This should end all of the false claims about paying US taxes on poker [Archive]

DING-DONG YO

02-01-2007, 01:48 PM

[ QUOTE ]
This one doesn't make sense:

"Myth #6. I can net my wins and my losses. Unless you’re a professional, the sum of your winning sessions are Other Income (line 21, Form 1040); your losing sessions, up to the amount of your winning sessions, are an itemized deduction taken on Schedule A. Professionals do get to net their results and file using Schedule C (Profit or Loss From Business). Professionals, though, must pay self-employment tax on their net income, at 15.3% of the first $94,000 of net income, and 2.9% above this (2006 numbers). While half of the self-employment tax is a deduction (line 27 of Form 1040), unless the professional earns a substantial six-figure income, he can pay more in tax."

So say a player plays ~5/10 NL 500,000 hands in year. Is he supposed to declare that he won $4,000,000 and lost $3,500,000? That is just rediculous. How the heck would you even keep track of all this? I mean yea you might have PT, but when you play on a different computer/different site?

[/ QUOTE ]

In that example, you should use a schedule C.

Russ Fox

02-01-2007, 01:54 PM

[ QUOTE ]
In that example, you should use a schedule C.

[/ QUOTE ]
But you can only use a Schedule C if you're a professional.

It's possible for some online gamblers to have fairly ridiculous "Other Income" and "Gambling Loss" deductions. Take an online SNG player, who plays 30 $100 SNGs a day. He could have $100,000 in income and $80,000 in losses. Suddenly some deductions that individual (who hypothetically can't file as a professional) had are gone.

The Tax Code isn't fair. But how you are supposed to treat gambling for the non-professional is very, very clear.

-- Russ Fox
co-author, "Why You Lose at Poker"

genesisgkh1

02-01-2007, 02:13 PM

Another article which states the letter of the law but takes no account of how things work in the real world. I again ask what if you multitable and count each table as a session and count breaks. Does that mean reporting 200 sessions a day? What if I have a full time job but play lots of onine poker and end up with $1,000,000 in wins and $999,000 in loses? What if I make some money but the site folds and I never recieve it?

P.S. Stop throwing around prison. No one goes to prison for reporting their income incorrectly. Truthfully, few go to prison even in blatant cases of fraud. The IRS just wants, and tends to get, its money. Contact a tax professional. They live in the real world.

Sparta45

02-01-2007, 02:27 PM

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Our tax code isn't exactly a shining example of common sense....

[/ QUOTE ]

QFT

wpr101

02-01-2007, 02:48 PM

[ QUOTE ]
[ QUOTE ]
This one doesn't make sense:

So say a player plays ~5/10 NL 500,000 hands in year. Is he supposed to declare that he won $4,000,000 and lost $3,500,000? That is just rediculous. How the heck would you even keep track of all this? I mean yea you might have PT, but when you play on a different computer/different site?

[/ QUOTE ]

This is not difficult. You bust out a little program called Excel and record the results of every session on every site. I keep track of time played, beginning balance and ending balance for the session. Very simple.

[/ QUOTE ]

This is not a "very simple" thing to do. Do you even play poker? I am only declaring my net because it's the only thing that makes sense.

NoXiousNuts

02-01-2007, 02:59 PM

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He could have $100,000 in income and $80,000 in losses. Suddenly some deductions that individual (who hypothetically can't file as a professional) had are gone.

[/ QUOTE ]

For those who are younger and will be filing taxes for the first time as well as for a few ignorant elders (I'm 35 and never even seen a tax return of mine other than to sign it), can you please discuss the implications of this - perhaps an example of the effect thereof?

djoyce003

02-01-2007, 03:11 PM

There's a thing called the alternative minimum tax that can sometimes cause you to lose some of your income tax deductions particularly in cases where your total deductions are very large. Also, if you don't itemize other areas, you can lose some deductions in the example given. Such as:

You are single, and don't own your own home. Thus you would normally take the standard deduction on your income taxes (lets say it's 8K for this example). Now you have a regular job but you play poker on the side. You also "win" 100K in poker, and "lose" 80k for a net win of 20k. However, to get credit for the 80K in losses you have to itemize deductions. You've now lost the 8k standard deduction you would have gotten. Say at your job you made 50k. Now you have 150k in income, and 80k in standard deductions or 70k in taxable income. If you could net, you'd have 70k in income, less 8 for deductions or 62k. Now you've lost some. This is fairly moot if you own a home or could otherwise itemize deductions without the gambling losses

RoundGuy

02-01-2007, 03:36 PM

[ QUOTE ]
This is not a "very simple" thing to do. Do you even play poker? I am only declaring my net because it's the only thing that makes sense.

[/ QUOTE ]
Ok. Have fun explaining that to the IRS.

IRS: Why are you not showing any gambling losses?
Hero: Because I netted my wins and losses
IRS: You can't do that.
Hero: But it's the only thing that makes sense.
IRS: But, you can't do that.
Hero: But it makes sense.
IRS: But you can't do that.

Gee, I wonder who's gonna win this argument....

Lottery Larry

02-01-2007, 03:38 PM

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[ QUOTE ]
In that example, you should use a schedule C.

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But you can only use a Schedule C if you're a professional.

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Someone grossing $4M playing poker better damn WELL be taking advantage of being a professional.

Lottery Larry

02-01-2007, 03:39 PM

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[ QUOTE ]
He could have $100,000 in income and $80,000 in losses. Suddenly some deductions that individual (who hypothetically can't file as a professional) had are gone.

[/ QUOTE ]

For those who are younger and will be filing taxes for the first time as well as for a few ignorant elders (I'm 35 and never even seen a tax return of mine other than to sign it), can you please discuss the implications of this - perhaps an example of the effect thereof?

[/ QUOTE ]

Talk to a tax professional

TALK TO A TAX PROFESSIONAL!

Lottery Larry

02-01-2007, 03:41 PM

[ QUOTE ]
This is not a "very simple" thing to do. Do you even play poker? I am only declaring my net because it's the only thing that makes sense.

[/ QUOTE ]

This is a VERY simple thing to do, you just don't want to spend the effort on doing it.

And if you're expecting some mercy from the IRS, just because online poker is much more involved to do this for.... well, my bridge is still for sale.

ginko

02-01-2007, 03:43 PM

Last year I filed for tax's as just recreational, they took my total wins which equaled around 150,000. Then I deducted my loss, 120,000. For a net of around 30k. Payed like 3-5k in tax, cant remember the exact numbers.

Lottery Larry

02-01-2007, 03:43 PM

[ QUOTE ]

P.S. Stop throwing around prison. No one goes to prison for reporting their income incorrectly.
They live in the real world.

[/ QUOTE ]

I'll visit your world sometime and find out why you claim things you obviously know nothing about.

BTW, Ed Miller's betting against your claim, as is the author of the article in my original post. And Al Capone's ghost would like to talk to you.

mntbikr15

02-01-2007, 03:46 PM

Stop being bitter at the people that actually have a positive net to declare

/images/graemlins/grin.gif

Lottery Larry

02-01-2007, 03:47 PM

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Stop being bitter at the people that actually have a positive net to declare

/images/graemlins/grin.gif

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ppllllllbbbbhhhhh!!!

RoundGuy

02-01-2007, 03:48 PM

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Last year I filed for tax's as just recreational, they took my total wins which equaled around 150,000. Then I deducted my loss, 120,000. For a net of around 30k. Payed like 3-5k in tax, cant remember the exact numbers.

[/ QUOTE ]
Pretty simple, ain't it? Why would people not want to follow the rules? I just don't get it.

dtan05

02-01-2007, 03:59 PM

maybe they think netting is way cheaper than not doing so

RoundGuy

02-01-2007, 04:00 PM

[ QUOTE ]
maybe they think netting is way cheaper than not doing so

[/ QUOTE ]
Yeah, and it would be even cheaper if they filed no tax return at all. Hmmm. Let's try that....

bcubed72

02-01-2007, 04:13 PM

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Take an online SNG player, who plays 30 $100 SNGs a day. He could have $100,000 in income and $80,000 in losses.

[/ QUOTE ]

This goes back to the issue of what constitutes a "session." The predominant view I've seen here is the most restrictive: each SNG=1 session, regardless of number played during one time at the computer, multitabling, or whatever.

Tis makes a certain amount of sense in a B+M casino; after all, you sit down at a table, play, then physically get off your arse and wait for the next one. This is NOT the case of internet player who's consistently playing >= 1 SNG for 5 hours straight.

To the best of my knowlege, this has yet to be challenged in court. I'd be willing to believe that a more liberal interpretation of a session might prevail.

Note that, to get in trouble for using this definition of a session, the IRS would have to:
1. Take exception to your figures
2. Audit you
3. Challenge whatever piece of paper you show them
4. Obtain contrary information
5. Take you to court
6. Win

I plan on counting continuous time spent logged on to a website as a "session." I seriously doubt any repurcussions.

Note that the law technically requires a losing player (who may never have even cashed out) to declare winnings. Do you think 1 in 500 do so?

Mondogarage

02-01-2007, 04:16 PM

[ QUOTE ]
P.S. Stop throwing around prison. No one goes to prison for reporting their income incorrectly. Truthfully, few go to prison even in blatant cases of fraud. The IRS just wants, and tends to get, its money. Contact a tax professional. They live in the real world.

[/ QUOTE ]

That defense didn't work so well for Al Capone.

Russ Fox

02-01-2007, 04:44 PM

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I again ask what if you multitable and count each table as a session and count breaks. Does that mean reporting 200 sessions a day? What if I have a full time job but play lots of onine poker and end up with $1,000,000 in wins and $999,000 in loses?

[/ QUOTE ]

Well, I've written an article about what a session is. Although you won't like my conclusions, a tournament is a session. For those who play lots of SNGs, they have lots of sessions. That's the law.

If you want to evade the Tax Code, and the regulations promulgated thereunder, that's your issue. I am a professional tax preparer, and if you think I'm going to advise anyone to evade the law, you're nuts.

Indeed, a SNG player could have your theoretical $1 MM in wins and $999k in losses. I've seen (and prepared) some strange looking returns for people impacted by the Alternative Minimum Tax (AMT). The Tax Court has repeatedly ruled (as have the Courts of Appeal) that the AMT causes some extremely unfair taxation issues, but that it's the law and only Congress can change it. I'm sure that if this issue appeared in front of them, they'd say the same thing.

Lots of things in tax have shades of gray--they're open to interpretation. But if you're an amateur player, you can't net your wins and losses. That's black and white, and there's no way around it.

And just so you know, if you knowingly evade the Tax Code, you've committed tax fraud. That's a felony. Yes, most people don't go to prison. But do you want the hassles: the extra penalties, interest, and costs (in both time and money) or would you rather prepare your return correctly?

As I said in the article, the Tax Code isn't fair. Some parts are stupid. But only Congress can change it.

-- Russ Fox (EA)
co-author, "Why You Lose at Poker"

Central Limit

02-01-2007, 04:45 PM

For B&M poker, why isn't one single hand a session? So, if I play 8 hours, and 250 hands, I should record each separately.

Because if one single hand isn't a session, then a session is determined by when I get up and when I sit down. If I get up to go to the restroom, does that end one session and start a new one? If not, then why can't I say that 8 hours of sleep was just a break in a single session rather than the dividing line between two separate sessions?

Orlando Salazar

02-01-2007, 05:09 PM

If you make enough, pay some guy to find an offshore loophole and use your OSA debit card. If not, don't pay tax. Pretty simple.

Dave2020

02-01-2007, 05:15 PM

If it is my first time filing as a professional, am I required to have already payed quarterly installments on my 2006 poker income?

NickMPK

02-01-2007, 05:31 PM

Russ,

As a professional tax preparer, how do you advise losing recreational gamblers to report their gambling winnings/losses?

For example:
If someone takes a weeklong trip to Vegas, where they play fifteen sessions of blackjack, with a total of $10,000 in winning sessions and $11,000 in losing session, would you force them to report that $10,000 as income and then give up the standard deduction in order to offset this in losses?

What about someone who buys lottery tickets every day, with $1800 in losses and $600 in wins. Do they have to pay tax on the $600 if they want to take the standard deduction?

I think 95% of these people don't have any record of their "sessions". Aren't most people who do any gambling violating the law when they prepare their taxes?

Wongboy

02-01-2007, 05:32 PM

[ QUOTE ]
This is not difficult. You bust out a little program called Excel and record the results of every session on every site. I keep track of time played, beginning balance and ending balance for the session. Very simple.

[/ QUOTE ]

Please tell me how you define a session. The term is undefined by the IRS. Is it every hand, every year, or something else?

Wake up CALL

02-01-2007, 05:42 PM

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Aren't most people who do any gambling violating the law when they prepare their taxes?

[/ QUOTE ]

I think most people prepare their taxes correctly.

genesisgkh1

02-01-2007, 05:43 PM

[ QUOTE ]
[ QUOTE ]
P.S. Stop throwing around prison. No one goes to prison for reporting their income incorrectly. Truthfully, few go to prison even in blatant cases of fraud. The IRS just wants, and tends to get, its money. Contact a tax professional. They live in the real world.

[/ QUOTE ]

That defense didn't work so well for Al Capone.

[/ QUOTE ]

Wow, had to pull out Capone. I did say very few go to prison for blatant fraud. Perhaps i should have said one? Live in the real world. Interest, penalties possible for incorrect reporting. Absolutely possible. Prison isn't, so stop lying.

atomicsoda

02-01-2007, 05:43 PM

[ QUOTE ]
Note that the law technically requires a losing player (who may never have even cashed out) to declare winnings. Do you think 1 in 500 do so?

[/ QUOTE ]

If you never cash out why would you declare anything. The IRS will only care if money is coming into your bank account and not being accounted for. The IRS cares about W2G income and unaccounted for deposits to your account. Same as in a B&M.

Wake up CALL

02-01-2007, 05:45 PM

RoundGuy

02-01-2007, 05:50 PM

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If you never cash out why would you declare anything. The IRS will only care if money is coming into your bank account and not being accounted for. The IRS cares about W2G income and unaccounted for deposits to your account. Same as in a B&M.

[/ QUOTE ]
Please explain why you would post such crap?

If you are completely ignorant of a given topic (which is obvious in this case), please shut up, read, and learn.

atomicsoda

02-01-2007, 05:50 PM

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Aren't most people who do any gambling violating the law when they prepare their taxes?

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I think most people prepare their taxes correctly.

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OK. Almost no one declares cash wins in casinos or even keeps track or wins or losses. If they win a slot jackpot or something they pay tax on that. I am not talking about people who gamble everyday or derive income from gambling but recreational gamblers.

RoundGuy

02-01-2007, 05:52 PM

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I think smart people prepare their taxes correctly.

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FYP /images/graemlins/smile.gif

atomicsoda

02-01-2007, 05:53 PM

you are the ignorant one. go to vegas or AC and ask random people if they keep track of wins and losses and report them. You will be lucky if you find 1 in 100 who do. We are talking about the real world not your fantasy land.

jaminbird

02-01-2007, 05:56 PM

[ QUOTE ]
[ QUOTE ]

P.S. Stop throwing around prison. No one goes to prison for reporting their income incorrectly.
They live in the real world.

