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#1
12-17-2005, 07:11 PM
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Re: Clarifications about Tax
[ QUOTE ]
under what circumstances would the IRS look at my account? I am still a dependent, I barely have any net winnings and as far as official records go I have never held even a part time job.(i worked for my aunt for a summer) [/ QUOTE ] If you are subject to US tax laws, and if you have made $10,000 playing poker and you don't declare it and pay taxes on it, you are in violation of the law, period. Your age, dependency, other employment, the legality of your winnings, etc., etc., are irrelevant. There are a number of ways you can come to the attention of the IRS. For one thing, anyone who knows you play poker and who doesn't like you (like, say, a dumped girl friend) can drop a dime on you and will receive a financial reward if it turns out you have income you didn't declare and pay taxes on. I dare say I myself could make a few bucks by telling the IRS the screen names of all the silly folk who have publicly declared on 2p2 that they don't pay taxes on their poker winnings. The IRS could identify the persons behind the screen names without difficulty, and then the fun would begin. Not of course that I would do such a thing, but I could, and so could anyone else. Banks and other financial institutions send information on accounts to the IRS which matches up what is in people's accounts with what is in their returns. Discrepancies invite audits. I knew someone who was hounded by the IRS on the grounds that he had not declared money from student bribes (for undeserved good grades). There were, of course, no bribes and no undeclared income, but there was a large pain in the butt for this fellow until it was straightened out. My assumption is that some disgruntled student angry about his/her grade informed the IRS as a means of vengeance that this guy was taking bribes , and the IRS obligingly made his life a misery for a while. He did not have any undeclared income, but if someone drops a dime on you and you do have undeclared income, you are in serious trouble. You can gamble that you won't come to the attention of the IRS, but if you lose, you can lose big. The best you could hope for is that they decide you are an ignorant fool, rather than an out and out tax-dodging crook. And once again, it is not simply a matter of net winnings.... Get yourself some real advice from a professional knowledgeable in the application of tax law to gambling income. If you get caught, the best that can happen is being required to pay back taxes embellished with penalties, interest, and fines. In the worst case, you go to the federal slammer for a while. 
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#3
12-17-2005, 10:56 PM
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Re: Clarifications about Tax
[ QUOTE ]
thanks. unfortunately i have not made 10k in poker winnings this year. some people are saying i must declare anyways. i am confused. [/ QUOTE ] There is a certain threshold (I am not sure of the current number). If you made above that threshold you must file, and you must declare all income, including gambling income. If your total income is below that threshold, you do not have to file, although you can file to get a refund of any tax withheld. This is explained in the beginning of the tax form booklet.
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#4
12-18-2005, 03:01 AM
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Re: Clarifications about Tax
[ QUOTE ]
[ QUOTE ] thanks. unfortunately i have not made 10k in poker winnings this year. some people are saying i must declare anyways. i am confused. [/ QUOTE ] There is a certain threshold (I am not sure of the current number). If you made above that threshold you must file, and you must declare all income, including gambling income. If your total income is below that threshold, you do not have to file, although you can file to get a refund of any tax withheld. This is explained in the beginning of the tax form booklet. [/ QUOTE ] I am not sure if this is the exemption you are speaking of, but I recall that there is a provision that says that 1.) if you are under a certain age (I believe 23 or so), and have earned under a certain amount in a tax year (~4350 or so), then you do not have to file. Please consult IRS literature on this to find out exactly what the deal is, but this loophole applied to me for FEDERAL (but not local) taxes several years ago when I was in college.
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#5
12-20-2005, 02:00 PM
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Re: Clarifications about Tax
[ QUOTE ]
[ QUOTE ] under what circumstances would the IRS look at my account? I am still a dependent, I barely have any net winnings and as far as official records go I have never held even a part time job.(i worked for my aunt for a summer) [/ QUOTE ] If you are subject to US tax laws, and if you have made $10,000 playing poker and you don't declare it and pay taxes on it, you are in violation of the law, period. Your age, dependency, other employment, the legality of your winnings, etc., etc., are irrelevant. [/ QUOTE ] You are incorrect, there is no $10,000 threshold. Russel Fox already summed it up, take his advice only... ignore the advice of others in this thread. Russell is one of the foremost authorities on taxation for gamblers, Mr. Fox is a tax practitioner enrolled to practice before the Internal Revenue Service. You can read some of his essays at www.gambling-law-us.com TT [img]/images/graemlins/club.gif[/img]
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#6
12-20-2005, 02:30 PM
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Re: Clarifications about Tax
I would like to know what part of my advice was incorrect or misleading that the OP or any others should ignore. I may not be as well known, but my points are just as valid as any made by Mr. Fox, who I also recognize is one of the foremost authorities in this area. You won't find any disagreement in any post that I have ever made on this site and what Mr. Fox has stated on any of the same topics.
