For pros / Schedule C filers, are you reporting total or using COGS?

[NewGuy]

In "How to Turn Your Poker Playing into a Business" by Ann-Margaret Johnston, she splits gross wins & losses.

The examples in the book have gross wins appearing under Schedule C Line 1 (Gross receipts or sales); "Cost of wagering" (or losses, I would assume) go in Lines 39 "Other costs" which is rolled into Line 42 "Cost of Goods Sold".

Gross profit (Line 5) is then Gross receipts - Cost of Goods sold.

I always assumed that just reporting your net win in Gross receipts (Line 1) and claiming $0 as Cost of Goods Sold (Line 4/42) was acceptable & cleaner.

Any opinions either way?

(FWIW, I should be submitting my forms to a CPA for review tomorrow but he's clueless about filing as a gambling pro so I assume he'll have no real insights on that part of my return. Since taxes are due in 4 days I don't think I'll have the time to line up a gambling taxes expert).

Thanks

[1p0kerboy]

[ QUOTE ]
gross wins appearing under Schedule C Line 1 (Gross receipts or sales); "Cost of wagering" (or losses, I would assume) go in Lines 39 "Other costs" which is rolled into Line 42 "Cost of Goods Sold".

[/ QUOTE ]

This one.

[plasphemy]

I haven't read a book that tells you to Net your winnings under Gross Receipts, they all say to seperate Win/Loss like you are explaning.

In the book I read, RBS Tax Services "The Tax Guide for Gamblers," it says to put your losses under Part V other expenses and seperate it for tournament entries, cash game losses, sports losses, etc. I assume that method is so you can list the expense instead of just saying "other."

[Poker CPA]

Line 1 is net. No ifs, ands or buts

[NewGuy]

[ QUOTE ]
Line 1 is net. No ifs, ands or buts

[/ QUOTE ]

Just to clarify, you are saying that if I have $150k in wins / winning sessions, and $70k in losing sessions, I should choose option 1

1) Put $80k in Line 1 (Gross sales ir receipts)

and NOT option 2 (per Johnston's book) ?
2) $150k in Line 1, - $70k in Line 42 (COGS) = $80k

[plasphemy]

You are contradicting the book I read...
It definitely separated wins and losses. It seems that you would have to... For example, you get $100k in W-2Gs but with tournament entries, your net is $20k. If you netted it, wouldn't that bother the IRS?

[Poker CPA]

Yes, but this is assuming that 80K = 80K.

[Poker CPA]

Screw the books, show me in the IRS regs and code sections. And the OP didn't mention W-2Gs. The only thing that matters is line 63 of the 1040, you don't get bonus points for following books. Line 63 is what we are being paid to do. Presentation is the key. 99% of all penalties are calculated off that line, not Sch C line whatever.

[Poker CPA]

Did you know that the third question, in a "face-to-face" audit, is "Mr Taxpayer is the tax calculated on your return true, accurate and complete and would you like change anything before we start". Tax liability is the key, not neatness. 80K is still 80K.

And BTW if you can't answer the question honestly, get representation.

[plasphemy]

So really... both ways would be fine as far as the IRS is concerned so long as the end result is accurate?

I spent a lot of time seperating wins/loss in PokerTracker. Netting it all on line 1 would have been so much easier.

[Poker CPA]

And if it wasn't fine, what could he do?

For players who feel uncomfortable with this approach, you could include an accompanying schedule, listing wins and losses, but its always "net" on line 1. Good Luck and never file over the internet, mail only baby.

And BTW, an auditor never has the original filed return. He always requests a copy from you. I've been told that some CPAs slip things into the copy, that were not part of the original return. Like elections, schedules and whatnot. I would never do that, but its happened.

[NewGuy]

[ QUOTE ]
never file over the internet, mail only baby.


[/ QUOTE ]
OK, I'll bite. Why not e-file?

[Poker CPA]

Because everything on the return gets dropped into its own little "bucket". This can make the job easier for the IRS computer to select and/or challenge a tax return. Why make it EZ for them and their auditors. Only fools e-file.

[BigAlK]

Normal disclaimers that I'm not an accountant or a tax expert, blah, blah, blah. Didn't even stay at a Holiday Express last night.