[/ QUOTE ]

I'll visit your world sometime and find out why you claim things you obviously know nothing about.

BTW, Ed Miller's betting against your claim, as is the author of the article in my original post. And Al Capone's ghost would like to talk to you.

[/ QUOTE ]

You guys are so paranoid. Al Capone intentionally didn't report his income. That is tax evasion and is the only way you end up in jail. If you make a good faith effort to pay your taxes properly, YOU WILL NOT GO TO JAIL. The worst thing that will happen is that you will owe interest and possibly penalties on any amount not paid.

RoundGuy

02-01-2007, 06:01 PM

[ QUOTE ]
you are the ignorant one. go to vegas or AC and ask random people if they keep track of wins and losses and report them. You will be lucky if you find 1 in 100 who do. We are talking about the real world not your fantasy land.

[/ QUOTE ]
Dude, you're an idiot.

We are in a poker forum, dedicated to regular, consistant poker players. Many of us win. Most of us are not stupid.

You are stupid. And if you continue to post your stupid "advice" you will continue to be called out.

Please google: "constructive receipt" and come back with your [censored] advice about what the IRS cares about.

atomicsoda

02-01-2007, 06:02 PM

Al Capone went to jail on tax evasion because they couldn't convict him for anything else and needed something they could convict him of. The IRS is not going after losing gamblers. deposits to your bank account are a flag and if you have them prepare your taxes as you should. If you never cash out the IRS is not investigating whether you gambled and lost. They do not ask for the casino players card records of random people to see that they won $500 at slots overall and lost $1500 at slots overall, which your card will show.

atomicsoda

02-01-2007, 06:07 PM

F U too. I am not talking about people who derive income from gambling (less than 1% of people). you said most people prepare their taxes correctly. Not so. I understand constructive receipt [censored] wad. you do not understand the IRS and their priorities. Only people like you who take money out of their poker accounts need to worry. you are scaring people who make no money gambling online.

cardcounter0

02-01-2007, 06:09 PM

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Well, I've written an article about what a session is. Although you won't like my conclusions, a tournament is a session. For those who play lots of SNGs, they have lots of sessions. That's the law.

[/ QUOTE ]

No, that is not the law. The law is very vague and leaves exactly what a session is undefined. There has been no case law to rely upon to try to further define session.

Your session definition is very restrictive. In fact, if you look at the log information that the IRS suggests gamblers keep, it would be inefficient to record sessions in the manner you prescribe.

The data that the IRS suggests you keep is more in line with -- you sit down to play, session starts; when you get up, session is over. Multi-table, multiple tourney's, ect. as long as it is continious, it is a single session.

You have maintained this stricter than the IRS stance on session definition, and now you are even lying about it.

"That's the law." -- BULL! The law is intentionally vague.
In fact, when the law is vague on definition, one has to rely on the dictionary definition -- Session: A period of time devoted to a specific activity, as to recording music in a studio. Playing SNGs online is a specific activity, and the time devoted to playing multiple SNGs online, would be the session.

greyhawke54

02-01-2007, 06:09 PM

I think Atomicsoda has a point. Most people that I know that go to a casino usually lose in the long run. They do however have the ocassional win. Be it hitting a jackpot on a slot or hot run at some table game. These people never worry about the taxes on winning, unless they have to fill out a form (W2G i am assuming). I have even been told (not by a credible source) that this is why a lot of slot machine jackpots are just under $1200. By doing this they are avoiding a the mandatory reporting amount. Supposedly you have to fill out paperwork at the casino on any jackpot over $1200.

I realize that my sample size is small and that the information may be totally incorrect. Please do not flame. Just post corrections. Thanks in advance fro thiis. This is just information that I have been told by some people that I play in a home poker game that regualarly play casion slots. They view any winnings as "found money". Unless they have have to fill out paperwork at the casino when they collect their jackpot.

Wongboy

02-01-2007, 06:11 PM

[ QUOTE ]
I think most people prepare their taxes correctly.

[/ QUOTE ]

Do most people declare the following as income?

> Mistakes made by a cashier in their favor (presumably our honest tax payer did not notice this until later). BTW, if they fail to notice the cashier mistake, they are still filing their taxes incorrectly.
> Money earned through odd jobs, babysitting, etc.
> A friend who gives you $20 for gas since you drove.
> Fair value of free drinks when you forgot your wallet and a friend paid.
> All winning lottery tickets, pull tabs, etc, regardless of amount won.
> All wins from a casino playing blackjack, etc.
> The $5 bets that you won from your golf buddies.
> Fair value of frequent flier miles that you earned while taking an employer-paid business trip.
> Any other cash received which is not specifically exempted from income per IRS regulations.

Alot of people will occasionally lose a couple hundred dollars gambling in a casino. I would guess that fewer than 1% of these recreational, losing players reports income for their gross wins.

I would say that almost no one prepares their taxes correctly. Most people make a good faith effort and are honest in reporting substantially all of their income.

RoundGuy

02-01-2007, 06:13 PM

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Only people like you who take money out of their poker accounts need to worry. you are scaring people who make no money gambling online.

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omg. Are you serious? You're talking about people who lose money at online poker???

This conversation is ludicrous, and I'm guessing you have no idea why.....

Thank you for my biggest laugh of the day.

atomicsoda

02-01-2007, 06:15 PM

[ QUOTE ]
[ QUOTE ]
I think most people prepare their taxes correctly.

[/ QUOTE ]

Do most people declare the following as income?

> Mistakes made by a cashier in their favor (presumably our honest tax payer did not notice this until later). BTW, if they fail to notice the cashier mistake, they are still filing their taxes incorrectly.
> Money earned through odd jobs, babysitting, etc.
> A friend who gives you $20 for gas since you drove.
> Fair value of free drinks when you forgot your wallet and a friend paid.
> All winning lottery tickets, pull tabs, etc, regardless of amount won.
> All wins from a casino playing blackjack, etc.
> The $5 bets that you won from your golf buddies.
> Fair value of frequent flier miles that you earned while taking an employer-paid business trip.
> Any other cash received which is not specifically exempted from income per IRS regulations.

Alot of people will occasionally lose a couple hundred dollars gambling in a casino. I would guess that fewer than 1% of these recreational, losing players reports income for their gross wins.

I would say that almost no one prepares their taxes correctly. Most people make a good faith effort and are honest in reporting substantially all of their income.

[/ QUOTE ]

you sir are 100% right.

Dave2020

02-01-2007, 06:15 PM

So I was talking to Phil Ivey's brother yesterday and I asked him...
"If 2006 is my first time filing as a professional gambler, am I required to have already payed quarterly installments on my 2006 poker income?"
I asked him this because I thought i had read something somewhere that said if you have no previous records to base quarterly payments on, you may not be responsible to do so...
He didn't know. Do any of you know about this? Maybe Russ Fox knows???

Russ Fox

02-01-2007, 06:18 PM

[ QUOTE ]
No, that is not the law. The law is very vague and leaves exactly what a session is undefined. There has been no case law to rely upon to try to further define session.

[/ QUOTE ]

Very true.

I didn't say what I should have: the law is that you must report by session (my response was to an individual claiming that he could net everything, which, of course, isn't the case). The definition of a session doesn't exist. Indeed, that was the premise of the article I wrote on what is a gambling session.

Actually, the IRS' view (which has been made clear to me from the audits I've been to) is much more restrictive than my own view. The IRS examiners I've dealt with have said that a session is your play at any one table at any one set of limits. If you're in a must move game, and you're moved, that's a new session. I think that's ridiculous, but that's what they've tried to use.

[ QUOTE ]
The law is intentionally vague.

[/ QUOTE ] We'd have to ask Congress about that....

-- Russ Fox
co-author, "Why You Lose at Poker"

atomicsoda

02-01-2007, 06:21 PM

[ QUOTE ]
I think Atomicsoda has a point. Most people that I know that go to a casino usually lose in the long run. They do however have the ocassional win. Be it hitting a jackpot on a slot or hot run at some table game. These people never worry about the taxes on winning, unless they have to fill out a form (W2G i am assuming). I have even been told (not by a credible source) that this is why a lot of slot machine jackpots are just under $1200. By doing this they are avoiding a the mandatory reporting amount. Supposedly you have to fill out paperwork at the casino on any jackpot over $1200.

I realize that my sample size is small and that the information may be totally incorrect. Please do not flame. Just post corrections. Thanks in advance fro thiis. This is just information that I have been told by some people that I play in a home poker game that regualarly play casion slots. They view any winnings as "found money". Unless they have have to fill out paperwork at the casino when they collect their jackpot.

[/ QUOTE ]

I think $600 is the limit now. I noticed a casino in Vegas that capped the high hand jackpots at $599 for this reason. They pay it in chips and it is considered table stakes, so the cap avoids any IRS reporting issues and players don't need to worry about taxes on it.

genesisgkh1

02-01-2007, 06:21 PM

The IRS has not defined a poker session. As far as I know, there are no hard and fast tax rules regarding reporting wins and loses by session, then having your poker site close down before you can cash out your winnings. By the letter of the law, if you play poker regularly, you must report it on your tax return, win or lose. Yet no losing poker player reports anything on their taxes, and NONE of them are in jail. Online poker is new and there are gray areas with regard to the tax code. Too many in this forum claim black and white and only they are correct, but just saying it don't necessarily make it so. DO NOT listen to anyone who says online poker income is not taxable. DO NOT listen to anyone who says you must report $1,000,000 in income and put the $999,000 under itemized deductions. DO NOT listen to anyone who talks about putting someone in jail if they made a good faith effort to pay their taxes. Contact a tax professional.

Russ Fox

02-01-2007, 06:24 PM

Estimated taxes are, in general, based on the lesser of 90% of the current year's taxes or 100%/110% of the prior year's taxes. If you had no tax last year (note: this isn't whether you got a refund or not, it's your total taxes), you don't have to make estimated payments. There's also a safe harbor rule (if your taxes total less than $1000, you don't have to make estimated payments). Most, but not all, states follow the federal rules for estimated taxes.

Russ Fox
co-author, "Why You Lose at Poker"

Zele

02-01-2007, 06:26 PM

[ QUOTE ]
you are scaring people who make no money gambling online.

[/ QUOTE ]

In some ways, accurate records are more important for net losers. There are several examples of losing gamblers who hit a big, documented jackpot and were forced to pay taxes on it even though they were net losers for the year, since without records they could not prove any losses.

Wongboy

02-01-2007, 06:29 PM

[ QUOTE ]
Very true.

I didn't say what I should have: the law is that you must report by session (my response was to an individual claiming that he could net everything, which, of course, isn't the case). The definition of a session doesn't exist. Indeed, that was the premise of the article I wrote on what is a gambling session.

Actually, the IRS' view (which has been made clear to me from the audits I've been to) is much more restrictive than my own view. The IRS examiners I've dealt with have said that a session is your play at any one table at any one set of limits. If you're in a must move game, and you're moved, that's a new session. I think that's ridiculous, but that's what they've tried to use.

[/ QUOTE ]

Under that IRS definition, if an online player stays seated at the same table, then they are still in the same session, correct?

BTW, do you have a link to your article on the definition of a session? I would be very interested in reading your take on this. Personally, my wife and I are both CPA's and we have another CPA do our taxes (we both have a non-tax focus).

Our tax CPA pushed back hard when I told him that we needed to report gross wins and losses, and also when I told him that I had >$5,000 in net winnings and no W-2G. He told me that he had never had a client report any gambling winnings unless they were straight from a W-2G. I really do not think he is alone in that experience, which is why the earlier post that claimed most (aka > 50%) people prepare their taxes correctly struck me as ludicrous.

If everyone was 100% legit, then it would be a tragedy to get drunk while gambling and forget the exact results of every "session" that you experience in the process of blowing $300 on Blackjack, tips, and booze. In fact, most casino's do not even allow you to take written notes of your results at the Blackjack table.

NickMPK

02-01-2007, 06:33 PM

Has anyone ever been convicted of tax evasion because they netted their wins and losses rather than reporting session wins and deducting session losses?

I'm not acquainted with the specific regulations regarding session reporting, only the statutes to the extent I learned them in one semester of income tax in law school. But it seems to me that one could mount a serious challenge to these regulations as unconstitutionally vague if they cause almost every recreational gambler in the county to account for their taxes incorrectly.

genesisgkh1

02-01-2007, 06:35 PM

BTW, in the future American companies will run taxed, regulated online poker sites for profit in our country. IMO, if you lose, nothing will be reported to the IRS and you receive no forms. If you win, a W-2 will come to your house and go to the IRS with your net winnings as income. They will want taxes paid on that amount. I doubt they are going to send you session breakdowns every year. This is just speculation, I could be wrong.

Lottery Larry

02-01-2007, 06:38 PM

[ QUOTE ]
BTW, in the future American companies will run taxed, regulated online poker sites for profit in our country. IMO, if you lose, nothing will be reported to the IRS and you receive no forms. If you win, a W-2 will come to your house and go to the IRS with your net winnings as income. They will want taxes paid on that amount. I doubt they are going to send you session breakdowns every year. This is just speculation, I could be wrong.

[/ QUOTE ]

If this comes to pass, you will be VERY wrong.

RoundGuy

02-01-2007, 06:39 PM

[ QUOTE ]
Our tax CPA pushed back hard when I told him that we needed to report gross wins and losses, and also when I told him that I had >$5,000 in net winnings and no W-2G. He told me that he had never had a client report any gambling winnings unless they were straight from a W-2G.

[/ QUOTE ]
Wow. Just.....wow.

A note to winning poker players: It pays to get a CPA that actually knows what the IRS rules are. Seriously. It's not their ass when the [censored] hits the fan....it's yours.

Lottery Larry

02-01-2007, 06:40 PM

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
Aren't most people who do any gambling violating the law when they prepare their taxes?

[/ QUOTE ]

I think most people prepare their taxes correctly.

[/ QUOTE ]

OK. Almost no one declares cash wins in casinos or even keeps track or wins or losses. If they win a slot jackpot or something they pay tax on that. I am not talking about people who gamble everyday or derive income from gambling but recreational gamblers.

[/ QUOTE ]

Well, now you know one recreational gambler who does keep track AND reports it.

dollerAday

02-01-2007, 06:40 PM

Did you also believe that Y2K was going to be the end of the world? How is life in the bunker?

atomicsoda

02-01-2007, 06:43 PM

[ QUOTE ]
[ QUOTE ]
you are scaring people who make no money gambling online.

[/ QUOTE ]

In some ways, accurate records are more important for net losers. There are several examples of losing gamblers who hit a big, documented jackpot and were forced to pay taxes on it even though they were net losers for the year, since without records they could not prove any losses.

