Taxes...The Shock

[Lucky]

First of all, I paid my taxes on winnings last year, and of course intend to do so agains this year.

Going over my records though, I'm facing a sort of "poker shock." I booked a decent win last year, and it will be quite significant this year. That's no big deal. I'm feeling a little weird about the numbers that will go in both the "gambling winnings" and "gambling losses" lines.
The only thing to avoid that is to file as a "professional gambler," also a bit weird living in Arkansas and all (go ahead and laugh, i'm used to it).

1. Is anyone else ever astounded at their tax numbers at the end of the year?

2. For those with a "real job," but who make more playing poker, do you file as an amateur or professional?

3. Also, I went with H & R block last year, decent I guess, but i don't want to deal with a 90 year old retiree in shock at the degenerate, sinful gambler before him again this year. I plan to hire a real CPA to do and sign off on my taxes this year. Pleas PM me if you can recommend someone good who understands gambling law here in Northwest Arkansas. I know this is a bit early, but I want to sit down and actually ask questions of someone who is paid to know the answers, as I'm compiling my records/sessions, etc.

4. Also, who's been audited or had "a friend" who was re: net poker. How did it go?

[Steph Djordjevic]

I actually had a chance at a college-football scholarship. That is, until, Coach Nickerson called a running play instead of having Rifleman kneel down to seal the win against Walnut Heights. Well, our team fumbled and we lost.

Coach and I got into a big fight, I was not allowed on the team bus, I got drunk with some buddies and threw trash on Coach's lawn. I was kicked off the team, and now I have to make all the right moves to get the scholarship I was hoping for.

If anyone can help, I would surely appreciate it. I am 5'4", which is a little on the short-side for a corner back, and white, which is unsual for a corner back.

Even though I haven't played in twenty years, I still have mad hops and speed (no, I don't mean my famous home-brew and my funny little pills).

Anyhow, lets hear about accountants and while you are at it, see if you know any college football coaches.

[CCass]

You are crazy if you go back to H&R Block. I am not a CPA (I do have an accounting degree), and I had to correct the errors H&R Block made on several of my employees returns last year. They really don't have much expertise on what I would consider tough or unusual tax issues.

[FlFishOn]

You must learn enough to prepare your own taxes. This is the only way to know enough to properly screw the Feds out of every dime to which you are entitled.

With knowledge comes the ability to structure your finances for the year and a lifetime. You may still need a CPA but you really want to know a decent fraction of what he knows. If you just cash a paycheck forget the above but if you've ever filed a Sch C or SE then this is a must.

[TorontoCFE]

I had a business associate go through an audit. It was not specifically about net poker but the issue came up in the course of the review.

This person maintains detailed records of both online and B&M play, showing date, table played, buy-in & cash out and table time. He backs that up with withdrawal / deposit slips for a bank account that is used only for his poker bankroll - he makes withdrawals before each play and deposits the results right after. Any withdrawals to personal use he does using a cheque written to himself and deposits into his personal account.

The auditor spent an hour looking it all over, said "thanks" and there was no adjustment to taxes owing as a result of the audit.

Auditors for the most part won't have a deep understanding of the business / hobby of poker and if your documentation hangs together and is complete (i.e. looks like other business' supporting documents) then there is little they can say.

[Synergistic Explosions]

Busted

Thu Oct 7,11:15 AM ET

By Stephane Fitch

Guy Garner and his six friends weren't out to cross the law last January when they sat down for their regular friendly game of poker in a cabin at the Chickasaw State Park near Jackson, Tenn. Garner was the park's manager, after all, and his poker buddies included a retired cop and a school board member.
So they were shocked when their game was raided and their $20 pot confiscated. These otherwise upstanding citizens found themselves embarrassed in the press, paraded in front of a Chester County Court judge and fined $50 each for violating Tennessee's prohibition on gambling. "We were cooking a stew and relaxing," said Garner. "It wasn't a big deal."