However FWIW I havet filled out several schedule Cs for myself and family members. The cost of goods sold lines make sense only if you're selling goods. Any advice that has you filling out this section for a service/entertainment/whatever the hell kind of business a professional gambler fits in doesn't make sense. In fact I'd be inclined to take everything else in the book as suspect based on this advice. COGS only applies to a retail, wholesale, or manufacturing business. Something that actually sells goods.

[NewGuy]

[ QUOTE ]
The cost of goods sold lines make sense only if you're selling goods.

In fact I'd be inclined to take everything else in the book as suspect based on this advice. COGS only applies to a retail, wholesale, or manufacturing business. Something that actually sells goods.

[/ QUOTE ]

That's what I was thinking as I read the sample tax forms in this book. I posted here because the approach in the book seemed counter-intuitive to me as well, and based on this thread (and common sense), I'm just reporting the net on Sched C line 1 (Gross receipts and sales).

On a semi-related note, none of the 6-digit profession codes seem to match so I'm using "999999 (Miscellaneous)" and using "Gaming" as my occupation. Anyone using a different code or have an argument for using a different profession ?

[Poker CPA]

The codes are nothing but trouble, excellent time to make a "honest mistake". 999999 is not smart because it indicates you thought about this code and took action. Dumb people make "honest mistakes". The IRS does not require perfection, just honest and reasonable efforts. 999999 is not reasonable.

[Poker CPA]

Sure as chit, don't use "Gambling/Wagering". Your state should have a definition of gambling and most states "poker" is exempt. Try something connected to your education and schooling. My favorites are "playerpoker", "onlinegaming specialist" and "hostprop". Use your brain.

[NewGuy]

Thanks for the responses.

[ QUOTE ]
The codes are nothing but trouble, excellent time to make a "honest mistake". 999999 is not smart because it indicates you thought about this code and took action. Dumb people make "honest mistakes". The IRS does not require perfection, just honest and reasonable efforts. 999999 is not reasonable.

[/ QUOTE ]

Well believe it or not 999999 (Miscellaneous) WAS my honest effort at pickig the correct category.

Other choices:
1) 711210 Spectator sports (inclusing professional sports clubs and racetrack operations)
2) 711219 Professional athlete (but NAICS definition explicitly states that the sport is performed in front of a paying audience)
3) 713200 Gambling industries (this relates to OPERATING, not playing in gambling establishments)

I'm actually TRYING to be accurate and can't find an appropriate code.

I guess I don't understand what is unreasonable about 999999, and more importantly, why that would/might be a red flag

[NewGuy]

[ QUOTE ]
Sure as chit, don't use "Gambling/Wagering". Your state should have a definition of gambling and most states "poker" is exempt. Try something connected to your education and schooling. My favorites are "playerpoker", "onlinegaming specialist" and "hostprop". Use your brain.

[/ QUOTE ]

I live in MA where gambling / online gambling / poker is not to the best of my knowledge illegal. This may be a dumb question, but what is the downside to filing my occupation as 1) "Professional poker player" or 2) "Professional gambler"?

Alternatively, if there is a downside, it seems like "Gaming professional" seems accurate while less of a red flag, no?

[Poker CPA]

Please "NewGuy", stop it. Use nothing for code.

"This may be a dumb question"

More like STUPID. I know you mean well, but you have your head up your azz.

[Skallagrim]

Id listen to Poker CPA if I were you guys, even if his posts do somewhat reflect him being overworked at this time. /images/graemlins/wink.gif

Remember the bigger picture: what really matters in tax law is paying the correct amount of taxes; dont lie about the numbers and you really have little/nothing to legally worry about.

But with respect to everything else, it pays to be creative and not draw attention to yourself. Since "gaming specialist" is just as true as "professional online poker player" why on earth would anyone choose the latter?

[NewGuy]

[ QUOTE ]
his posts do somewhat reflect him being overworked at this time. /images/graemlins/wink.gif


[/ QUOTE ]

Ya think? I appreciate the help, even if it comes with attitude and mocking.

[ QUOTE ]

Remember the bigger picture: what really matters in tax law is paying the correct amount of taxes; dont lie about the numbers and you really have little/nothing to legally worry about.