[/ QUOTE ]

Yes, that is true. Most people are forced to pay on jackpots. Hang around an OTB parlor and you will see how people will complain about this after hitting ther trifecta and scheme of ways to find losses to offset so they can get the withholding back on their tax return.

genesisgkh1

02-01-2007, 06:45 PM

gummy d

02-01-2007, 06:45 PM

for example
I play recreationally and the net of my winning sessions is 8000. The net of my loosing sessions is 11,000. I have an income of 16,000 from a regular job.
When filing I would not take the standard deduction. I would claim 8000 in "other income". When taking deductions I would claim 8000 as well as mortgage interest on home, medical bills etc... The end result being I made 24,000 and i'm taking 11,000 in deductions.
Is this basicly the idea for a losing rec. gambler with a job and home? Doesn't seem right. Could anyone correct me here?
Give some back to a fish.

Dave2020

02-01-2007, 06:46 PM

Thanks very much Russ Fox for your reply!
Just to further clarify... As long as I had a certain amount of taxable income for 2005, quarterly taxes must have been payed for 2006 regardless of whether I filed as a pro or not in 2005. Quarterly payments for 2006 should have been based on whatever my 2005 taxable income was?

dollerAday

02-01-2007, 06:48 PM

No the end would be 13k in income.

Wake up CALL

02-01-2007, 06:49 PM

From IRS Publication 529[ QUOTE ]
Gambling Losses Up to the Amount of Gambling Winnings
You must report the full amount of your gambling winnings for the year on Form 1040, line 21. You deduct your gambling losses for the year on Schedule A (Form 1040), line 27. You cannot deduct gambling losses that are more than your winnings. Generally, nonresident aliens cannot deduct gambling losses on Schedule A (Form 1040NR).

You cannot reduce your gambling winnings by your gambling losses and report the difference. You must report the full amount of your winnings as income and claim your losses (up to the amount of winnings) as an itemized deduction. Therefore, your records should show your winnings separately from your losses.

Diary of winnings and losses. You must keep an accurate diary or similar record of your losses and winnings.

Your diary should contain at least the following information.

The date and type of your specific wager or wagering activity.

The name and address or location of the gambling establishment.

The names of other persons present with you at the gambling establishment.

The amount(s) you won or lost.

Proof of winnings and losses. In addition to your diary, you should also have other documentation. You can generally prove your winnings and losses through Form W-2G, Certain Gambling Winnings, Form 5754, Statement by Person(s) Receiving Gambling Winnings, wagering tickets, canceled checks, substitute checks, credit records, bank withdrawals, and statements of actual winnings or payment slips provided to you by the gambling establishment.

[/ QUOTE ]

and

[ QUOTE ]
These recordkeeping suggestions are intended as general guidelines to help you establish your winnings and losses. They are not all-inclusive. Your tax liability depends on your particular facts and circumstances.

Keno. Copies of the keno tickets you purchased that were validated by the gambling establishment, copies of your casino credit records, and copies of your casino check cashing records.

Slot machines. A record of the machine number and all winnings by date and time the machine was played.

Table games (twenty-one (blackjack), craps, poker, baccarat, roulette, wheel of fortune, etc.). The number of the table at which you were playing. Casino credit card data indicating whether the credit was issued in the pit or at the cashier's cage.

Bingo. A record of the number of games played, cost of tickets purchased, and amounts collected on winning tickets. Supplemental records include any receipts from the casino, parlor, etc.

Racing (horse, harness, dog, etc.). A record of the races, amounts of wagers, amounts collected on winning tickets, and amounts lost on losing tickets. Supplemental records include unredeemed tickets and payment records from the racetrack.

Lotteries. A record of ticket purchases, dates, winnings, and losses. Supplemental records include unredeemed tickets, payment slips, and winnings statements.

[/ QUOTE ]

Russ Fox Session Definition (http://www.gambling-law-us.com/Articles-Notes/Gambling-Session.htm)

RoundGuy

02-01-2007, 06:50 PM

[ QUOTE ]
Did you also believe that Y2K was going to be the end of the world? How is life in the bunker?

[/ QUOTE ]
In a bunker, eh? Hmmm. As opposed to having your head firmly implanted in your ass like some of the ignorant posters in this thread? I'll take the bunker. ( and no, I wasn't a Y2K'er)

gummy d

02-01-2007, 06:50 PM

Don't you mean yes, the end would be 13k in income?

atomicsoda

02-01-2007, 06:51 PM

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
Aren't most people who do any gambling violating the law when they prepare their taxes?

[/ QUOTE ]

I think most people prepare their taxes correctly.

[/ QUOTE ]

OK. Almost no one declares cash wins in casinos or even keeps track or wins or losses. If they win a slot jackpot or something they pay tax on that. I am not talking about people who gamble everyday or derive income from gambling but recreational gamblers.

[/ QUOTE ]

Well, now you know one recreational gambler who does keep track AND reports it.

[/ QUOTE ]

your mother must be very proud.

Lottery Larry

02-01-2007, 06:53 PM

I've talked to the IRS- while the rep I spoke to was a little shaky, she basically said that a tournament is a session. A satellite tourney is a separate session from the event you're winning your way into.

[ QUOTE ]
Under that IRS definition, if an online player stays seated at the same table, then they are still in the same session, correct?

[/ QUOTE ]

That's how I've read it/interpreted it, from IRS listings and from other CPA's writing on in (including the author of the article I linked to- that author and others have written about this for years.

[ QUOTE ]
BTW, do you have a link to your article on the definition of a session?

[/ QUOTE ]

A quick search on the IRS website just now. While you can't find a cut and dried definition (I'm sure they left it vague to avoid creating loopholes), you can extrapolate what a session should be (time/date, length of play, location of session) from putting 2+2 together.... in MY UNPROFESSIONAL NON-LICENSED OPINION.

Gambling Income and Expenses
http://www.irs.gov/taxtopics/tc419.html

"All gambling winnings must be reported irrespective as to whether any portion thereof is subject to withholding. in addition, you may be required to pay an estimated tax on your gambling winnings. For information on withholding on gambling winnings, refer to Publication 505, Tax Withholding and Estimated Tax."

http://www.irs.gov/publications/p529/ar02.html#d0e2065

"You cannot reduce your gambling winnings by your gambling losses and report the difference. You must report the full amount of your winnings as income and claim your losses (up to the amount of winnings) as an itemized deduction. Therefore, your records should show your winnings separately from your losses. "

"Your diary should contain at least the following information.

The date and type of your specific wager or wagering activity.

The name and address or location of the gambling establishment.

The names of other persons present with you at the gambling establishment.

The amount(s) you won or lost.
Proof of winnings and losses. In addition to your diary, you should also have other documentation. You can generally prove your winnings and losses through Form W-2G, Certain Gambling Winnings, Form 5754, Statement by Person(s) Receiving Gambling Winnings, wagering tickets, canceled checks, substitute checks, credit records, bank withdrawals, and statements of actual winnings or payment slips provided to you by the gambling establishment.

For specific wagering transactions, you can use the following items to support your winnings and losses.

These recordkeeping suggestions are intended as general guidelines to help you establish your winnings and losses. They are not all-inclusive. Your tax liability depends on your particular facts and circumstances.

Keno. Copies of the keno tickets you purchased that were validated by the gambling establishment, copies of your casino credit records, and copies of your casino check cashing records.

Slot machines. A record of the machine number and all winnings by date and time the machine was played.

Table games (twenty-one (blackjack), craps, poker, baccarat, roulette, wheel of fortune, etc.). The number of the table at which you were playing. Casino credit card data indicating whether the credit was issued in the pit or at the cashier's cage.

Bingo. A record of the number of games played , cost of tickets purchased, and amounts collected on winning tickets. Supplemental records include any receipts from the casino, parlor, etc.

Racing (horse, harness, dog, etc.). A record of the races, amounts of wagers, amounts collected on winning tickets, and amounts lost on losing tickets. Supplemental records include unredeemed tickets and payment records from the racetrack.

Lotteries. A record of ticket purchases, dates, winnings, and losses. Supplemental records include unredeemed tickets, payment slips, and winnings statements. "

And, the bonus for you illegal income online gambling fans:

http://www.irs.gov/publications/p525/ar02.html#d0e7770
"Bribes. If you receive a bribe, include it in your income. "

http://www.irs.gov/compliance/enforcement/article/0,,id=129064,00.html
"On June, 13, 2005, in Houston, TX, Robert Angleton was sentenced to 87 months in prison and ordered to pay a $125,000 fine for evading more than $1 million in federal excise taxes on gambling wagers of over $64 million related to his bookmaking business."

[ QUOTE ]
Our tax CPA pushed back hard when I told him that we needed to report gross wins and losses, and also when I told him that I had >$5,000 in net winnings and no W-2G.

[/ QUOTE ]

Fire him if he won't do it correctly, as you're requesting.

[ QUOTE ]
In fact, most casino's do not even allow you to take written notes of your results at the Blackjack table.

[/ QUOTE ]

I've never been stopped- what regulation are you claiming to refer to, regarding this?

genesisgkh1

02-01-2007, 06:53 PM

[ QUOTE ]
for example
I play recreationally and the net of my winning sessions is 8000. The net of my loosing sessions is 11,000. I have an income of 16,000 from a regular job.
When filing I would not take the standard deduction. I would claim 8000 in "other income". When taking deductions I would claim 8000 as well as mortgage interest on home, medical bills etc... The end result being I made 24,000 and i'm taking 11,000 in deductions.
Is this basicly the idea for a losing rec. gambler with a job and home? Doesn't seem right. Could anyone correct me here?
Give some back to a fish.

[/ QUOTE ]

DO NOT try to deduct gambling loses off income from a regular job.

Lottery Larry

02-01-2007, 06:53 PM

[ QUOTE ]

your mother must be very proud.

[/ QUOTE ]

She is- are YOU proud of me? Because that's the important consideration.

dollerAday

02-01-2007, 06:55 PM

yea, that's it.

Lottery Larry

02-01-2007, 06:59 PM

[ QUOTE ]

Russ Fox Session Definition (http://www.gambling-law-us.com/Articles-Notes/Gambling-Session.htm)

[/ QUOTE ]

" The method that I was originally taught was that your play at any one table at any one set of limits is a session. "

This is the exact definition of session that I use to this day.

If I ever play online, that's what I'm going to do there as well. I'm not going to try to explain to an IRS auditor how I can be playing at a particular site, at numbered tables, and I can't come up with session records.

Signing off,
Mama's Boy

genesisgkh1

02-01-2007, 07:02 PM

[ QUOTE ]
I've talked to the IRS- while the rep I spoke to was a little shaky, she basically said that a tournament is a session. A satellite tourney is a separate session from the event you're winning your way into.

[ QUOTE ]
Under that IRS definition, if an online player stays seated at the same table, then they are still in the same session, correct?

[/ QUOTE ]

That's how I've read it/interpreted it, from IRS listings and from other CPA's writing on in (including the author of the article I linked to- that author and others have written about this for years.

[ QUOTE ]
BTW, do you have a link to your article on the definition of a session?

[/ QUOTE ]

A quick search on the IRS website just now. While you can't find a cut and dried definition (I'm sure they left it vague to avoid creating loopholes), you can extrapolate what a session should be (time/date, length of play, location of session) from putting 2+2 together.... in MY UNPROFESSIONAL NON-LICENSED OPINION.

Gambling Income and Expenses
http://www.irs.gov/taxtopics/tc419.html

"All gambling winnings must be reported irrespective as to whether any portion thereof is subject to withholding. in addition, you may be required to pay an estimated tax on your gambling winnings. For information on withholding on gambling winnings, refer to Publication 505, Tax Withholding and Estimated Tax."

http://www.irs.gov/publications/p529/ar02.html#d0e2065

"You cannot reduce your gambling winnings by your gambling losses and report the difference. You must report the full amount of your winnings as income and claim your losses (up to the amount of winnings) as an itemized deduction. Therefore, your records should show your winnings separately from your losses. "

"Your diary should contain at least the following information.

The date and type of your specific wager or wagering activity.

The name and address or location of the gambling establishment.

The names of other persons present with you at the gambling establishment.

The amount(s) you won or lost.
Proof of winnings and losses. In addition to your diary, you should also have other documentation. You can generally prove your winnings and losses through Form W-2G, Certain Gambling Winnings, Form 5754, Statement by Person(s) Receiving Gambling Winnings, wagering tickets, canceled checks, substitute checks, credit records, bank withdrawals, and statements of actual winnings or payment slips provided to you by the gambling establishment.

For specific wagering transactions, you can use the following items to support your winnings and losses.

These recordkeeping suggestions are intended as general guidelines to help you establish your winnings and losses. They are not all-inclusive. Your tax liability depends on your particular facts and circumstances.

Keno. Copies of the keno tickets you purchased that were validated by the gambling establishment, copies of your casino credit records, and copies of your casino check cashing records.

Slot machines. A record of the machine number and all winnings by date and time the machine was played.

Table games (twenty-one (blackjack), craps, poker, baccarat, roulette, wheel of fortune, etc.). The number of the table at which you were playing. Casino credit card data indicating whether the credit was issued in the pit or at the cashier's cage.

Bingo. A record of the number of games played , cost of tickets purchased, and amounts collected on winning tickets. Supplemental records include any receipts from the casino, parlor, etc.

Racing (horse, harness, dog, etc.). A record of the races, amounts of wagers, amounts collected on winning tickets, and amounts lost on losing tickets. Supplemental records include unredeemed tickets and payment records from the racetrack.

Lotteries. A record of ticket purchases, dates, winnings, and losses. Supplemental records include unredeemed tickets, payment slips, and winnings statements. "

And, the bonus for you illegal income online gambling fans:

http://www.irs.gov/publications/p525/ar02.html#d0e7770
"Bribes. If you receive a bribe, include it in your income. "

http://www.irs.gov/compliance/enforcement/article/0,,id=129064,00.html
"On June, 13, 2005, in Houston, TX, Robert Angleton was sentenced to 87 months in prison and ordered to pay a $125,000 fine for evading more than $1 million in federal excise taxes on gambling wagers of over $64 million related to his bookmaking business."

[ QUOTE ]
Our tax CPA pushed back hard when I told him that we needed to report gross wins and losses, and also when I told him that I had >$5,000 in net winnings and no W-2G.

[/ QUOTE ]

Fire him if he won't do it correctly, as you're requesting.

[ QUOTE ]
In fact, most casino's do not even allow you to take written notes of your results at the Blackjack table.

[/ QUOTE ]

I've never been stopped- what regulation are you claiming to refer to, regarding this?

[/ QUOTE ]

Call the IRS 4 times and you may get 4 different answers. The reason they are shakey is because a poker session has not been defined. Why is that so hard for you to understand?

cardcounter0

02-01-2007, 07:05 PM

When I play online my computer and monitor always remain on the same table in my living room, I never change tables.
/images/graemlins/smirk.gif

gummy d

02-01-2007, 07:07 PM

Ok what am i missing here? besides a brain...
How do you seperate the deductions from your losses from the other deductions you would normally take against your job income?

adanthar

02-01-2007, 07:10 PM

Disclaimer: I am an attorney, but this is not legal advice, I know nothing about tax law other than my own research, etc. etc. etc. talk to a tax pro...

Russ,

[ QUOTE ]
Well, I've written an article about what a session is. Although you won't like my conclusions, a tournament is a session. For those who play lots of SNGs, they have lots of sessions. That's the law.