If coverage of the World Series (news - web sites) of Poker on ESPN has inspired you to host games in your basement, you'd best think twice before strapping on your green eyeshade. Twenty states, including Maryland, Illinois and Utah, forbid you to play at home for money--even penny stakes. Penalties range from misdemeanor fines to felony convictions and jail time for being repeatedly busted for playing high-stakes poker games in private homes--constituting "aggravated gambling." Florida permits home play, but only if the stakes are $10 or less. Other states impose no dollar limit, but make other stipulations. For a complete rundown of state rules, visit www.gambling-law-us.com.


Whatever you do, don't rake the pot. In April last year David Turpin, a member of Washington State University's track squad who was attending the school on a partial scholarship, was arrested and charged with a felony violation of Washington's gambling laws after an undercover agent witnessed him hosting games of Texas Hold 'Em in his apartment and taking 10% of the pots as his fee. Turpin, insisting the money was just enough to cover his costs of hosting, pled guilty to a misdemeanor and paid a small fine.


In states that permit social gambling it's okay for a host to make money from his winnings--but not by any other means. Says Nathan Barankin, spokesman for the California attorney general, "If the person operating the game is charging a fee or receiving gifts in exchange for making the game available, they're in trouble."


Planning to run for public office someday? Then be sure you keep the Internal Revenue Service (news - web sites) happy. Report gross winnings as "other income" (line 21) on form 1040. Enter losses as a "miscellaneous deduction" on Schedule A. You can deduct a loss only up to the amount of the win you report in the same year. But such losses are not subject to the same floor (2% of adjusted gross income) that limits other miscellaneous deductions.


Accountant and poker enthusiast Russell C. Fox of Irvine, Calif. logs his winnings and losses after every game, noting where he played, when and the names of other players, if the game took place in a private home. "You don't need very good documentation for your winnings--the IRS is always happy to see you report more income," Fox says, "but you sure need it for the losses." What if the game was illegal? You're not obliged to say. Report winnings anyway.


Suppose you become so besotted with hosting games that you want to become a for-profit promoter. You're not completely out of luck. Most states, even those that ban social gambling, allow people to run "amateur leagues." Players in these pay nothing to enter and put no money at risk, competing only for the honor of being named league champ. As host you provide tables, cards, chips and dealers. You make money by charging the owners of venues looking to attract the leagues to their establishments--a bar, restaurant, church, school or fairground, for example. The venue makes its money by selling food and drink to players or by soliciting donations.


Former real estate broker Jack D. Murdock, 54, makes good money hosting leagues. Some 3,500 people per week sign up for the 100 tournaments he holds in Tulsa and Norman, with bar and restaurant owners paying him $1.25 per player. Oklahoma's Alcoholic Beverage Laws Enforcement Commission, which regulates bars, said in July that even though gambling is totally prohibited in Oklahoma, Murdock's business was perfectly legit--as long as no prizes, not even a trophy or a T shirt, were awarded to winners.


In states permitting friendly gambling, it's perfectly legal, of course, to make money by mastering the art of beating your buddies. In Poker, A Guaranteed Income for Life, Frank R. Wallace suggests you not base your bets on "card odds" (the 1-in-50 chance of being dealt, for example, three of a kind versus the 1-in-4,000 chance of being dealt four of a kind). Instead, focus on "investment odds," which multiply the card odds by the ratio of your potential winnings to your potential losses. Thus, you might fold if you were holding a pair of threes and a pair of tens and you believed your hand had only a 30% chance of winning. But you'd be wise to stay in the game if the pot was $100 and you knew it would cost only $20 to play on.


The single smartest thing you can do to avoid trouble? Be gracious to fellow players, both in victory and in defeat. Persons charged with violating gambling statutes almost always had been fingered by disgruntled fellow players.

[collegeplayer1]

it shoudl take you about 5 minutes to fill out the tax forms...Keep a journal, and your bank statements should match up with the numbers you provide.. dont be so paranoid, just be honest and all will turn well...

[KowCiller]

My father is a D-I Defensive Coordinator. Send me some game film and I'll pass it along ;-)

KoW