[/ QUOTE ]


I'm reporting every dollar I won at online poker. Granted it's a naive question, but this is why I'm unsure about asking why using "professional gambler" is so dumb. I mean STUPID, it's not dumb, it's STUPID Gotta get my head out of my azz I guess. /images/graemlins/wink.gif

[ QUOTE ]

But with respect to everything else, it pays to be creative and not draw attention to yourself. Since "gaming specialist" is just as true as "professional online poker player" why on earth would anyone choose the latter?

[/ QUOTE ]

a) I would never put "online poker player", just "professional gambler" or "poker player"
b) The reason I would choose this over "gaming specialist"? Well, it's more accurate for one thing.

As for the downside... since no one will actually come out and answer my question, I'm guessing you & PokerCPA feel that the IRS is more likely to audit a "professional poker player" than a gaming specialist?

FWIW, I have read absolutely ZERO on this board or elsewhere convincing me I should worry about the legality of my playing online poker in MA. So since I'm not worried about being prosecuted, I can only assume the advantage of all this "creativity" with the profession is to reduce a chance of audit?

[Poker CPA]

Do you have any idea what a audit costs in time and money?

You don't, BECAUSE

First you buy a book on the subject, then wait till April 12th to do tax planning and then you hire a clueless CPA, at $150 an hour. While the free advice isn't quite good enough.

There is a saying for this, "xxxxxx is what xxxxxx does".

And of course you're welcome. Come back anytime.

[NewGuy]

[ QUOTE ]
Do you have any idea what a audit costs in time and money?

You don't, BECAUSE

First you buy a book on the subject, then wait till April 12th to do tax planning and then you hire a clueless CPA, at $150 an hour. While the free advice isn't quite good enough.

There is a saying for this, "xxxxxx is what xxxxxx does".

And of course you're welcome. Come back anytime.

[/ QUOTE ]

1) Yes I am aware how costly an audit is.
2) I am not waiting until April 12th to do tax planning. My taxes were essentially filled out 2 months ago. I thought I would solicit opinions on the last 2 open questions I had remaining - what would be the best 6-digit Business Code and occupation to use on my Schedule C.
3) I am not paying my CPA $150/hour, and he is not clueless in the areas I am hiring him for, he just has limited gambling expertise. I am paying my CPA a reasonable fee to review my overall return and file my taxes, since I have real estate and other investments that make my return more complicated than I would be comfortable doing on my own.
4) I believe twice I indicated that I appreciated your responses... "Thanks for the responses." "I appreciate the help, even if it comes with attitude and mocking."

I'm asking questions like "what is the downside to listing professional gambler?" that may seem stupid or simplistic to you, but they are on the minds of myself as well as 2 or 3 friends who are filing as pros for the 1st time.

You still never specifically stated that listing "professional gambler" as your profession increases the chances of an audit. I read between the lines of the barbs, insults, and sarcasm that you believe that to be true. I'm just looking for a simple answer to what is a simple question.

So just to re-iterate (for the 3rd time), I appreciate the help/advice. There are a lot of differeing opinions on these minor issues related to a Schedule C, and I value your opinion (even if it comes at a non-financial price /images/graemlins/wink.gif)

[Poker CPA]

A "thank you" that comes with a "but" makes people feel warm and fuzzy. Thank you.

[NewGuy]

The 1st thank you didn't, the one after this comment did... "More like STUPID. I know you mean well, but you have your head up your azz. "
Meh, you get what you pay for I guess.

[Poker CPA]

Seriously now. Do you think you have handled this matter in a smart way? It is April 14th and you allowed your clueless CPA to do nothing in regards to these questions. Gee is this what you mean by getting what you pay for?

HE DOESN"T GIVE A CRAP and your current state is proof positive. He needs a kick in the azz and so do you.

ITS Fing APRIL 14th Skippy.

[gurgeh]

[ QUOTE ]
Because everything on the return gets dropped into its own little "bucket". This can make the job easier for the IRS computer to select and/or challenge a tax return. Why make it EZ for them and their auditors. Only fools e-file.

[/ QUOTE ]

Could explain what you mean by this a little more? I work at the IRS and even I'm confused. Of course, I don't work on electronic returns.

[Poker CPA]

Your confused about what?

[Poker CPA]

So Joe you're an IRS tax examiner. The following statement could be taken a lot of different ways. LOL

"I work at the IRS and even I'm confused."