[/ QUOTE ]

I agree with you that a 'session' according to the tax code is somewhere between 'time spent sitting down at a table' and a day, most likely the former. However, I disagree with you that an individual sit and go constitutes a session.

The reason why I disagree has to do with multitabling. I don't think *anyone* is advocating that somebody 8-tabling cash games is playing 8 different sessions at once. Indeed, that makes no recordkeeping sense even on sites that are supported by PT, much less ones that are not. Walter Lewis, Nelson Rose and every other gambling professional tax writer I've ever heard of basically agrees with the "keep a log book" approach, ie, Excel. But it is reasonably impossible to keep an individual *table* record using Excel on non-PT sites, although you can (and I do) keep track of overall performance using the cashier.

The same applies to people playing massive amounts of sit and gos. Certain people I know play upwards of 200 of them a day on a regular basis. That is not, by any reasonable definition, 200 sessions. The IRS (ie, the random individual that's in charge of the hypothetical audit we're talking about) may argue otherwise, but at some point, if this particular issue comes in front of a tax court, the judge *is* reasonably likely to exercise common sense. Additionally, even if you are audited and the auditor takes exception to this definition, you will not go to jail for arguing your point, since it is reasonable and you're not attempting to defraud anyone/did pay your taxes.

[ QUOTE ]
The IRS has not defined a poker session. As far as I know, there are no hard and fast tax rules regarding reporting wins and loses by session, then having your poker site close down before you can cash out your winnings.

[/ QUOTE ]

There are. You fill out a form (I don't remember which one offhand) claiming that the site absconded with your money.

NickMPK

02-01-2007, 07:11 PM

Well, I'm sure glad that article ended all the false claims about paying US taxes on poker....

tagtastic

02-01-2007, 07:14 PM

[ QUOTE ]
[ QUOTE ]
Our tax CPA pushed back hard when I told him that we needed to report gross wins and losses, and also when I told him that I had >$5,000 in net winnings and no W-2G. He told me that he had never had a client report any gambling winnings unless they were straight from a W-2G.

[/ QUOTE ]
Wow. Just.....wow.

A note to winning poker players: It pays to get a CPA that actually knows what the IRS rules are. Seriously. It's not their ass when the [censored] hits the fan....it's yours.

[/ QUOTE ]

The letter of the law and reality are two very, very different things.

How much money do you owe the government if you had to pay $20 for everytime you jaywalked? $100 everytime you broke the speed limit (even by 1mph)? $300 everytime you didn't come to a 100% complete stop at a stop sign?

Show me stories of poker players being audited and sent to prison. Sodomy is a crime in most states, show me porn actors being arrested. Their crimes have been very well documented.

Laws and enforcement are two very separate things. I'd much rather have a CPA with real life experience vs. one just out of school who has the whole tax code memorized.

genesisgkh1

02-01-2007, 07:14 PM

[ QUOTE ]
Disclaimer: I am an attorney, but this is not legal advice, I know nothing about tax law other than my own research, etc. etc. etc. talk to a tax pro...

Russ,

[ QUOTE ]
Well, I've written an article about what a session is. Although you won't like my conclusions, a tournament is a session. For those who play lots of SNGs, they have lots of sessions. That's the law.

[/ QUOTE ]

I agree with you that a 'session' according to the tax code is somewhere between 'time spent sitting down at a table' and a day, most likely the former. However, I disagree with you that an individual sit and go constitutes a session.

The reason why I disagree has to do with multitabling. I don't think *anyone* is advocating that somebody 8-tabling cash games is playing 8 different sessions at once. Indeed, that makes no recordkeeping sense even on sites that are supported by PT, much less ones that are not. Walter Lewis, Nelson Rose and every other gambling professional tax writer I've ever heard of basically agrees with the "keep a log book" approach, ie, Excel. But it is reasonably impossible to keep an individual *table* record using Excel on non-PT sites, although you can (and I do) keep track of overall performance using the cashier.

The same applies to people playing massive amounts of sit and gos. Certain people I know play upwards of 200 of them a day on a regular basis. That is not, by any reasonable definition, 200 sessions. The IRS (ie, the random individual that's in charge of the hypothetical audit we're talking about) may argue otherwise, but at some point, if this particular issue comes in front of a tax court, the judge *is* reasonably likely to exercise common sense. Additionally, even if you are audited and the auditor takes exception to this definition, you will not go to jail for arguing your point, since it is reasonable and you're not attempting to defraud anyone/did pay your taxes.

[ QUOTE ]
The IRS has not defined a poker session. As far as I know, there are no hard and fast tax rules regarding reporting wins and loses by session, then having your poker site close down before you can cash out your winnings.

[/ QUOTE ]

There are. You fill out a form (I don't remember which one offhand) claiming that the site absconded with your money.

[/ QUOTE ]

This person is using professional and reasonable arguments in response to a real world situation. He should be banned from this forum immediately /images/graemlins/laugh.gif

adanthar

02-01-2007, 07:15 PM

Sodomy is no longer a crime. It is on the books in some places, but enforcing it is unconstitutional after Lawrence v. Texas /images/graemlins/tongue.gif

tagtastic

02-01-2007, 07:17 PM

[ QUOTE ]
Sodomy is no longer a crime. It is on the books in some places, but enforcing it is unconstitutional after Lawrence v. Texas /images/graemlins/tongue.gif

[/ QUOTE ]

exactly. legislation does not mean enforcement.

wpr101

02-01-2007, 07:24 PM

How am I supposed to know something other than my net when I played without poker tracker before? I don't know a single person who records all their sessions. It's not a possibly for me to do this so I will be declaring net.

I hate threads like these because half the people say one thing and the other half another and you don't know who to believe.

Wongboy

02-01-2007, 07:41 PM

[ QUOTE ]
In fact, most casino's do not even allow you to take written notes of your results at the Blackjack table.

[/ QUOTE ]

I've never been stopped- what regulation are you claiming to refer to, regarding this?

[/ QUOTE ]

Thanks for the info in your post. I'm only replying to this part, but the rest is very helpful.

Casino's do not need to have a legal reason before they restrict your ability to do something at a blackjack table. I have been restricted from playing blackjack entirely at over 20 casinos, and been restricted from entering 2 casinos and the casinos involved never accused me of doing anything illegal or against regulations. I was suspected of the ability to play their game, under their rules, and maintain a long-term advantage in doing so.

In this case however, there is a very restrictive law called the device law in Nevada and similar laws that are on the books in every other state with casino gambling (most states model their law on Nevada's law). The law makes the use of a computerized or non-comnputerized device a felony.

From personal experience, I have had numerous casinos tell me that I could not write down information at a blackjack table. YMMV.

707782

02-01-2007, 07:42 PM

I have lost tons of money gambling, will IRS give me back my refund?

adanthar

02-01-2007, 07:43 PM

[ QUOTE ]
How am I supposed to know something other than my net when I played without poker tracker before? I don't know a single person who records all their sessions. It's not a possibly for me to do this so I will be declaring net.

I hate threads like these because half the people say one thing and the other half another and you don't know who to believe.

[/ QUOTE ]

As an attorney who is conscientious about taxes, here is what I do (YMMV, not legal advice, consult tax pro, blah blah blah):

-Record all of my MTT's as separate sessions (Exitonly in MTT's has a spreadsheet that lets you do this very easily). Note that you probably *must* do this if you play on major sites, because, for one thing, there are Internet databases covering your performance; you can't even claim poor record keeping as a reasonable excuse, since there are sites doing it for you.

-List my SNG's as separate sessions, because I played a whopping 20 or so of them for the year, one or two at a time. If I played them full time as a non-professional, especially at non-PT sites, I would probably just net the cashier after I got up from the computer. There is no question that one sit and go played at one time constitutes one session, but 100 played in a 12 hour period is not 100 sessions in the common usage of that word in this field (which does have a certain amount of value in court.)

-List cash per 'time spent at the computer on each site'. If I play on Stars for 2 hours, I list the minutes I spent (roughly), stakes, and what I won/lost, taken from the cashier. I'm not about to track this for each of the 4-6 tables I play 10-100 hands on at any given time, especially since I usually play on Small Site X rather than Stars, and I think this is as much of a requirement as a court will ever impose on a *recreational gambler* (remember that a professional doesn't even need to worry about this in the first place*).

*As an aside, I think that in the near future, the IRS will not mind if someone claims both 'professional gambler' and a full time job on the return. This is based off the fact that they've been sending letters to people asking them to reclassify their hobby returns as pros, not vice versa. It is unlikely that they will ask people voluntarily paying SE tax to redo those returns solely because they have another job. Regardless, filing as a hobbyist when you should've filed as a pro or vice versa may eventually come back to cost you a few thousand, but again, if you did it in good faith you're not going to jail.

-Rakeback, bonuses, etc. are all 'income'. As a professional, I just put them in the cash spreadsheet since there's no tangible difference for me; non-pros may or may not be in a more interesting spot because some of those things are only tangentially gambling income, but if you put them in the 'cash' column and add a note, sorting it out will not be much of a problem later on.

I wouldn't want to get audited, of course, but I believe I've covered myself well enough to post what I do on the Internet /images/graemlins/tongue.gif

NickMPK

02-01-2007, 07:44 PM

Soul Rebel

02-01-2007, 08:26 PM

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
This one doesn't make sense:

So say a player plays ~5/10 NL 500,000 hands in year. Is he supposed to declare that he won $4,000,000 and lost $3,500,000? That is just rediculous. How the heck would you even keep track of all this? I mean yea you might have PT, but when you play on a different computer/different site?

[/ QUOTE ]

This is not difficult. You bust out a little program called Excel and record the results of every session on every site. I keep track of time played, beginning balance and ending balance for the session. Very simple.

[/ QUOTE ]

This is not a "very simple" thing to do. Do you even play poker? I am only declaring my net because it's the only thing that makes sense.

[/ QUOTE ]

What are you talking about? If I didn't play professionally, I doubt I would bother to go into this sort of detail, as it would not be necessary. My income is about 65% online cash games, 20% MTTs, and 15% rakeback. I have 3 excel tabs within one spreadsheet, one for each of these.

For the cash sheet, I have 9 columns. Date, Time session started, time session ended, total time played, site, game played, starting balance, ending balance, profit, and loss.
I record all of these for every site every session.

So for the last few columns, excel automatically does the math between the starting and ending balance, which equals the session's outcome. I move that number into either the profit or loss column. As a result, my profits are all in one column, and losses are in another. I sum each of the columns, and presto, I have my total wins and total losses.

MTTs are easier, you subtract buyins from total winnings. I record similarly detailed information for every MTT I play, with separate columns for buyins, rebuys, and cashes.

Lastly, my rakeback sheet has a column for every site I play on, and I simply record how much I made at each site for each month. At the end of the year I add all that together for my total rakeback.

wpr101

02-01-2007, 08:38 PM

Adathar, how would I go about reporting say 4,000 sngs? I can look it up on sharkscope but it only shows a graph and ROI really. I haven't kept track of this. Plus sharkscope did not used to record every tourney.

On cash games, I've played probably 20% of my hands on computers they aren't mine or do not have pokertracker. Pokerstars doesn't keep track of these.

On MTTs, I have no record either.

Lastly, do FPPs count as rakeback since there is no direct conversion?

adanthar

02-01-2007, 08:50 PM

Cash: Last I heard, PS will send you a record of every hand you've ever played there if you ask them to for tax purposes. I have no idea if they do the same for SNG's.

MTT's should be obtainable from thepokerdb (advanced version) etc. I'm looking at your Stars results right now /images/graemlins/tongue.gif

IMO, not legal opinion etc etc etc, FPP's only count as income if and when you cash them out/buy stuff with them.

In your case, I would reconstruct the records as best I could/make a good faith effort. Things like this are more damaging to gamblers, but do happen a lot in the stock trading world, since people don't always keep track of what price/date they bought a stock at. For those people, estimating has been considered enough, again, assuming a good faith effort to reconstruct the approximate dates/times.

wpr101

02-01-2007, 08:56 PM

Thanks for the help. Assuming I did I ask pokerstars for every hand I played would they send me a zip file for everything? Then I would import that into pokertracker I suppose? I feel ike it is going to be a nightmare if I have to reconstruct everything.

Yeah, my MTT record is terrible lol /images/graemlins/tongue.gif

cardcounter0

02-01-2007, 08:59 PM

[ QUOTE ]
FPP's only count as income if and when you cash them out/buy stuff with them.

[/ QUOTE ]

FPPs, like casino comps, as long as they are not in the form of direct actual cash, are not taxable.

adanthar

02-01-2007, 10:14 PM

[ QUOTE ]
Thanks for the help. Assuming I did I ask pokerstars for every hand I played would they send me a zip file for everything? Then I would import that into pokertracker I suppose? I feel ike it is going to be a nightmare if I have to reconstruct everything.

Yeah, my MTT record is terrible lol /images/graemlins/tongue.gif

[/ QUOTE ]

I don't know how they would send it to you or if they do (but like I said, I heard that they do/did). If they *don't*, and the best you can do is Sharkscope/cashier records, you're gonna have to do the best you can and reconstruct everything*. If they do, obviously use those records.

*let's assume you don't and want to simply net out. In my best non-legally binding opinion, you have two options: 1)file as a pro or 2)take your chances. If you file as a pro, you won't have any record problem (other than the cashier statements, which I assume you do have records of) but will owe extra taxes. If you take your chances and the IRS comes along and audits you, they'll probably wind up trying to charge you penalties/fees and whatever else they feel like - but unlike the people that got screwed in the past, you have records detailing your approximate wins/losses and even a cashier statement; they just happen to be from outside websites and thus not 'session to session' accurate. You thus won't be in danger of losing all of your loss deductions, although you will likely be on the hook for *something*. I would recommend that, if you can't reconstruct your records, you contact a tax pro, ask him about exactly these two options, and see what he has to say. My guess is that most will tell you to net out by default, BUT, most tax pros are not up to date on the last two years of Internet gambling law development, so find a good one that is. In no case are we talking about jail time or any sort of criminal charges unless you fail to file entirely, however...though now that you know the law, for 2007, I would advise you to do it right.

[ QUOTE ]
[ QUOTE ]
FPP's only count as income if and when you cash them out/buy stuff with them.

[/ QUOTE ]

FPPs, like casino comps, as long as they are not in the form of direct actual cash, are not taxable.

[/ QUOTE ]

Casino comps are very, very taxable. If a casino comps you an Ipod (or a Porsche), you owe taxes on it.

AmIAFishy2?

02-01-2007, 10:52 PM

Hypothetical situation

Say i cash out 3k in winnings from stars and use an e wallet to directly deposit it into my bank account...i then go to the bank and cash out the full 3k. Tax time comes around...what if i "say" that i lost 2k or w/e amount playing in live games (it can be over lots of sessions or just one) but actually just held onto the cash. What if these live games were just home games? What if i said they were at some random casino? I mean, seriously...how can they find out?

Pog0

02-01-2007, 11:12 PM

AmIAFishy2?

