM
ginko ginko is offline
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Default Re: More boring tax questions

Hi, I guess you think not reporting the money is foolish. Fair enough.


To be clear, I plan to pay tax's on ALL of my winnings. I'm not trying to 'screw' the IRS. The more money I save, the more money I make, the more money the IRS makes when I finally cash out.


Try thinking it from this scenerio. Say I have 100k in my bankroll online. I've cashed out 50k. I report I've made 150k and I pay 50k on tax's. The next year, I cash out all of my bankroll and some new winnings, lets say 300k.

The IRS expects me to pay tax on 300k even though I already payed tax on 100k of it. How do I explain to them I already payed tax on that money, I just havnt cashed it out yet? They will probably audit me, right?

Anyways, thanks for the time and the sarcasm.
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  #4  
Old 12-07-2005, 02:55 PM
Jeffage Jeffage is offline
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Default Re: More boring tax questions

Honestly, you have a deep misunderstanding when it comes to taxes on gambling winnings. Consult an accountant, it should be like $300 to have a good one set you up w/ quarterly payments and everything and they will do all this work for you. If you try to do it how you're saying, you are asking for problems. Also - you should already be paying quarterly.

Disclaimer: I'm not an accountant.

Jeff
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  #5  
Old 12-07-2005, 02:55 PM
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Default Re: More boring tax questions

Assuming you report your income using the cash method (which most people do) you will have to report income when you receive it. And when they mean receive it, they also mean when you constructively receive it:

http://www.irs.gov/publications/p538/ar02.html#d0e1685

[ QUOTE ]
Under the cash method, you include in your gross income all items of income you actually or constructively receive during the tax year. If you receive property and services, you must include their fair market value in income.

Constructive receipt. Income is constructively received when an amount is credited to your account or made available to you without restriction. You need not have possession of it. If you authorize someone to be your agent and receive income for you, you are considered to have received it when your agent receives it. Income is not constructively received if your control of its receipt is subject to substantial restrictions or limitations.

Example 1.

Interest is credited to your bank account in December 2003, but you do not withdraw it or enter it into your passbook until 2004. You must include the amount in gross income for 2003, not 2004.

Example 2.

You have interest coupons that mature and become payable in 2003, but you do not cash them until 2004. You must include the interest in gross income for 2003, the year of constructive receipt. You must include the interest in your 2003 income, even if you later exchange the coupons for other property, instead of cashing them.

Delaying receipt of income. You cannot hold checks or postpone taking possession of similar property from one tax year to another to postpone paying tax on the income. You must report the income in the year the property is received or made available to you without restriction.

[/ QUOTE ]

This is only a guess, but I would think that each time you "receive" the income during the year is when your session ends. Another thread (in the Internet Magazine forum, with more experienced poker people than I) have debated what constitutes the end of a "session" on-line, and they didn't seem to be 100% sure either. But it might be worth checking out if you haven't already.
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  #6  
Old 12-07-2005, 03:02 PM
Chadt74 Chadt74 is offline
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Default Re: More boring tax questions

Cardcoutner, BAD IDEA. I hate to be the person who tells you this, but your broker (If they are in the US) has a record of your stock sales and that can screw you depending on what "huge" is. Sorry you have to pay taxes, if you have held the stock for over a year it is only 15% in most cases. Oh and as for that "I would have paid tax on money I don't have anymore" logic that is just crazy talk and you have a limited grasp of the basic principals of taxation and accounting.

Ginko again I hate to be the one to tell you this, but you owe taxes on any money won so yes the money in your poker account is infact taxable. The cardroom is not regulated by the US government and has no reporting requirements so for now the IRS can not 'see' into the poker room so if you decide not to pay taxes they would almost have no way to 'see' that money. The IRS of course can estimate your winnings based on your cashouts or some unknown formula.

Overall the IRS can and will put someone in jail for tax evasion (of course they'd prefer a payment with interest and penalty) but if you make a mistake and made a good faith effort you will generally be ok and just have to pay the correct amount.
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  #7  
Old 12-07-2005, 03:08 PM
BigF BigF is offline
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Default Re: More boring tax questions

[ QUOTE ]
Cardcoutner, BAD IDEA. I hate to be the person who tells you this, but your broker (If they are in the US) has a record of your stock sales and that can screw you depending on what "huge" is. Sorry you have to pay taxes, if you have held the stock for over a year it is only 15% in most cases. Oh and as for that "I would have paid tax on money I don't have anymore" logic that is just crazy talk and you have a limited grasp of the basic principals of taxation and accounting.

Ginko again I hate to be the one to tell you this, but you owe taxes on any money won so yes the money in your poker account is infact taxable. The cardroom is not regulated by the US government and has no reporting requirements so for now the IRS can not 'see' into the poker room so if you decide not to pay taxes they would almost have no way to 'see' that money. The IRS of course can estimate your winnings based on your cashouts or some unknown formula.

Overall the IRS can and will put someone in jail for tax evasion (of course they'd prefer a payment with interest and penalty) but if you make a mistake and made a good faith effort you will generally be ok and just have to pay the correct amount.

[/ QUOTE ]

Even the OP gets it.
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  #8  
Old 12-07-2005, 03:31 PM
ginko ginko is offline
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Default Re: More boring tax questions

I'm very scared now. I don't know what I'm going to do.

I've made 35k so far. I only have 17k left. I'm supposed to pay quarterly. If I went to pay my tax's today, my bankroll would be demolished. Leaving me with what, 7k?

Tax's are due in april which is 5 months, which means I've already missed 2 quarters. Which means I already have to pay fines because I havnt payed up.

WOW.
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  #9  
Old 12-07-2005, 03:33 PM
ginko ginko is offline
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Default Re: More boring tax questions

I'm seriously considering just taking my chances of going to jail. It's either that, or I'm homeless and BROKE.
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  #10  
Old 12-07-2005, 03:33 PM
cardcounter0 cardcounter0 is offline
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Default Re: More boring tax questions

[ QUOTE ]
To be clear, I plan to pay tax's on ALL of my winnings. I'm not trying to 'screw' the IRS. The more money I save, the more money I make, the more money the IRS makes when I finally cash out.


[/ QUOTE ]

EXACTLY!!! I also plan on paying the IRS all my earnings on my Stock Investments, but the more money I save by not paying taxes now, the more money I have to invest, and the more money the IRS makes when I finally cash out.

IN FACT, I am planning on telling my employer not to take any taxes out of my paycheck any more, that way I will have even more money to invest, and eventually I will be able to pay the IRS that much more!

Can't see any problems in your plan, thanks for the tip.
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