Seriously, I think I know what you mean.

A few questions, if you don't mind.

1. Have you reach the level of having a "gold" or "silver" badge.

2. Have you ever had the need to carry a gun or a weapon in your duties as an IRS employee.

3. Why would anyone want to e-file? And please not the refund stuff, because that situation is just plain irrational. I'll bet you don't overpay your taxes to your "Boss".

4. Are you in the "small business" area. If so, do you consider yourself an expert in "tax accounting" matters?

5. How do you feel about "Neteller" being considered a financial institution?

6. How come IRS agents can't access originally filed returns, thus the need, for US, to provide you copies so you can start your audit.

[Poker CPA]

And just recently was threaten for not providing them in a timely fashion. The agent called back 15 minutes later and apologized, the enevlope was sitting another agent's desk. He was on vacation.

7. How come "in-your-face" audits are way down?

[Poker CPA]

Thank you, in advance, for the effort

[Poker CPA]

8. And the Statute of Limitations. A few helpful hints for our listening audience. And the form that you need to extend it, I understand every agent has a stack of them in his car, next to his bed and even the refrig. Is this your worse nightmare?

9. Appeals officers a pretty good guys, right? But your supervisor is a prick. Be honest now.

[Poker CPA]

10. I mention earlier about about the third question an agent asks in starting an audit. How come the first two questions are always "Where are the cream donuts" and "whats for lunch"?

Seriously, how should a taxpayer, who has done his very best to prepare his return and pay his taxes, answer the first 10 questions on the initial interview and not hurt themselves. Should every answer be qualified with a "Based on my understanding of these fing rules I ------"

[BigAlK]

[ QUOTE ]
10. I mention earlier about about the third question an agent asks in starting an audit. How come the first two questions are always "Where are the cream donuts" and "whats for lunch"?

[/ QUOTE ]

Wow. Did one of the guards get upset about his small tax return and take it out on you?

[Poker CPA]

No the guards all pool the refunds, then divide envenly. Then we play cards.

[BigAlK]

[ QUOTE ]
No the guards all pool the refunds, then divide envenly. Then we play cards.

[/ QUOTE ]

So eventually you get all their money anyway. Sounds like a good deal. /images/graemlins/smile.gif

[Poker CPA]

And the prep fee, use of telephone to check in with "Jabba" and of course, free internet time.

[Jugador]

I'm a bit confused by this as I am using Turbo Tax.
I used "Gaming Specialist" on my Schedule C, but when I leave out the #code I had previously used, it catches this error on error check.

Would leaving the Principal Business Code empty be a bigger flag then using the 9999999 code? Is there a better code I can use?

[Poker CPA]

Based on your reading of the codes, pick one or nothing, but give it an honest effort. Select the one the produces the highest tax liability.

[BigAlK]

[ QUOTE ]
Select the one the produces the highest tax liability.

[/ QUOTE ]

Now you're levelling us.

[Poker CPA]

My mistake. Add the highest and the lowest tax amounts, and the divide by 2. If still not satisfied, then spent $1,000 on an IRS Revenue Ruling, you'll have your answer no later than October 15th.

[Poker CPA]

But you better hurry.

Seriously folks lets wait for our IRS examiner. This should be very helpful and interesting.

[Poker CPA]

And Jugs, Its my opinion that about 20 to 30% of ALL schedule Cs filed, this area is blank because of how confusing the IRS information is. I think an e-filed return gets a 999999 assigned if blank, not so with a "hard" copy. Just my opinion, I hope this helps. Good Luck

[gurgeh]

[ QUOTE ]
Your confused about what?

[/ QUOTE ]

"everything on the return gets dropped into its own little "bucket"."

[Poker CPA]

You answer the questions and I'll tell you about the "buckets". I'm surprised you don't know this. Its an inside joke at the MA office. You know Joe, the Andover office. I think thats the name of it.

[gurgeh]

[ QUOTE ]
You answer the questions and I'll tell you about the "buckets". I'm surprised you don't know this. Its an inside joke at the MA office. You know Joe, the Andover office. I think thats the name of it.