02-01-2007, 11:14 PM

lol sftrue

cardcounter0

02-01-2007, 11:23 PM

[ QUOTE ]

Casino comps are very, very taxable. If a casino comps you an Ipod (or a Porsche), you owe taxes on it.

[/ QUOTE ]

The IRS has considered comps as a form of rebates, which are not taxable. If I buy a car and GM gives me a $2000 rebate on the purchase, I do not declare $2000 in income on my tax form. When I use my frequent user points on my credit card to get a discount airline ticket, the amount of that discount is not reported as income.

Although there is no real guidance in this area, comps have been considered by the IRS similar in nature to airline miles/points, which are only taxable when converted to cash.

The casino CANNOT reimburse you for your expenses with cash (this would be taxable). But standard casino freebies, like free room, show tickets, free meals, drinks, etc. are not considered taxable. When you go to Vegas and get free drinks for playing do you declare the cost of the alcohol as income?

So if I play enough at Stars to get an IPOD, that IPOD is a rebate for all my play, not a form of taxable income. However, if I play in a donkament and win the Aston Martin, that would be taxable at fair market value, as it is a prize and not a comp.

cardcounter0

02-01-2007, 11:27 PM

[ QUOTE ]
Hypothetical situation

Say i cash out 3k in winnings from stars and use an e wallet to directly deposit it into my bank account...i then go to the bank and cash out the full 3k. Tax time comes around...what if i "say" that i lost 2k or w/e amount playing in live games (it can be over lots of sessions or just one) but actually just held onto the cash. What if these live games were just home games? What if i said they were at some random casino? I mean, seriously...how can they find out?

[/ QUOTE ]

By asking you to back up your claims by showing a log book or records where you have recorded the times, dates, places, amounts, etc. where you have lost this money. They can then do analysis on this log to see if it was indeed created over the time period, or something you made up all at once.

They might want further proof also, like someone to verify that you were indeed at those places at those times. No logs? No records of the loss? Well, then you might as well have just held on to the money, because your deduction will be disallowed.

[ QUOTE ]
I mean, seriously...how can they find out?

[/ QUOTE ]

This is where you are going wrong. The IRS does not need to find out anything. It is up to you to prove what you say is true. If you are claiming you do not owe taxes on winnings, then you need proof of the losses. No proof? No deduction. Fake Proof? BIG FINES.

AmIAFishy2?

02-01-2007, 11:35 PM

[ QUOTE ]
[ QUOTE ]
Hypothetical situation

Say i cash out 3k in winnings from stars and use an e wallet to directly deposit it into my bank account...i then go to the bank and cash out the full 3k. Tax time comes around...what if i "say" that i lost 2k or w/e amount playing in live games (it can be over lots of sessions or just one) but actually just held onto the cash. What if these live games were just home games? What if i said they were at some random casino? I mean, seriously...how can they find out?

[/ QUOTE ]

By asking you to back up your claims by showing a log book or records where you have recorded the times, dates, places, amounts, etc. where you have lost this money. They can then do analysis on this log to see if it was indeed created over the time period, or something you made up all at once.

They might want further proof also, like someone to verify that you were indeed at those places at those times. No logs? No records of the loss? Well, then you might as well have just held on to the money, because your deduction will be disallowed.

[/ QUOTE ]

ok...so i think i lost $800 tonight in a local game. Next week I plan on losing 600 at harrahs. Maybe ill win a few hundred the week after that...no one knows me at these games, no one knows if im there or not.

im definitely not saying that i do this...but doesnt it just seem like such an easy way around things?

adanthar

02-01-2007, 11:36 PM

Okay, you seem knowledgeable enough on this that barring somebody else putting down some definite authority, I'll defer. It's not what I remember reading, but there are no regs on any of this anyway so I'm pretty sure you're not going to jail for arguing this, either.

However, even under this definition, an outright bonus (like the one that Stars lets you buy) is taxable...

RonMexico

02-01-2007, 11:45 PM

Another tax post filled with myopic disinformation and impractical paranoia. Every single one of these threads has a poster who repeatedly says something like, "Have a nice time explaining that to the IRS when they show up at your doorstep." If you want to spew this [censored] garbage, perhaps you should make a list of the countless thousands who were audited after making a good faith claim on internet poker winnings. Also, most of the "definitive" interpretations of a session are laughable since the wording was clearly constructed in relation to B&M games. The IRS has no clear definition for internet gaming sessions--neither should you.

(P.S. For those of you suggesting it would be proper to report 73,000 sessions of play...wow)

cardcounter0

02-01-2007, 11:51 PM

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
Hypothetical situation

Say i cash out 3k in winnings from stars and use an e wallet to directly deposit it into my bank account...i then go to the bank and cash out the full 3k. Tax time comes around...what if i "say" that i lost 2k or w/e amount playing in live games (it can be over lots of sessions or just one) but actually just held onto the cash. What if these live games were just home games? What if i said they were at some random casino? I mean, seriously...how can they find out?

[/ QUOTE ]

By asking you to back up your claims by showing a log book or records where you have recorded the times, dates, places, amounts, etc. where you have lost this money. They can then do analysis on this log to see if it was indeed created over the time period, or something you made up all at once.

They might want further proof also, like someone to verify that you were indeed at those places at those times. No logs? No records of the loss? Well, then you might as well have just held on to the money, because your deduction will be disallowed.

[/ QUOTE ]

ok...so i think i lost $800 tonight in a local game. Next week I plan on losing 600 at harrahs. Maybe ill win a few hundred the week after that...no one knows me at these games, no one knows if im there or not.

im definitely not saying that i do this...but doesnt it just seem like such an easy way around things?

[/ QUOTE ]

READ THE IRS REGULATIONS IN THIS THREAD AGAIN. You can't "think" you lost, you can't "plan" you lost. You need to keep records. You need a LOG of your wins and losses in order to use them. The IRS tells you what information you need to keep in these records. If it looks fishy, they will ask for back-up proof.

AmIAFishy2?

02-01-2007, 11:59 PM

Please dont shout...im asking a serious question. Obviously anyone who did this would log all of these sessions on random days, on random nights whenever they felt like it...they would be careful to make it not look fishy, theyd do it in smallish amounts, and mix in some wins as well. They would write down all the information that was asked....as for back up proof? are they going to ask for back up proof on all your winnings too? Please...theres no way anyone is putting together all of this "proof".

please dont insult me, im just asking an honest question...how wouldnt this work?

cardcounter0

02-02-2007, 12:00 AM

[ QUOTE ]
However, even under this definition, an outright bonus (like the one that Stars lets you buy) is taxable...

[/ QUOTE ]

You are correct. If you get comped cash, it is taxable. If you use the FPPs to get multiple IPODs, and EBAY them, that is probably taxable too.

I used to get RFB + Airfare to Las Vegas comped to me. If the casino made the air ticket arrangements, it is a comp and not taxable. If I bought the plane ticket and the casino hands me cash to reimburse me for the airfare, it is taxable.

broiler

02-02-2007, 12:07 AM

Libutti v Comissioner includes many non-cash comp items as taxable to the taxpayer. The list of items given to the whale include: automobiles, vacations, jewelry, champagne and entertainment tickets.

A quick search through my research came up with this unsourced quote: Gambling casinos often provide their customers with complimentary goods and services (“comps”) to encourage future patronage. IRS says that extraordinary comps, such as autos and jewelry, are taxable income. But it reserved the question of whether “normal comps,” such as food, drink, lodging, and entertainment, can be excluded from income as purchase price adjustments.

Zele

02-02-2007, 12:07 AM

[ QUOTE ]

please dont insult me, im just asking an honest question...how wouldnt this work?

[/ QUOTE ]

It probably would, but if it didn't you'd be in deep - much deeper than if you had just left the income off your return (which is also a bad idea).

adanthar

02-02-2007, 12:09 AM

Okay, that makes sense - I probably missed the distinction the first time around since it wasn't relevant for me at the time. So it's tied to profit motive vs. outright free stuff? Thanks.

edit: lol, someone cited authority while I was typing. god I hate tax law.

Fishy: Yes, you can get away with small scale tax fraud and probably not get caught. Do you feel lucky?

cardcounter0

02-02-2007, 12:13 AM

[ QUOTE ]
Please dont shout...im asking a serious question. Obviously anyone who did this would log all of these sessions on random days, on random nights whenever they felt like it...they would be careful to make it not look fishy, theyd do it in smallish amounts, and mix in some wins as well. They would write down all the information that was asked....as for back up proof? are they going to ask for back up proof on all your winnings too? Please...theres no way anyone is putting together all of this "proof".

please dont insult me, im just asking an honest question...how wouldnt this work?

[/ QUOTE ]

You might google some tax court cases of big winners trying to doctor up some "proof" of losses, and what happened to them. It is rather easy to determine if a log book has been created in one sitting or was actually done day by day over time. If you are claiming you were at a casino at a certain table for part of your losses, do you have any credit card receipts putting you in the area? A casino players card showing activity from that date? How about a call to the pit boss to see if they ever heard of you? Oh, they got a record of a credit card transaction a hundred miles away when you were supposed to be at the track?

And no they don't want any further proof of winnings. they got that, that is what you are being taxed on, they will just take your word for winnings. Of course, if they do find any winnings that you have not claimed ... well, you are behind the 8-ball again.

RonMexico

02-02-2007, 12:23 AM

AmIAFishy2?

02-02-2007, 12:24 AM

well we're obviously not talking about big winners here...and i never said that youd make the log book in one session, youd just make it as you went throughout the year, picking random numbers that didnt look suspicious. Oh and the cardroom is pretty close to where you live, easily within driving distance...no one even knows your name at the cardroom, youre pretty quiet. So yeah, you live close to the place where you play so most of what you said wouldnt apply, heck they dont even have a pitboss half the time and he wouldnt know your name anyway...theres lots of players, new faces all the time....

well i guess i got my answer, this would be an easy thing to pull off as long as you werent a complete moron. Odds against getting caught if you're smart and its small amounts? 5000:1? over/under?

cardcounter0

02-02-2007, 12:56 AM

[ QUOTE ]
Libutti v Comissioner includes many non-cash comp items as taxable to the taxpayer. The list of items given to the whale include: automobiles, vacations, jewelry, champagne and entertainment tickets.

A quick search through my research came up with this unsourced quote: Gambling casinos often provide their customers with complimentary goods and services (“comps”) to encourage future patronage. IRS says that extraordinary comps, such as autos and jewelry, are taxable income. But it reserved the question of whether “normal comps,” such as food, drink, lodging, and entertainment, can be excluded from income as purchase price adjustments.

[/ QUOTE ]

Do you have a link to this case? I can't find it. It seems the key to the taxability is "extraordinary comps". It would be nice to see where that line can be drawn.

Notice the IRS is again fuzzy. They list as "normal comps" entertainment -- yet the whale is given a taxable list that includes entertainment tickets.

So when is a comp "normal" and a rebate, and when is it "extraordinary" and taxable. I would like to study the case.

I also found a distinction between comps that are given for gambling, and comps that are given to "induce" gambling.

snoop01

02-02-2007, 01:20 AM

so i can't do this right??

I won $49,305.00

but i deposited $40,330

for a profit of $8975 for 06'

I can just claim the profit of $8975?? I have to break down how i got those numbers individually?

Also I played on some sites that no longer allow US players to access the sites. I didn't keep logs as I was just going to grab them and enter the data when I started filling out my tax information. What should one do now?

PS my main money site both + and - is still active.

Any insight would be great..... Thanks

Niediam

02-02-2007, 01:26 AM

[ QUOTE ]
[ QUOTE ]
FPP's only count as income if and when you cash them out/buy stuff with them.

[/ QUOTE ]

FPPs, like casino comps, as long as they are not in the form of direct actual cash, are not taxable.

[/ QUOTE ]

Do you have a site for your claim?

In the Gamblers Guide To Taxes by Lewis the author references a court case where it was ruled that casino comps are taxed as gambling income.

I'll try to explain the difference between receiving a rebate for a purchase and a comp but I might not to express the concept very clearly.

The compairison of comps to a rebate doesn't work here because with rebates the money has already been taxed but with comps that is not the case. When you get $2000 rebate on your new car purchase that money was already taxed once - mostly income tax from your job.

When you receive a comp from a poker room (and this applies equally well for rakeback) the money hasn't been taxed yet. Let's say we deposit $500 into stars. We run well win enough pots to run our deposit up to $1000. But of course Stars needs to make some money so lets say they rake $100 so we have $900 in our account. Now of course we owe taxes on the $400 profit that we have won (lets ignore the whole 'session' issue now for simplicity).

Notice that we don't pay taxes on the $100 that we paid for rake. The money wasn't money taxed before our deposit as we still have the initial $500. The $100 won't be taxed on our next return because the IRS doesn't tax us on the money raked by the sites. Stars then gives us a a brand new $25 twoplustwo book because of our play. Yes you can view it as a 'refund' of our rake but that money hasn't ever been taxed and of couse our fine government would like its share.

To try and put it really really simply: when you receive a rebate from puchasing something you don't actually end up with more than you started with. You start with X amount of cash and end up with some amount of cash plus goods which equal the amount of money you started with. No gain = no tax. When you use your FPPs on Stars for that $100,000 you certainly have material gain and will owe taxes.

cardcounter0

02-02-2007, 01:33 AM

[ QUOTE ]
In the Gamblers Guide To Taxes by Lewis the author references a court case where it was ruled that casino comps are taxed as gambling income.

[/ QUOTE ]

Again, I would like to see a link to the specific case. Because I have never seen the IRS asking people who have gone to Vegas where is the income from the free drinks or comped meals. What is the fair market value of a "I /images/graemlins/heart.gif Harrahs" keychain?

Niediam

02-02-2007, 01:39 AM

[ QUOTE ]
[ QUOTE ]
In the Gamblers Guide To Taxes by Lewis the author references a court case where it was ruled that casino comps are taxed as gambling income.

[/ QUOTE ]

Again, I would like to see a link to the specific case. Because I have never seen the IRS asking people who have gone to Vegas where is the income from the free drinks or comped meals. What is the fair market value of a "I /images/graemlins/heart.gif Harrahs" keychain?

[/ QUOTE ]

Thats because the IRS doesn't really care about those things. We are talking about Stars sending you a new computer not a PokerStars mousepad.

cardcounter0

02-02-2007, 01:46 AM

[ QUOTE ]
Thats because the IRS doesn't really care about those things. We are talking about Stars sending you a new computer not a PokerStars mousepad.

[/ QUOTE ]

Absolutely, so where are they going to draw the line?

Mousepad > Hat > Shirt > Book > Tickets > IPOD > TV > COMPUTER > Personal Jet > Private Island

And does amount of effort or play matter? If I spend 365 days online and get a certain comp is that "normal", if I just browse the website and get something, is that income?

I'm sure the findings on some of these cases touches on these factors.

Niediam

02-02-2007, 03:19 AM

Safe thing of course is just to report everything.

Using some sort of common sense method I'm though I'm sure will be fine because even if the IRS says you did it wrong they arn't going to throw a fit. Something like "report if it costs more than a date to the movies" or "report it if you would be upset if the item didn't arrive".