Your statements are the kind that have chased away other CPAs from this site. There are a handful of qualified people on this site who answer tax questions with all of skill and qualifications that Mr. Fox has. Please don't disrespect us with such a blanket statement as "ignore everyone except Mr. Fox."
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#7
12-20-2005, 11:57 PM
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Re: Clarifications about Tax
[ QUOTE ]
[ QUOTE ] [ QUOTE ] under what circumstances would the IRS look at my account? I am still a dependent, I barely have any net winnings and as far as official records go I have never held even a part time job.(i worked for my aunt for a summer) [/ QUOTE ] If you are subject to US tax laws, and if you have made $10,000 playing poker and you don't declare it and pay taxes on it, you are in violation of the law, period. Your age, dependency, other employment, the legality of your winnings, etc., etc., are irrelevant. [/ QUOTE ] You are incorrect, there is no $10,000 threshold. Russel Fox already summed it up, take his advice only... ignore the advice of others in this thread. Russell is one of the foremost authorities on taxation for gamblers, Mr. Fox is a tax practitioner enrolled to practice before the Internal Revenue Service. You can read some of his essays at www.gambling-law-us.com TT [img]/images/graemlins/club.gif[/img] [/ QUOTE ] No, TT, you are incorrect. I never said there was a $10,000 threshhold. In fact, I said if you made $10,000 playing poker and didn't declare it, you would be in violation of the law--and you would be, because $10,000 is over the threshhold that requires you to file. There is a section on who is required to file in the front of the income tax booklet. If you meet the criteria for filing listed there, you must file, and if you must file, you must declare all your gambling winnings, as well as all other income derived from taxable sources. Note, you must declare all your winnings without regard to your losses. If you itemize, you can deduct your losses from your winnings up to the amount of your winnings. You cannot use gambling losses to offset non-gambling income. You MUST keep records of what you won and lost where/when to substantiate your claims. If you are a professional gambler and gambling is your business, then you file schedule C and the rules are different and complicated. The point is, for the OP, that his age and dependency and whether he gambles legally or illegally are irrelevant. He must add up his income from taxable sources (e.g., wages, salaries, interest, dividends, profits and TOTAL--not net-- gambling winnings). If his income is above the threshhold for filing, then he must declare every dollar of his gambling winnings without regard to his losses. If he has enough deductions to make it worthwhile to itemize, then he can deduct his losses from his winnings.
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#8
12-23-2005, 02:00 PM
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Re: Clarifications about Tax
[ QUOTE ]
[ QUOTE ] [ QUOTE ] [ QUOTE ] under what circumstances would the IRS look at my account? I am still a dependent, I barely have any net winnings and as far as official records go I have never held even a part time job.(i worked for my aunt for a summer) [/ QUOTE ] If you are subject to US tax laws, and if you have made $10,000 playing poker and you don't declare it and pay taxes on it, you are in violation of the law, period. Your age, dependency, other employment, the legality of your winnings, etc., etc., are irrelevant. [/ QUOTE ] You are incorrect, there is no $10,000 threshold. Russel Fox already summed it up, take his advice only... ignore the advice of others in this thread. Russell is one of the foremost authorities on taxation for gamblers, Mr. Fox is a tax practitioner enrolled to practice before the Internal Revenue Service. You can read some of his essays at www.gambling-law-us.com TT [img]/images/graemlins/club.gif[/img] [/ QUOTE ] No, TT, you are incorrect. I never said there was a $10,000 threshhold. In fact, I said if you made $10,000 playing poker and didn't declare it, you would be in violation of the law--and you would be, because $10,000 is over the threshhold that requires you to file. There is a section on who is required to file in the front of the income tax booklet. If you meet the criteria for filing listed there, you must file, and if you must file, you must declare all your gambling winnings, as well as all other income derived from taxable sources. Note, you must declare all your winnings without regard to your losses. If you itemize, you can deduct your losses from your winnings up to the amount of your winnings. You cannot use gambling losses to offset non-gambling income. You MUST keep records of what you won and lost where/when to substantiate your claims. If you are a professional gambler and gambling is your business, then you file schedule C and the rules are different and complicated. The point is, for the OP, that his age and dependency and whether he gambles legally or illegally are irrelevant. He must add up his income from taxable sources (e.g., wages, salaries, interest, dividends, profits and TOTAL--not net-- gambling winnings). If his income is above the threshhold for filing, then he must declare every dollar of his gambling winnings without regard to his losses. If he has enough deductions to make it worthwhile to itemize, then he can deduct his losses from his winnings. [/ QUOTE ] There have been numerous incorrect posts in the past declaring there to be a threshold of $10,000, hence your original post can easily be misunderstood as also advocating a fictitious threshold. Glad to see you and I are on the same page. TT [img]/images/graemlins/club.gif[/img]