[/ QUOTE ]

You mean the questions that aren't really questions and look like they were written by a ritalin-snorting twelve year old? If you had real questions, I would answer them as best I could. But as someone who spends most of his day correcting math errors and wrong social security numbers, I probably don't have any knowledge that anyone would consider interesting, much less useful.

Dude, just answer the question. If you try to push this off again it makes you look like you're just making stuff up. I already told you I don't work electronic returns, and your description so far doesn't make any sense. If you actually know what you say you know, I'd love to hear why electronic filing is a bad idea, as I think would a number of people.

[Poker CPA]

"Dude, just answer the question"

Boy that has a scary "ring" to it.

"But as someone who spends most of his day correcting math errors and wrong social security numbers,"

Congrats, you're not an auditor. I'm doing you a favor, I'm saving your job. 100% e-file and you're walking to unemployment. But could it be, Dear God I hope so. A PROMOTION to tax auditor, I don't think I could handle your skills (math errors and SS numbers). If only we could go 100% e-file; the GOLD f'ing badge and maybe a gun. I like it, career goals.

Why don't you do everyone a favor and found out if "Neteller" is a financial entity requiring that disclosure form. Do something useful for these posters, they want to do the right thing, Jerk-off.

Now can everyone now see the benefits of NOT filing e-file. The IRS resources needed to check "math errors" and SS numbers will now be turned against honest US taxpayers.

There's not a week that goes by, that I don't think about that poor SOB who commited suicide for the life insurance proceeds, so his wife could pay the IRS collection agents. Can you imagine the pressure that must have been applied?

GFY

[Sniper]

Well, this thread certainly got interesting...

[BigAlK]

[ QUOTE ]
Dude, just answer the question.

[/ QUOTE ]

Ah, Dude, is it really that tough to understand? I can't believe you don't get it. Just in case you're serious I'll spell out what I understand him to be saying. You might be in a better to position to know whether what he's saying is true or not.

If a return is e-filed every field on the form is sent (hence a "bucket" or field for everything). If a paper form is sent in then the only way to get every single number in the computer requires some form of data entry. That might be using OCR (optical character recognition) where possible (I would guess the IRS is using this technology) but in at least some cases (handwritten for sure) it would require someone keying all of the data. If all the data isn't keyed in (maybe only certain key figures are) then that means they'll have less data in the computer. Less data means less specific things to look at to trigger the "this seems out of line" flag and hence less chance of audit.

Technically I'm sure there is a "bucket" in the IRS systems for all the data, but if everything isn't entered it doesn't matter.

Edit to add: If this turns out to be the case then handwritten forms rather than using the neat little "fill in the form" PDFs on the IRS site would be the way to go since I'm pretty certain those would be OCR compatible and potentially able to capture all data.

[Sniper]

[ QUOTE ]
Edit to add: If this turns out to be the case then handwritten forms rather than using the neat little "fill in the form" PDFs on the IRS site would be the way to go since I'm pretty certain those would be OCR compatible and potentially able to capture all data.

[/ QUOTE ]

Has Poker CPA recommended filing taxes on a cocktail napkin yet?

[Poker CPA]

Thank you Al. Just one more day to take the guards money, and then freedom.

[Poker CPA]

No I have not, but I think you can. No way they send the check back. Go for certified mail for sure.

[LuckyDevil]

[ QUOTE ]
[ QUOTE ]
Dude, just answer the question.

[/ QUOTE ]

Ah, Dude, is it really that tough to understand? I can't believe you don't get it. Just in case you're serious I'll spell out what I understand him to be saying. You might be in a better to position to know whether what he's saying is true or not.

If a return is e-filed every field on the form is sent (hence a "bucket" or field for everything). If a paper form is sent in then the only way to get every single number in the computer requires some form of data entry. That might be using OCR (optical character recognition) where possible (I would guess the IRS is using this technology) but in at least some cases (handwritten for sure) it would require someone keying all of the data. If all the data isn't keyed in (maybe only certain key figures are) then that means they'll have less data in the computer. Less data means less specific things to look at to trigger the "this seems out of line" flag and hence less chance of audit.

Technically I'm sure there is a "bucket" in the IRS systems for all the data, but if everything isn't entered it doesn't matter.