EMc

02-02-2007, 03:51 AM

[ QUOTE ]
[ QUOTE ]
In the Gamblers Guide To Taxes by Lewis the author references a court case where it was ruled that casino comps are taxed as gambling income.

[/ QUOTE ]

Again, I would like to see a link to the specific case. Because I have never seen the IRS asking people who have gone to Vegas where is the income from the free drinks or comped meals. What is the fair market value of a "I /images/graemlins/heart.gif Harrahs" keychain?

[/ QUOTE ]

Robert Libutti, TC Memo 1996-108, Code Sec(s). 165 is the full name, try searching some law databases or something. I see it through a pay service, so that link will do you no good.

AmIAFishy2?

02-02-2007, 04:26 AM

[ QUOTE ]
Safe thing of course is just to report everything.

Using some sort of common sense method I'm though I'm sure will be fine because even if the IRS says you did it wrong they arn't going to throw a fit. Something like "report if it costs more than a date to the movies" or "report it if you would be upset if the item didn't arrive".

[/ QUOTE ]

I would be very upset if my mousey pad didnt arrive. /images/graemlins/frown.gif

Niediam

02-02-2007, 06:35 AM

[ QUOTE ]
[ QUOTE ]
Safe thing of course is just to report everything.

Using some sort of common sense method I'm though I'm sure will be fine because even if the IRS says you did it wrong they arn't going to throw a fit. Something like "report if it costs more than a date to the movies" or "report it if you would be upset if the item didn't arrive".

[/ QUOTE ]

I would be very upset if my mousey pad didnt arrive. /images/graemlins/frown.gif

[/ QUOTE ]

I actually happen to have Party mousepad right in front of me that I'm not using so I have you covered if there is a problem! /images/graemlins/smile.gif

broiler

02-02-2007, 08:41 AM

ustaxcourt.gov has cases going back to 1995. There is another free site that goes back farther and that is legalbitstream.com. Both of those sites are free and the search function is not too bad.

The direct link to the Libutti case: http://www.ustaxcourt.gov/InOpHistoric/LIBBUTI.TCM.WPD.pdf

Libutti was a craps player whose average bet was ~$15k. The case history gives a pretty good detail of the comped items and the FMV that was included.

I would also note that Libutti won the case on the point that comps are gambling source income so that he could claim losses up to the amount of his winnings plus comps. When you see the schedule of deficiency listed, you will understand why this case went to court on this point.

Billman

02-02-2007, 09:09 AM

[ QUOTE ]
Sodomy is no longer a crime. It is on the books in some places, but enforcing it is unconstitutional after Lawrence v. Texas /images/graemlins/tongue.gif

[/ QUOTE ]

Yeah Sodomy!

DVaut1

02-02-2007, 10:18 AM

[ QUOTE ]
Another tax post filled with myopic disinformation and impractical paranoia. Every single one of these threads has a poster who repeatedly says something like, "Have a nice time explaining that to the IRS when they show up at your doorstep." If you want to spew this [censored] garbage, perhaps you should make a list of the countless thousands who were audited after making a good faith claim on internet poker winnings. Also, most of the "definitive" interpretations of a session are laughable since the wording was clearly constructed in relation to B&M games. The IRS has no clear definition for internet gaming sessions--neither should you.

[/ QUOTE ]

Wow, so the first "ZOMG you guys are all paranoid lolz suxorz" was SO compelling, you had to post it twice!

I was still unsure the first time you posted this, but now that you've posted the exact same thing, I'm sold.

Maybe if you post it a THIRD time, all the fence sitters will finally see the error of their ways. Perhaps if you consider adding a bit more invective and a few more ad hominems, and a few more of those stinging adjectives (holy [censored] - not just disinformation, but MYOPIC disinformation!) then this we all see the wisdom of "roflz IRS guidelines and expert knowledge, I play by my own rulez".

cardcounter0

02-02-2007, 10:54 AM

This is very clear.

Here are the comps:
[ QUOTE ]
The automobiles and accessories included five Rolls Royces with an aggregate value of $916,300, three Ferraris with an aggregate value of $731,400 (exclusive of additional accessories of $14,875), one Bentley Corniche valued at $212,000 (exclusive of a $1,890 phone installed therein), one Mercedes Benz valued at $60,583, automobile repairs of $12,740, a $14,310 payment by Trump so that petitioner could trade a Bentley for a Rolls, and a $34,980 payment by Trump so that petitioner could trade a Bentley Turbo for a Bentley Corniche. The vacations included five European vacations with an average value of $17,568 and one vacation in California valued at $16,500. The jewelry included a Rolex watch and bracelet valued at $32,300, a 2.7-carat diamond valued at $30,000, a bracelet and diamond earrings valued at $23,426, a bracelet watch valued at $19,800, a tennis bracelet valued at $12,900, and a diamond bracelet valued at $3,286. The champagne included 178 bottles of Cristal Rosé, valued at $225 a bottle. The tickets were to theater and sporting events such as the Super Bowl, the NCAA basketball tournament, boxing events, and the United States Open in Flushing Meadows, New York.

[/ QUOTE ]
A nice little AC tidbit:
[ QUOTE ]
Casinos in New Jersey were prohibited from transferring cash comps to patrons during the subject years. Trump and petitioner used the automobile comps to attempt to circumvent this prohibition.

[/ QUOTE ]
Here is why these 'comps' are taxable:
[ QUOTE ]
Trump "purchased" the automobiles on behalf of petitioner, and petitioner contemporaneously "sold" the automobiles for cash

[/ QUOTE ]

So as I said previously, if you are using FPPs for IPODs, and turning around and selling them on EBAY, that is taxable. If you get a Book, and IPOD, and a TV for your bathroom -- those are non-taxable rebates.

I also notice Trump got nailed by the AC Gambling Commission, too much of this was too direct in the way of cash. Car repairs, transfer fees paid, etc. As I also said, if you get comped directly in cash (ie. the FPPs for cash bonus) it is taxable.

Anybody have this guy's address? He sounds like a BALLA HOLLA boy.

Wynton

02-02-2007, 11:02 AM

I just want to thank Russ personally for writing this part. I have no idea how this myth got created, and I've been trying to correct people every time I see it

"Myth #12. The IRS can’t share information from my tax return with other government agencies because of the “Silver Platter” doctrine. Another falsehood. As noted above, the IRS routinely shares information with state tax agencies. In Garner v. United States (424 U.S. 648 (1976)) the Court held that the occupation listed on a tax return can be shared. If you are foolish enough to list your occupation on your tax return as “illegal drug dealer,” the IRS can forward your name to other law enforcement agencies."

DING-DONG YO

02-02-2007, 11:08 AM

[ QUOTE ]
[ QUOTE ]
In that example, you should use a schedule C.

[/ QUOTE ]
But you can only use a Schedule C if you're a professional.

It's possible for some online gamblers to have fairly ridiculous "Other Income" and "Gambling Loss" deductions. Take an online SNG player, who plays 30 $100 SNGs a day. He could have $100,000 in income and $80,000 in losses. Suddenly some deductions that individual (who hypothetically can't file as a professional) had are gone.

The Tax Code isn't fair. But how you are supposed to treat gambling for the non-professional is very, very clear.

-- Russ Fox
co-author, "Why You Lose at Poker"

[/ QUOTE ]

this has probably been addressed already in the thread, so forgive me.

I agree that how you are supposed to treat gambling for the non-pro is clear.

What is not near as clear is how to decide if you are or are not a professional. My point in the example above is that, if your play results in numbers such as these, I do not think you would have a very difficult time in filing as a professional.

Russ, I think you missed what I was saying.

ozziepat

02-02-2007, 11:43 AM

Forest vs Trees

It's all too easy to get lost in the tax code. Here is some simple, common sense advice:

1. File a return, especially if you have ever previously filed a return of any kind for any amount. Simply filing evidences good faith of a sort and avoids leaving a "hole" in your tax history.

2. Keep records. Bad records are better than no records. Good records are highly preferred. If you are audited, and have no records, you might find some arbitrary guidelines being applied and have no way to fight them.

3. Pay a professional tax preparer, and I do not mean H&R Block. An accountant who is already familiar with gambling-related tax regulations would be best. Otherwise find a smart, capable accountant who is willing to learn. Then stick with them. This is money well-spent even if gambling income/loss is only a fraction of your total financial picture.

4. The typical outcome from a "mistake" found in the IRS' favor on a return is payment of amount due with some percentage tacked on as a penalty. You do not, however, ever want to be flagged as someone who habitually and beneficially errs in his/her favor.

Remember: In the US (but NOT in many other countries), tax evasion is a crime, tax avoidance is your patriotic duty. As a taxpayer, you are entitled to decide in your favor in borderline (do I declare/pay or don't I) cases. Problem is, unless you are an expert in the field of current relevant tax law, you aren't a good judge of this - another reason to have sound professional advice. Blog forums, however well-intentioned, do not substitute. And in closing, don't depend on the IRS for information either. Their personnel are notorious for being inconsistent with the advice they hand out over the phone.

Russ Fox

02-02-2007, 02:29 PM

I'm going to reply to a bunch of things in this thread. I'll probably miss an item or two, but I'm busy...doing tax returns, so forgive me.

1. The $1 MM gross winnings and $999,000 losses. If someone runs up such ridiculous totals, they may be gambling in a full-time way, and be able to file as a professional.

Let's take an example of an attorney, making $250,000/year. He has netted $1,000 from his online gambling, playing 16 $115 turbo SNGs a night, and barely eeking out a profit. He has those ridiculous numbers. If he were audited, and he had filed as a professional, that probably wouldn't hold up.

Of course, he might net the numbers (which he is not able to do legally), and get away with it. Because I am a licensed, professional tax preparer, on a public forum I cannot advise anyone to act contrary to the Tax Code.

2. Many people aren't declaring their gambling income. Of course that's the case. But the Tax Code is quite clear that all gambling winnings, from $1 up, are taxable. And those who lost money still must declare their winnings. There was a Tax Court case a couple of years ago about that.

3. Are comps taxable? Thank you, Broiler, for posting the link to Libutti v. Commissioner. As the Court noted in the case, it's gains from gambling that are taxable, not winnings. If you go to a casino, and they give you a comped lunch which you eat, there's no gain. If you sell the comp (and the casino allows that) to John Doe for $20, you've made $20 in taxable income.

If a casino gives you a Rolls Royce as an enticement to gamble, that's a pretty big gain.

4. You make a mistake on your return; what kind of penalties? There are thousands upon thousans of errors made annually on tax returns. Many are math mistakes; some are forgetting a W-2 or 1099-MISC, etc. Almost everyone who makes such an error will get a notice in the mail, the error will be pointed out, and you can agree with the IRS and pay the additional tax and interest (and possibly a small penalty) or you can disagree and point out why.

You're not going to jail for that.

And you're not going to go to jail if you honestly completed your tax forms, and are generally complying with the law. Where you can get into trouble is not counting part of your income due to using one of the frivolous tax protestor arguments (e.g. Wesley Snipes' claim that only foreign income is taxable), deliberately understating your income by a large percentage (e.g. you show income of $100,000, but you won $200,000 more playing poker), etc.

Let's say that today is the first time you realized that your $200,000 in gambling winnings from 2005 is taxable. If you amend your return, pay the additional tax, interest, and penalties, you will likely just suffer a monetary penalty. If the IRS finds you, then you could face a worse situation.

I think that's it for today. I'll try to respond to additional questions/issues daily. Sorry if I missed something.

-- Russ Fox

NOTE: This opinion is limited to the one or more Federal tax issues addressed in the opinion. Additional issues may exist that could affect the Federal tax treatment of the transaction or matter that is the subject of this opinion and the opinion does not consider or provide a conclusion with respect to any additional issues. With respect to any significant Federal tax issues outside the limited scope of this opinion, the article was not written, and cannot be used by the taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer.

EMc

02-02-2007, 02:37 PM

[ QUOTE ]

3. Are comps taxable? Thank you, Broiler, for posting the link to Libutti v. Commissioner. As the Court noted in the case, it's gains from gambling that are taxable, not winnings. If you go to a casino, and they give you a comped lunch which you eat, there's no gain. If you sell the comp (and the casino allows that) to John Doe for $20, you've made $20 in taxable income.

If a casino gives you a Rolls Royce as an enticement to gamble, that's a pretty big gain.

[/ QUOTE ]

Russ,

Im pretty sure that the comp is still taxable but not as gambling income.

Mathemagician

02-02-2007, 02:50 PM

[ QUOTE ]
3. Are comps taxable? Thank you, Broiler, for posting the link to Libutti v. Commissioner. As the Court noted in the case, it's gains from gambling that are taxable, not winnings. If you go to a casino, and they give you a comped lunch which you eat, there's no gain. If you sell the comp (and the casino allows that) to John Doe for $20, you've made $20 in taxable income.

If a casino gives you a Rolls Royce as an enticement to gamble, that's a pretty big gain.

[/ QUOTE ]What if you eat it?

M

cardcounter0

02-02-2007, 03:10 PM

[ QUOTE ]
[ QUOTE ]

3. Are comps taxable? Thank you, Broiler, for posting the link to Libutti v. Commissioner. As the Court noted in the case, it's gains from gambling that are taxable, not winnings. If you go to a casino, and they give you a comped lunch which you eat, there's no gain. If you sell the comp (and the casino allows that) to John Doe for $20, you've made $20 in taxable income.

If a casino gives you a Rolls Royce as an enticement to gamble, that's a pretty big gain.

[/ QUOTE ]

Russ,

Im pretty sure that the comp is still taxable but not as gambling income.

[/ QUOTE ]

Im pretty sure that you didn't read Libutti v. Commissioner.

NickMPK

02-02-2007, 03:32 PM

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]

3. Are comps taxable? Thank you, Broiler, for posting the link to Libutti v. Commissioner. As the Court noted in the case, it's gains from gambling that are taxable, not winnings. If you go to a casino, and they give you a comped lunch which you eat, there's no gain. If you sell the comp (and the casino allows that) to John Doe for $20, you've made $20 in taxable income.

If a casino gives you a Rolls Royce as an enticement to gamble, that's a pretty big gain.

[/ QUOTE ]

Russ,

Im pretty sure that the comp is still taxable but not as gambling income.

[/ QUOTE ]

Im pretty sure that you didn't read Libutti v. Commissioner.

[/ QUOTE ]

Libutti (from skimming the link) holds that the comps were gambling income. The issue was not whether they were income, but whether they were gambling winnings or some other type of income. Libutti won the case, which allowed him to deduct his gambling losses and effectively not have to pay taxes on the comps.

But the reason you don't have to pay tax on a comped lunch has nothing to do with this case. A comped lunch is de minimus; it is too small for the tax code to be concerned with. The comps in Libutti were worth thousands of dollars, far different from the comps the average recreational gambler gets.

kutuz_off

02-02-2007, 03:48 PM

[ QUOTE ]
I used to get RFB + Airfare to Las Vegas comped to me. If the casino made the air ticket arrangements, it is a comp and not taxable. If I bought the plane ticket and the casino hands me cash to reimburse me for the airfare, it is taxable.

