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.

[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.

[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.

[DcifrThs]

[ QUOTE ]
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.

[/ QUOTE ]

the only site i know and play on regularly that doesn't have readily available data put ON YOUR COMPUTER for you is paradise. i dont keep paradise records but my forthcomingness with the rest of my poker income will be 100%.

i keep meaning to ask my accountant this, and i spoke extremely briefly w/ antoher 2p2er about it but id rather not have to pay tax on(or be able to get more deductible credit for) money i use as my current poker bankroll. since this is a self employed venture, the argument stands that the available funds online is working capital necessary for proper and complete adherence to the variance associated with the business. its a tough argument though b/c corporations pay taxes (or book deferred tax liabilities) on accounts receivable booked with current period income despite the lack of received funds. the longer their days to cash, the worse the business appears in terms of cash flow but they are still liable to the IRS for income booked under US GAAP and filed with the IRS. so that working capital argument may not be all that strong [img]/images/graemlins/frown.gif[/img]

i will have an answer eventually but i thought id just put that out there as it was mentioned to me and discussed w/ another 2p2er.

Barron

[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?