Edit to add: If this turns out to be the case then handwritten forms rather than using the neat little "fill in the form" PDFs on the IRS site would be the way to go since I'm pretty certain those would be OCR compatible and potentially able to capture all data.

[/ QUOTE ]

I'm almost tempted to rewrite all my data from Turbo Tax onto new forms, just so its hand written.

[gurgeh]

[ QUOTE ]
Do something useful for these posters, they want to do the right thing, Jerk-off.

[/ QUOTE ]

So I ask a simple question, and this is the result? Way to hide the fact that you have no idea what you're talking about.

[Poker CPA]

Give your version of the e-file question. From the inside

[gurgeh]

[ QUOTE ]
Ah, Dude, is it really that tough to understand?

[/ QUOTE ]
How you think there is a logical connection between "buckets" and "fields of data" I'm not sure, but in any case the comparison, at best, sucks.


[ QUOTE ]
I can't believe you don't get it.

[/ QUOTE ]
Me neither.


[ QUOTE ]
Just in case you're serious I'll spell out what I understand him to be saying. You might be in a better to position to know whether what he's saying is true or not.

[/ QUOTE ]
I asked because I really didn't know what he was talking about. The IRS is highly compartmentalized, and when I did venture a question about auditors/returns being sent for audit I was told I didn't need to know. He could very well have known more than I did, but as his last post all but proves, he's really just FOS.


[ QUOTE ]
If a return is e-filed every field on the form is sent (hence a "bucket" or field for everything). If a paper form is sent in then the only way to get every single number in the computer requires some form of data entry.

[/ QUOTE ]
I'll give you one guess as to why I think this last part is very, very funny.


[ QUOTE ]
That might be using OCR (optical character recognition) where possible (I would guess the IRS is using this technology) but in at least some cases (handwritten for sure) it would require someone keying all of the data. If all the data isn't keyed in (maybe only certain key figures are) then that means they'll have less data in the computer. Less data means less specific things to look at to trigger the "this seems out of line" flag and hence less chance of audit.

[/ QUOTE ]
I guess the "more data = more ammunition for an audit" is a possibility, but I don't buy it. If you enter an abnormally high number for something from Part II of Schedule C, then your total expenses will be abnormally high too, and they could just catch it there even if they didn't enter the field you took a huge break on. Same goes for fields in the 1040, schedule A, schedule E, etc.


[ QUOTE ]
Technically I'm sure there is a "bucket" in the IRS systems for all the data, but if everything isn't entered it doesn't matter.

[/ QUOTE ]
Wouldn't that completely negate your idea then?


[ QUOTE ]
Edit to add: If this turns out to be the case then handwritten forms rather than using the neat little "fill in the form" PDFs on the IRS site would be the way to go since I'm pretty certain those would be OCR compatible and potentially able to capture all data.

[/ QUOTE ]
Unless of course your theory is backwards, and in fact they're coding for nonstandard forms and take a closer look whenever one comes up. I mean, I really do wish I knew for certain, but the fact is that these are both just uninformed guesses.

[Poker CPA]

Buckets = data collection, Al was spot on.

Why should we make your job easier? A very simple question. A cost of an audit is at least double the cost of preparing the return. And why can't the auditor get his hands on the original return. Why do I have to give him copy, I bill this time to my client.

[frommagio]

[ QUOTE ]
Id listen to Poker CPA if I were you guys, even if his posts do somewhat reflect him being overworked at this time. /images/graemlins/wink.gif

[/ QUOTE ]

I would wait until I see him post a contribution that's well-written, shows some evidence of subject knowledge, and doesn't contain gratuitous rudeness or the typical 2+2 crap-slinging food-fight attitude. He hasn't come close yet.

Read the materials, and follow your own nose - call the IRS helpline if you have honest questions. Why rely on the advice of a buffoon?

[Poker CPA]

See buckets are used to collect items of need. IRS has a need to collect information on US Taxpayers and then they collect taxes. Their whole being, or purpose, is about collection. You, in fact, are a collector. You need buckets, for your information, or if you like computers. A rather simple concept. Buckets collect things and so does the IRS. You chose the information, we chose the method of how it gets in the bucket. Thats fair IMO, how about you?

[frommagio]

[ QUOTE ]
A "thank you" that comes with a "but" makes people feel warm and fuzzy. Thank you.