[/ QUOTE ]

In the latter case, couldn't you deduct the price of plane ticket as gambling-related expense anyway? I mean, it adds to your gross income and deductions, which may or may not have consequences, but it still nets to essentially zero, right?

More general questions - I logged about 1500 hours playing online poker in year 2006. Am I eligible to file as a professional? Also, my online poker records show a healthy net profit, while offline poker records show a lot of large negative sessions. Obviously, online sessions are easier to trace than offline ones. Would that make IRS suspicious? My offline records only show date and name of the Casino and the game played. In a few cases, I have tournament entry receipts, but for cash games I got no proof.

Another question - I won a qualifier in 2006 to a live tournament in 2007. I don't think the value of the seat is taxable in 2006, since it has no cash value, can't be transferred or sold, etc. I cashed in the tournament, and I believe I now owe taxes on the full value of the gross prize less transportation expenses, but it's for year 2007. Is that correct?

EMc

02-02-2007, 03:48 PM

cardcounter0

02-02-2007, 04:19 PM

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
[ QUOTE ]

3. Are comps taxable? Thank you, Broiler, for posting the link to Libutti v. Commissioner. As the Court noted in the case, it's gains from gambling that are taxable, not winnings. If you go to a casino, and they give you a comped lunch which you eat, there's no gain. If you sell the comp (and the casino allows that) to John Doe for $20, you've made $20 in taxable income.

If a casino gives you a Rolls Royce as an enticement to gamble, that's a pretty big gain.

[/ QUOTE ]

Russ,

Im pretty sure that the comp is still taxable but not as gambling income.

[/ QUOTE ]

Im pretty sure that you didn't read Libutti v. Commissioner.

[/ QUOTE ]

Im pretty sure I did a report on it, and was confirming that while not gambling income the comps were still income.

[/ QUOTE ]

Im pretty sure you didn't do too well on the report, because that was exactly what the court found, the comps were gambling gains that could be offset by gambling loss deductions. If the comps were some other type of income, they could not have been offset by gambling losses.

cardcounter0

02-02-2007, 04:30 PM

[ QUOTE ]
In the latter case, couldn't you deduct the price of plane ticket as gambling-related expense anyway? I mean, it adds to your gross income and deductions, which may or may not have consequences, but it still nets to essentially zero, right?

[/ QUOTE ]
If you file as a pro, yes the cost of the trip is a business expense.

[ QUOTE ]
More general questions - I logged about 1500 hours playing online poker in year 2006. Am I eligible to file as a professional?

[/ QUOTE ]
There is a list of about 10 factors used to determine if you are a pro. Consult a tax pro or maybe Russ can write an article showing what the IRS uses to determine this.

[ QUOTE ]
Also, my online poker records show a healthy net profit, while offline poker records show a lot of large negative sessions. Obviously, online sessions are easier to trace than offline ones. Would that make IRS suspicious? My offline records only show date and name of the Casino and the game played. In a few cases, I have tournament entry receipts, but for cash games I got no proof.

[/ QUOTE ]
Do you have a player's card? How about dropping by the gift shop and picking up a key chain. Keep the reciept. It shows you were at the casino when your log says you were. This will boost your log along with tourney entry receipts.

[ QUOTE ]
Another question - I won a qualifier in 2006 to a live tournament in 2007. I don't think the value of the seat is taxable in 2006, since it has no cash value, can't be transferred or sold, etc. I cashed in the tournament, and I believe I now owe taxes on the full value of the gross prize less transportation expenses, but it's for year 2007. Is that correct?

[/ QUOTE ]
Depends. Are you sure the seat had no cash value? Could people enter the tourney in 2007 directly with cash? Then what you won in 2006 had a value, since you did play in the tourney. Also what you won in 2007 is minus the value of the entry -- if what you won in 2006 had value.

Lottery Larry

02-02-2007, 04:39 PM

talk about laughable:

"Also, most of the "definitive" interpretations of a session are laughable since the wording was clearly constructed in relation to B&M games"

hmmm, I wonder why that was......?

"make a list of the countless thousands who were audited after making a good faith claim on internet poker winnings"

Are you trying to say that we "paranoid" posters are claiming that less-than-complete records will TRIGGER an IRS audit?

I can look around my neighborhood and see lots of crack dealers. Just because I don't see most of them not getting busted doesn't mean:

a) They won't get busted, with potentially serious consequences (you can define "serious" in our audit context)

b) They aren't doing something illegal.

The problem that I and evidently others have is non-professionals telling people that they can just smooth things over with a "but I tried my best, since I didn't keep records in the first place" defense.

We are not saying that you're going to jail for 20 years and paying $1M in fines for bad records. But people telling others that they don't need to keep reasonable records because they don't run a big risk of getting caught is foolish and objectionable.

I can tell you that there's big money in being a crack dealer and you're unlikely to get caught if you don't get too big or are careful. That still makes you a crack dealer and you're still at risk.

Lottery Larry

02-02-2007, 04:39 PM

Boy, was the title of THIS post way off base....

Lottery Larry

02-02-2007, 04:44 PM

[ QUOTE ]
I just want to thank Russ personally for writing this part. I have no idea how this myth got created, and I've been trying to correct people every time I see it

"Myth #12. The IRS can’t share information from my tax return with other government agencies because of the “Silver Platter” doctrine. Another falsehood. As noted above, the IRS routinely shares information with state tax agencies. In Garner v. United States (424 U.S. 648 (1976)) the Court held that the occupation listed on a tax return can be shared. If you are foolish enough to list your occupation on your tax return as “illegal drug dealer,” the IRS can forward your name to other law enforcement agencies."

[/ QUOTE ]

Mine also- I had the same impression about the silver platter concept. I thought that was the IRS' slick plan to get more money reported, without someone having to admit to being a criminal.

If the gubbermint ever gets around to making playing poker online illegal, rather than just trying to cut off the revenue stream..... it's going to be a tough sell of the "report your illegal income" message.

E.Z.

02-02-2007, 09:21 PM

i need some help guys and wonder who much trouble my relative may be in.

"Slot machines. A record of the machine number and all winnings by date and time the machine was played."

my grandma has a theory to put $5 in each slot in the casino. she stops when she loses it or stops when she runs it up to $50 or more. she claims this way she doesn't get mad or think one machine is better than the other. and she says it is fun, great exercise and i nice way to meet wealthy men. and claims this style of play makes her lose less money. in fact... she claims she breaks even.

so, i told her that she has about 200 (instead of 1) sessions a day X 150 days a year ( she loves those slots) +30,000 sessions a year X $5 = $150,000

i personally think she loses a little so I'll guess she has winning sessions of 74,000 and losses of 76,000. when i asked to see her 30,000 sessions with all the usual info that everyone has, like:

1.The date and type of your specific wager or wagering activity.

2.The name and address or location of the gambling establishment.

3. The names of other persons present with you at the gambling establishment.

4. Slot machines. A record of the machine number

she nearly fell out of her rocker. i then went on to tell her that perhaps leave the country or turn herself in downtown. she began to panic and then called all her friends and even a old college sweetheart ( who worked for the IRS for 30 years) and they all told her that they sometimes forget to right down all the slot machine numbers too. because she has trouble writing (30,00 sessions is alot of writing) she now bets on the horses for fun so she can keep better records.

she is rather silly with how she bets. instead of picking a winner, she picks 2 losing horses and bets $10 on all the other horses. i keep telling her the odds are impossible to win doing it this way. she replies " well, this way i can keep all my tickets together come 2007 tax season." As of Feb 1st she is down almost 5K this year on horses and has had wagers of 100,000 total already in a month. i fear the losing may continue and that come tax time she may have to pay a professional accountant way too much money to sift through her 1.2 million in wagers. it's a real mess, i wish she could still play the slots she loved so much without having to worry about jail time since she is a losing player.

on a side note. i know longer play heads up turbo tournaments on Doyle's ( played about 15-20 an hour) since reading these rules cause i was on pace to wager 10 million this year while hardly turning a profit when i wasn't reporting everything to the IRS. I'm not a tax man but reporting 10 million between wins/losses would have raised some flags and perhaps drawn more attention to my life long hero ( my grandma)

thank you for your time..

ez

Lottery Larry

02-02-2007, 09:30 PM

Nicely done :P

AmIAFishy2?

02-02-2007, 11:36 PM

efficacy

02-03-2007, 08:57 AM

[ QUOTE ]
I think 95% of these people don't have any record of their "sessions". Aren't most people who do any gambling violating the law when they prepare their taxes?

[/ QUOTE ]

First of all, there is no law saying that we have to pay federal income tax.

Lottery Larry

02-03-2007, 11:32 AM

[ QUOTE ]
[ QUOTE ]
I think 95% of these people don't have any record of their "sessions". Aren't most people who do any gambling violating the law when they prepare their taxes?

[/ QUOTE ]

First of all, there is no law saying that we have to pay federal income tax.

[/ QUOTE ]

Then, why can people go to jail for tax evasion?

joe c

02-03-2007, 04:48 PM

efficacy

02-03-2007, 06:51 PM

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
I think 95% of these people don't have any record of their "sessions". Aren't most people who do any gambling violating the law when they prepare their taxes?

[/ QUOTE ]

First of all, there is no law saying that we have to pay federal income tax.

[/ QUOTE ]

its called section 1 of the tax code. just because some moran made a movie claiming there isn't a law requiring individuals to pay federal income tax, doesn't mean he's correct.

[/ QUOTE ]

show me the law.

damaniac

02-03-2007, 06:53 PM

sports_quant99

02-03-2007, 08:25 PM

[ QUOTE ]
I just want to thank Russ personally for writing this part. I have no idea how this myth got created, and I've been trying to correct people every time I see it

"Myth #12. The IRS can’t share information from my tax return with other government agencies because of the “Silver Platter” doctrine. Another falsehood. As noted above, the IRS routinely shares information with state tax agencies. In Garner v. United States (424 U.S. 648 (1976)) the Court held that the occupation listed on a tax return can be shared. If you are foolish enough to list your occupation on your tax return as “illegal drug dealer,” the IRS can forward your name to other law enforcement agencies."

[/ QUOTE ]

Hmmmm.... Russ, are you sure you're correct on this? I thought the IRS could only share info if you incriminate yourself, waiving your 5th amendment rights.

NickMPK

02-03-2007, 08:42 PM

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
I think 95% of these people don't have any record of their "sessions". Aren't most people who do any gambling violating the law when they prepare their taxes?

[/ QUOTE ]

First of all, there is no law saying that we have to pay federal income tax.

[/ QUOTE ]

its called section 1 of the tax code. just because some moran made a movie claiming there isn't a law requiring individuals to pay federal income tax, doesn't mean he's correct.

[/ QUOTE ]

show me the law.

[/ QUOTE ]

26 USC sec. 1:

§ 1. Tax imposed

(a) Married individuals filing joint returns and surviving spouses
There is hereby imposed on the taxable income of—
(1) every married individual (as defined in section 7703) who makes a single return jointly with his spouse under section 6013, and
(2) every surviving spouse (as defined in section 2 (a)),
a tax determined in accordance with the following table:

If taxable income is: The tax is:
Not over $36,900 15% of taxable income.
Over $36,900 but not over $89,150 $5,535, plus 28% of the excess over $36,900.
Over $89,150 but not over $140,000 $20,165, plus 31% of the excess over $89,150.
Over $140,000 but not over $250,000 $35,928.50, plus 36% of the excess over $140,000.
Over $250,000 $75,528.50, plus 39.6% of the excess over $250,000.

(b) Heads of households
There is hereby imposed on the taxable income of every head of a household (as defined in section 2 (b)) a tax determined in accordance with the following table:

If taxable income is: The tax is:
Not over $29,600 15% of taxable income.
Over $29,600 but not over $76,400 $4,440, plus 28% of the excess over $29,600.
Over $76,400 but not over $127,500 $17,544, plus 31% of the excess over $76,400.
Over $127,500 but not over $250,000 $33,385, plus 36% of the excess over $127,500.
Over $250,000 $77,485, plus 39.6% of the excess over $250,000.

(c) Unmarried individuals (other than surviving spouses and heads of households)
There is hereby imposed on the taxable income of every individual (other than a surviving spouse as defined in section 2 (a) or the head of a household as defined in section 2 (b)) who is not a married individual (as defined in section 7703) a tax determined in accordance with the following table:

If taxable income is: The tax is:
Not over $22,100 15% of taxable income.
Over $22,100 but not over $53,500 $3,315, plus 28% of the excess over $22,100.
Over $53,500 but not over $115,000 $12,107, plus 31% of the excess over $53,500.
Over $115,000 but not over $250,000 $31,172, plus 36% of the excess over $115,000.
Over $250,000 $79,772, plus 39.6% of the excess over $250,000.

(d) Married individuals filing separate returns
There is hereby imposed on the taxable income of every married individual (as defined in section 7703) who does not make a single return jointly with his spouse under section 6013, a tax determined in accordance with the following table:

If taxable income is: The tax is:
Not over $18,450 15% of taxable income.
Over $18,450 but not over $44,575 $2,767.50, plus 28% of the excess over $18,450.
Over $44,575 but not over $70,000 $10,082.50, plus 31% of the excess over $44,575.
Over $70,000 but not over $125,000 $17,964.25, plus 36% of the excess over $70,000.
Over $125,000 $37,764.25, plus 39.6% of the excess over $125,000.[/i]

break0ut

02-04-2007, 12:03 AM

Hi guys/gals, just chiming in here. I am a 5th yr. Accounting student (CPA eligible) and am a certified tax preparer. I would be more than happy to assist in answering questions so don't hesitate to post or PM me.

Josem

02-04-2007, 12:53 AM

lol@ this thread.

y'all should really look at migrating somewhere with simpler tax codes.

as an outsider (from a country where a pro-player would, i think, just submit their net, and an amateur be tax free) you really should consider the costs of maintaining records like the IRS apparently want.

(there may be residual tax obligations if you do move. look into it)

Russ Fox

02-04-2007, 02:11 AM

[ QUOTE ]
Hmmmm.... Russ, are you sure you're correct on this? I thought the IRS could only share info if you incriminate yourself, waiving your 5th amendment rights.

[/ QUOTE ]

I'm sure about this. Although you are supposed to put down your occupation, if you're in an illegal occupation you should "adjust" what you do. Businessman, salesperson, etc. are legal occupations. You're not required to incriminate yourself (note: I'm not an attorney, but that was the Supreme Court's ruling).

There are two cases that I'm aware of regarding occupation. The first was a bookmaker in Kentucky who put down as his occupation "bookmaker." (No, he wasn't in the publishing business; he really was a sports betting bookmaker.) He sent in his tax return, someone at the IRS forwarded the information that he might be a bookmaker to the FBI. The FBI investigated, found he was a bookmaker. He was arrested and convicted. The appeals court basically said that there was no problem with the IRS forwarding his name to the FBI.

There's a similar case that I've heard about (but have never seen) dealing with a bank robber in Iowa.

Those engaged in illegal occupations are not forced to self-incriminate themselves by listing their 'true' occupations on their tax returns. Indeed, the IRS has special procedures for individuals paying the excise tax on wagering; their names cannot be forwarded to law enforcement.