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#9
12-23-2005, 08:21 PM
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Re: Clarifications about Tax
[ QUOTE ]
[ QUOTE ] [ QUOTE ] [ QUOTE ] [ QUOTE ] under what circumstances would the IRS look at my account? I am still a dependent, I barely have any net winnings and as far as official records go I have never held even a part time job.(i worked for my aunt for a summer) [/ QUOTE ] If you are subject to US tax laws, and if you have made $10,000 playing poker and you don't declare it and pay taxes on it, you are in violation of the law, period. Your age, dependency, other employment, the legality of your winnings, etc., etc., are irrelevant. [/ QUOTE ] You are incorrect, there is no $10,000 threshold. Russel Fox already summed it up, take his advice only... ignore the advice of others in this thread. Russell is one of the foremost authorities on taxation for gamblers, Mr. Fox is a tax practitioner enrolled to practice before the Internal Revenue Service. You can read some of his essays at www.gambling-law-us.com TT [img]/images/graemlins/club.gif[/img] [/ QUOTE ] No, TT, you are incorrect. I never said there was a $10,000 threshhold. In fact, I said if you made $10,000 playing poker and didn't declare it, you would be in violation of the law--and you would be, because $10,000 is over the threshhold that requires you to file. There is a section on who is required to file in the front of the income tax booklet. If you meet the criteria for filing listed there, you must file, and if you must file, you must declare all your gambling winnings, as well as all other income derived from taxable sources. Note, you must declare all your winnings without regard to your losses. If you itemize, you can deduct your losses from your winnings up to the amount of your winnings. You cannot use gambling losses to offset non-gambling income. You MUST keep records of what you won and lost where/when to substantiate your claims. If you are a professional gambler and gambling is your business, then you file schedule C and the rules are different and complicated. The point is, for the OP, that his age and dependency and whether he gambles legally or illegally are irrelevant. He must add up his income from taxable sources (e.g., wages, salaries, interest, dividends, profits and TOTAL--not net-- gambling winnings). If his income is above the threshhold for filing, then he must declare every dollar of his gambling winnings without regard to his losses. If he has enough deductions to make it worthwhile to itemize, then he can deduct his losses from his winnings. [/ QUOTE ] There have been numerous incorrect posts in the past declaring there to be a threshold of $10,000, hence your original post can easily be misunderstood as also advocating a fictitious threshold. Glad to see you and I are on the same page. TT [img]/images/graemlins/club.gif[/img] [/ QUOTE ] TT, the OP seemed to have the peculiar idea that if he had less than $10,000 net winnings, he didn't have to pay taxes on them, and he seemed to think that somehow being young and dependent and winning his money illegally would excuse him from owing taxes. A bunch of people (me included) kept trying to explain that he had it all wrong, but he didn't seem to be getting the picture. I hope the situation is now clear to the OP and to all the other posters who are not accustomed to the infamous 1040 with all of its myriad attachments and complexities. Any and all of you, if your total income is over a certain (low) threshhold (which changes slightly from year to year), you MUST file, and if you must file, you MUST declare every dollar of your poker winnings--not your net winnings, but your gross winnings. You MUST keep meticulous records of winning and losing sessions (and the question of what is a session is vexed), and you can only offset winnings with losses if you itemize. Folks, you cannot blow off this obligation because you are young or still live with your folks or because you would rather not admit to income derived from activities of dubious legality. The IRS is not going to overlook the tax liabilities of hordes of young guys who are winning tens and hundreds of thousands of dollars just because the transactions are offshore or because the young guys winning and losing these sums of money would rather not be bothered with taxes. I think that was the point of Edward's article--a genral sense that somehow taxes don't apply to young guys who just wanna have lucrative fun. I read posts from guys who say they don't keep records and don't know how and others who publicly boast that they have no intention of paying taxes on their poker winnings (how stupid is that). Online poker is not under the radar and the IRS has its ways. The best advice is to get good professional help and meet your legal obligations.
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