Who Pays Taxes on Poker Earnings? (POLL)

[tongni]

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I've got money that I havent been keeping records for and don't know how to report.... I can't be the only person in this situation. It's stressing me out.

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This is exactly my problem. My greatest fear is that I file, my reporting causes me to get audited, and then somehow I end up getting screwed over whereas if I hadn't filed at all I wouldn't have gotten in any trouble.

[Python49]

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Your sales tax deduction can be your choice of either your actual sales tax paid or an arbitrary amount that is based on your AGI. Since your AGI is severely inflated, your sales tax deduction will be inflated. This, of course, was not thought about when the sales tax deduction was made law, but we should be glad to have it.


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How does an inflated AGI lead to an inflated sales tax. Well first, I guess i'd need to have a full understanding of the relationship of a sales tax to poker. How does sales tax relate to poker... what are you referring to when you say "on the table".. is the sales tax the rake? If not, is there anyway you can deduct based on rake?


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[jrz1972]

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also doesnt filing taxes on gambling just draw a red flag in their system anyway and give them more of a reason to audit you?

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1. Probably not. People who report gambling winnings are demonstrating honesty by reporting them in the first place.

2. So what if I get audited? It will take me all of 5 minutes to produce whatever records of my winnings the IRS wants. And I have an accountant. Go ahead, audit me. WTF do I care.

[BottlesOf]

I agree with much of what you wrote, but the "double taxation" you mention occurs in other areas and it is deemed legitimate by our government. Until there's a change, the law is the law, imo.

[primetime32]

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The line of questioning might go something like this:

Q: So, how did you afford $80,000 car.
A: I won the money playing poker. As you can see, I reported $120,000 in winnings this year.

Q: Ahh, I see. You say you play 30/60? How did you get the money for that? We have no poker earnings for you last year? Is this your first year? Do you have a backer?
A: Uhhhhhh

Q: Sir, could we see....???
A: That's priveleged information.

Q: Not in IRS terms. I think the judge would like to know how you are special and Willie Nelson is not.


For those of you that don't think you can go to prison, you are wrong. I know someone that went to prison for evasion (I think it was 2 years with 6 months served, plus he still had to pay a huge bill).

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Anyone dumb enough to spend 80,000 on a car and NOT report the gambling winnings that funded the purchase deserves to get audited and go to jail. not for tax evasion, but for stupidity.

[primetime32]

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also doesnt filing taxes on gambling just draw a red flag in their system anyway and give them more of a reason to audit you?

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1. Probably not. People who report gambling winnings are demonstrating honesty by reporting them in the first place.


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I presume that you still believe in santa claus.

I can picture an IRS agent going through a persons file and deciding that since this person is reporting his illegal poker earnings that he must be an honest guy.

I think everyone should pay their taxes, i certainly pay my fair share. But don't be ignorant and think that there arent inherent risks when you report gambling winnings.

[Mempho]

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great post mempho, very informative, I have to bump it. So if you were a loosing player but you made a good living at a real job could you deduct your loses from taxable income and therefore pay less taxes? It would be a great way to pay less taxes for cronicaly losing players. You could even pay less taxes on your work related income while being a winning player, since you could easily disguise you winning if you play the cards right.

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No, a losing player can only deduct to the extent of his winnings. Now, this is very important since it happens all the time. Let's take the case of a player who quits his job, goes pro, and tries to 8-table the 15/30 on Party. He finds out correctly that the game is tough, real tough. He plays all year and has lost 10% of his $40,000 bankroll, so he has a loss of $4,000 for the year. His $4,000 loss is gone forever, whether he files as a professional or a recreational player. He can't use it to nullify income next year if he makes that $4,000 back or he can't use it as a carryback to get a refund on taxes paid in the prior year.

That is what is the worst part of taxes and gambling. It was much worse when everyone had to play live. Many great players have been unable to overcome bad variance playing live (ala Doyle Brunson last year). This means that they lost the tax benefit of that loss. Businesses, of course, are not treated this way with one exception: the casino business. This has happened to a casino when they accepted heavy action from a whale or group of whales. Certain people in the world are capable of betting enough to wipe out all of the winnings for a given year. This is one reason why there are betting limits.

[Mempho]

The sales tax deduction gets higher as your AGI goes up. Presumably, this is because most people spend more as they make more. Of course, this is good for us, because we didn't really make that much money. It is simply an overlooked situation or one that they didn't care to try to rectify.

[Mempho]

The IRS defines a session as a trip to a casino. If you leave the casino, change casinos, etc, you have the end of a session. You can't, however, play at a casino, stay in the casino's hotel, and come back to the floor the next day and start a new session. When you leave the casino floor, you are "exiting" a session.

Now, I can already hear people saying something with regards to online poker. You might ask, "What if I never log out?" No, you can't do this. The IRS will laugh in your face and hand you the bill if you try to make this point. The legal precept regarding taxation is "substance over form." This violates that concept.

I personally define a session as my results at a given casino on a given day. I generally multitable by using Eurobet and another room, for example. I count my results for the day on Eurobet as one session and my results at the other site as a session. So, for tax purposes, I generally have two sessions every time I play online.

This is not perfect, but it is accurate enough to keep you out of hot water. Also, it captures the "substance" of what you are doing very well. Yes, it does happen that I play for a while in the afternoon, leave, and come back and play that evening. The afternoon and evening sessions are technically separate. However, I don't think that doing it my way will cause much, if any, problem if I got audited.

[TGoldman]

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How does an inflated AGI lead to an inflated sales tax. Well first, I guess i'd need to have a full understanding of the relationship of a sales tax to poker. How does sales tax relate to poker... what are you referring to when you say "on the table".. is the sales tax the rake? If not, is there anyway you can deduct based on rake?

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He's referring to IRS Pub 600 that allows you to deduct your state sales tax against your federal income tax liability. At the bottom of the publication, they include a list of tables for your AGI level to estimate your deduction.