-- Russ Fox
co-author, "Why You Lose at Poker"

Wynton

02-04-2007, 10:27 AM

[ QUOTE ]

Those engaged in illegal occupations are not forced to self-incriminate themselves by listing their 'true'

[/ QUOTE ]

I'm not sure what you mean exactly here. If someone lists their occupation so as to indicate an illegal activity, that evidence will be admissible in court, even if they claim they were forced to incriminate themselves. To put it differently, I don't believe a court would accept the argument that this was some kind of coerced statement (for a hard or difficult choice does not make it involuntary).

Perhaps you are suggesting that a person cannot get in trouble by indicating the wrong occupation?

In any event, I have no doubt that the IRS may forward its files to law enforcement agencies.

sports_quant99

02-04-2007, 11:51 AM

[ QUOTE ]
[ QUOTE ]
Hmmmm.... Russ, are you sure you're correct on this? I thought the IRS could only share info if you incriminate yourself, waiving your 5th amendment rights.

[/ QUOTE ]

I'm sure about this. Although you are supposed to put down your occupation, if you're in an illegal occupation you should "adjust" what you do. Businessman, salesperson, etc. are legal occupations. You're not required to incriminate yourself (note: I'm not an attorney, but that was the Supreme Court's ruling).

There are two cases that I'm aware of regarding occupation. The first was a bookmaker in Kentucky who put down as his occupation "bookmaker." (No, he wasn't in the publishing business; he really was a sports betting bookmaker.) He sent in his tax return, someone at the IRS forwarded the information that he might be a bookmaker to the FBI. The FBI investigated, found he was a bookmaker. He was arrested and convicted. The appeals court basically said that there was no problem with the IRS forwarding his name to the FBI.

There's a similar case that I've heard about (but have never seen) dealing with a bank robber in Iowa.

Those engaged in illegal occupations are not forced to self-incriminate themselves by listing their 'true' occupations on their tax returns. Indeed, the IRS has special procedures for individuals paying the excise tax on wagering; their names cannot be forwarded to law enforcement.

-- Russ Fox
co-author, "Why You Lose at Poker"

[/ QUOTE ]

That's my point. So the silver platter doctrine *does* apply, as long as you dont incriminate yourself (?)

joe c

02-04-2007, 01:03 PM

Lottery Larry

02-04-2007, 01:35 PM

THANK you, joe.

Lottery Larry

02-04-2007, 01:37 PM

[ QUOTE ]
you really should consider the costs of maintaining records like the IRS apparently want.

[/ QUOTE ]

talk about LOL- the "costs of maintaining records"? How hard/expensive do you think that actually is?

It's simple, really. Anyone who has more than 10 posts in a month on this forum can't claim they don't have enough time to keep records, even for online play.

mwgr5

02-04-2007, 02:29 PM

So to clarify, if I am playing say 5 tables of a cash game in "one sitting" during one day, I would have played one session and thus would report the net winnings or loses from that session. Or is each table I played considered an individual session?

adanthar

02-04-2007, 03:04 PM

Lottery Larry

02-04-2007, 03:26 PM

[ QUOTE ]
So to clarify, if I am playing say 5 tables of a cash game in "one sitting" during one day, I would have played one session and thus would report the net winnings or loses from that session. Or is each table I played considered an individual session?

[/ QUOTE ]

I assume you're talking about online. Yes, as I read the IRS regulations listed, each table is an individual session in B&M and therefore will be treated the same in virtualland.

If and when the IRS comes out with specific online poker details, I think that's the only safe (and most accurate) way to interpret the existing requirements.

Personally, I doubt that the IRS is going to write clear guidelines about online gambling any time soon, given the current DOJ stance and legal environment.

Now, to be clear, I'm pretty sure you're not required to send in the detailed session breakdown with your tax return each year. These are records to back up your summed miscellaneous income and gambling deductions, if the IRS would ever come calling.

cardcounter0

02-04-2007, 03:32 PM

[ QUOTE ]
Yes, as I read the IRS regulations listed, each table is an individual session in B&M and therefore will be treated the same in virtualland.

[/ QUOTE ]

That is a big stretch. Most people use only 1 computer monitor.
/images/graemlins/wink.gif

Lottery Larry

02-04-2007, 03:34 PM

[ QUOTE ]

[/ QUOTE ]

That is a big stretch. Most people use only 1 computer monitor.
/images/graemlins/wink.gif

[/ QUOTE ]

smartass :P

Lottery Larry

02-04-2007, 03:46 PM

[ QUOTE ]
Russ Fox maintains that this would be five sessions. I strongly disagree with this and I think if it ever got to court I would be proven correct. YMMV.

[/ QUOTE ]

Strongly disagree based on what, exactly? I couldn't find anything but this:

"-List cash per 'time spent at the computer on each site'. If I play on Stars for 2 hours, I list the minutes I spent (roughly), stakes, and what I won/lost, taken from the cashier. I'm not about to track this for each of the 4-6 tables I play 10-100 hands on at any given time, especially since I usually play on Small Site X rather than Stars, and I think this is as much of a requirement as a court will ever impose on a *recreational gambler* "

Can you match this presumption up with the details in my post below?

http://forumserver.twoplustwo.com/showthreaded.php?Cat=0&Number=9011290&page=0&vc=1

How about some examples of what you might do?

Let say you play three $3/6 tables, one $10/20 table (major fish schooling, you took a shot), a $1-5 table and four $4/8 tables in your 2 hours on Stars? (I'm making up the table limits, don't be picky).

What example record would you put together?

I still don't see what's so hard about several entries such as this:

Table 33245983824
Start time: 21:04
End time: 21:40
Limit: $X/X
Buy-in :
Cash out:
Amount won/lost $15,250 (someone autoraised you with the second-straight flush /images/graemlins/wink.gif

Online, you could have a preconfigured spreadsheet open and take a few seconds, in between folded hands, to do this. It should be much simplier than B&M.

Hell, it would sum ongoing totals for you, if you spend the time beforehand to set it up. That would probably be a good tool for an online gambler to use, removing all questions about how you are doing at a particular game level.

adanthar

02-04-2007, 04:37 PM

Larry,

The problems with doing it that way are as follows:

-I don't play cash on Stars. Rather, I play it on, by and large, sites with no PT support (and in some cases with no saved hand histories at all). That removes the PT tracking option, which makes this an order of magnitude more complicated.

-I don't usually play at different stakes (although when I do, I do usually differentiate them out for other recordkeeping purposes.) Instead, much like 90% of the online pro population, I play, say, 4 tables of the same stakes (or 6, or 8, or 12.) However, I don't spend the entire session at each table because they open and close frequently, fish leave, etc., so each 3 hour session of '4 tabling' more frequently has 8-10 tables listed. One or two of these might've been open for 3 hours, one or two might've been open for 3 hands, and the rest are in between.

-Of course, if we're 12 tabling, this gets an order of magnitude more complicated; anything over 6 tables means that you cannot even record the table you just closed before 3 others are beeping at you. Even if we're merely 6 tabling, at this point, the recordkeeping takes up as much attention as playing the game.

-The crux of the issue is what the word 'session' means. It is indisputable that a 'session' at B&M is different than a 'session' on the Internet, and that, in common trade usage, a 'session' online has come to mean "X hours of sitting at a computer playing Y tables at Z stakes". The IRS guideline for a session accurately sums up a B&M pro's session; however, no reasonable Internet poker player, recreational or pro, would sit down at his computer, open up 8 tables, play for 4 hours, carefully sum up his records and deduce that he has played 47 different sessions during this time period. This is not meaningless, and, in fact, is often how a court will resolve a dispute in a contract matter where a single word determines the outcome.

Also, keep in mind that this logbook is not the only piece of evidence you have in an audit; it will be supported by the site's cashier tab, which is incontrovertible evidence as to the maximum amount of money you have ever made at that site. At this point, there is no room left to disallow losses, so the only thing that the worst IRS agent in the world can quibble over is the amount of gross profit - losses, which the logbook should be more than detailed enough to overcome.

I_C_ALL

02-04-2007, 04:47 PM

Just wanted to add that I've read setting up a corporation(S election or LLC) may "aid" in proving the gambling is professional. There would obviously need to be a profit(I read somewhere about 3 years worth), but this method would also decrease the self-employment tax burden. You are only required to pay self-employment tax on the amount you take as a salary. This can usually cut the amount of self-employment tax in half or quarter depending on how aggressive you want to be.

I'm told by CPAs that corporations are handled separately(1120S)from individual returns(1040) and that they are SIGNIFICANTLY less likely to be audited. I AM NOT RECOMMENDING NON-COMPLIANCE, but I would much rather pay my "fair share" and NOT get audited than try to argue with a grumpy agent about the definition of a session, not to mention the cost and stressed involved in an audit.

boondoggle

02-04-2007, 04:47 PM

Why don't the tax nazis just give information and let us decided what to do...thanks.

cheers
Boon

NickMPK

02-04-2007, 04:59 PM

Aren't taxpayers allowed to resolve ambiguities in the tax law in their favor? It seems like since "session" isn't defined, each taxpayer could define it in any reasonable way they like.

Lottery Larry

02-05-2007, 05:47 PM

I didn't realize online play was so chaotic/fluid. Given that description, it does sound very difficult to match the table=session definition in the IRS regs.

Maybe an online session could be X hours played at one level?

I played at tables 23, 34, 45 and 38 for 3 hours ($3/6 level) and won $X amount? That might work for the IRS, who knows?

If anyone has discussed this with the IRS, or a CPA that isn't telling you to net wins/losses or not report at all, let us know.

adanthar

02-05-2007, 05:56 PM

[ QUOTE ]
I didn't realize online play was so chaotic/fluid. Given that description, it does sound very difficult to match the table=session definition in the IRS regs.

Maybe an online session could be X hours played at one level?

I played at tables 23, 34, 45 and 38 for 3 hours ($3/6 level) and won $X amount? That might work for the IRS, who knows?

[/ QUOTE ]

That's basically what I do (I don't list individual tables, but do sort it by stakes - it doesn't add much complexity and I like knowing how I'm doing at each level.) Basically, doing less than this doesn't pass the smell test, but doing more than that is not merely ridiculous; IMO, it even calls into question whether you're a recreational gambler or a pro (because is a guy who plays as a hobby really going to list everything in that much detail?)

Anyway, compared to the 9/10 people that are netting gambling wins/losses entirely because their CPA's tell them to (lol), anyone who keeps an Excel sheet is pretty much going to be viewed as making a good faith effort.

ThreePutt

02-06-2007, 06:35 PM

OK, that generates another question. Does your log need to be a hand-written log or can it be an Excel spreadsheet? I believe the IRS regs indicate a hand-written log but again I imagine this was something that written well before the proliferation of PCs. If we're expected to follow rules that clearly were not written for online poker do we also need to follow the letter of the law on this?

adanthar

02-06-2007, 07:02 PM

No. Electronic records are fine.

Russ Fox

02-06-2007, 09:34 PM

[ QUOTE ]
No. Electronic records are fine.

[/ QUOTE ]

Sorry. For brick and mortar play, you need a "contemporaneously written log." That's what the IRS regulations specify.

There have been no cases about online play. Given its nature, I believe that electronic records are just fine for online play.

If you make a good-faith effort, you won't be held liable for most penalties. Good faith effort includes advice from tax professionals in most cases. However, the Tax Court and the Courts of Appeal have ruled in numerous cases that (1) you're liable for your tax return, and you're supposed to review it for accuracy even if it's prepared by a professional, and (2) if you know better than the professional on a specific matter, you can be held liable for penalties.

[ QUOTE ]
So to clarify, if I am playing say 5 tables of a cash game in "one sitting" during one day, I would have played one session and thus would report the net winnings or loses from that session. Or is each table I played considered an individual session?

Russ Fox maintains that this would be five sessions. I strongly disagree with this and I think if it ever got to court I would be proven correct. YMMV.

[/ QUOTE ]

I don't think that's the conclusion I reached in my article on "What is a poker session." Indeed, I wrote, "Now, what about an online player playing multiple games at the same time? Take Player E, who plays at one online site. He plays simultaneously at four different virtual tables: Tables 17 & 18 in $1/$2 Texas hold’em games and Tables 19 & 20 in $1/$2 Omaha games. E wins $10 at Table 17, loses $20 at Table 18, wins $30 at Table 19 and loses $5 at Table 20 while playing these tables simultaneously during the same one-hour period.

There are no rules created by the IRS to treat online gambling differently than gambling in a bricks & mortar cardroom. This means that we can apply the above rule. E has two sessions, a loss of $10 in hold’em and a win of $25 in Omaha." You can find more in the article I wrote, available here. (http://www.gambling-law-us.com/Articles-Notes/Gambling-Session.htm)

[ QUOTE ]
First of all, there is no law saying that we have to pay federal income tax.

[/ QUOTE ]

lol. To that individual, if you are caught by the IRS...or I should say when you're caught by the IRS, you will pay your tax, plus interest, plus penalties. When people come to me claiming that there's no income tax, or only foreign income is taxable, I direct them to the Tax Protestor FAQ. (http://evans-legal.com/dan/tpfaq.html) Courts have heard all of these schemes before, and they're not amused at all by them. Wesley Snipes will be discovering that in the coming months.

-- Russ Fox
co-author, "Why You Lose at Poker"

adanthar

02-06-2007, 10:12 PM

[ QUOTE ]
[ QUOTE ]
No. Electronic records are fine.

[/ QUOTE ]

Sorry. For brick and mortar play, you need a "contemporaneously written log." That's what the IRS regulations specify.

[/ QUOTE ]

Right. But 'contemporaneously written' can include Excel, providing, of course, that you are entering your wins/losses immediately after you get back to your house and not six months later.

[ QUOTE ]
[ QUOTE ]
So to clarify, if I am playing say 5 tables of a cash game in "one sitting" during one day, I would have played one session and thus would report the net winnings or loses from that session. Or is each table I played considered an individual session?

Russ Fox maintains that this would be five sessions. I strongly disagree with this and I think if it ever got to court I would be proven correct. YMMV.

[/ QUOTE ]

I don't think that's the conclusion I reached in my article on "What is a poker session." Indeed, I wrote, "Now, what about an online player playing multiple games at the same time? Take Player E, who plays at one online site. He plays simultaneously at four different virtual tables: Tables 17 & 18 in $1/$2 Texas hold’em games and Tables 19 & 20 in $1/$2 Omaha games. E wins $10 at Table 17, loses $20 at Table 18, wins $30 at Table 19 and loses $5 at Table 20 while playing these tables simultaneously during the same one-hour period.

There are no rules created by the IRS to treat online gambling differently than gambling in a bricks & mortar cardroom. This means that we can apply the above rule. E has two sessions, a loss of $10 in hold’em and a win of $25 in Omaha." You can find more in the article I wrote, available here. (http://www.gambling-law-us.com/Articles-Notes/Gambling-Session.htm)

[/ QUOTE ]

My apologies - it looks like we agree on the definitions of a cash game session, at least. I would follow up by saying SNG's in mass quantities aren't discrete events, either, but I do understand where you are coming from.