[/ QUOTE ]

Now that the tax season is over, you really should go back and reread your posts - with the goal of trying to understand what makes you act like such a jerk.

[BigAlK]

Just a few comments.

[ QUOTE ]
How you think there is a logical connection between "buckets" and "fields of data" I'm not sure, but in any case the comparison, at best, sucks.

[/ QUOTE ]

Can't argue that the comparison sucks. However historically this has been a really common term used when talking to the technically unsophisticated. We've reached the point that very few in the work force don't understand the meaning of data field or some other more correct term. But the use of "bucket" as a synonym for field is pretty ingrained in some. I'd guess people from their mid-thirties and up who work in IT or interface with those who do are very familiar with the term. It's probably exactly they way PokerCPA heard it and he understood what was meant.

[ QUOTE ]
I asked because I really didn't know what he was talking about. The IRS is highly compartmentalized, and when I did venture a question about auditors/returns being sent for audit I was told I didn't need to know. He could very well have known more than I did, but as his last post all but proves, he's really just FOS.

[/ QUOTE ]

I understand and agree with all but the last part. What PokerCPA has been saying is at least possible. He's indicated or implied (at least as I've read it) that he believes this based on knowledge he's gained, presumably from someone at the IRS that's in a "compartment" that might know more about this than you. Also from reading a lot of his posts I've found him to be knowledgeable and credible when he expresses an opinion. Apparently he has issues with the IRS and their employees. That doesn't mean he doesn't know what he's talking about.

[ QUOTE ]
I'll give you one guess as to why I think this last part is very, very funny.

[/ QUOTE ]

I'll admit that this is a guess, but based on what you've said about your job it sounds like what you're doing is correcting or fixing data entry errors. So you might know the answer to the underlying question. Does the IRS enter every single field from every paper form? Just because there is a place in the system for it doesn't mean that it is always entered.


[ QUOTE ]
I guess the "more data = more ammunition for an audit" is a possibility, but I don't buy it. If you enter an abnormally high number for something from Part II of Schedule C, then your total expenses will be abnormally high too, and they could just catch it there even if they didn't enter the field you took a huge break on. Same goes for fields in the 1040, schedule A, schedule E, etc.

[/ QUOTE ]

Maybe, maybe not. I've got no idea how sophisticated the flagging process is. But I don't think it is out of the question that the ratio of revenue to expenses for a poker pro would fit within a reasonable range for some other type of business. Especially something that operates on tight margins.


[ QUOTE ]
Wouldn't that completely negate your idea then?

[/ QUOTE ]

No. See my explanation above. Just because there is a field doesn't mean it always gets entered.


[ QUOTE ]
Unless of course your theory is backwards, and in fact they're coding for nonstandard forms and take a closer look whenever one comes up. I mean, I really do wish I knew for certain, but the fact is that these are both just uninformed guesses.

[/ QUOTE ]

If filling out the 1040 I received in the mail using a pen is a "non-standard" form then I agree. I'm not sure what percentage are still received that way, but I doubt it's reached the point of being a trivial amount.

As far as guess, you're right. I've got no special knowledge about how the IRS functions. However I have worked in IT for 30 years, understand a lot about how big organizations work, and the kind of tradeoffs involved in systems that were first written back in the computer stone ages. I've also got experience trying to retrofit newer technologies (like an e-file option) into these kinds of systems. Admittedly a lot of what I've thrown out are guesses, but not totally uninformed.

[frommagio]

[ QUOTE ]
Seriously now. Do you think you have handled this matter in a smart way? It is April 14th and you allowed your clueless CPA to do nothing in regards to these questions. Gee is this what you mean by getting what you pay for?

HE DOESN"T GIVE A CRAP and your current state is proof positive. He needs a kick in the azz and so do you.

ITS Fing APRIL 14th Skippy.

[/ QUOTE ]

Yes, he did find himself in an unfortunate situation - where he was so short on time, that he was willing to toss out questions to 2+2. Essentially, he opened himself up to insult from any riff-raff that crawled out of the local dump. He probably knew there would be no shortage of jerks willing to kick him in the butt, but he tried anyway. The inevitable result transpired; he wound up in communication with someone like you.

I bet he learned his lesson. You taught him well.

[Poker CPA]

Thats not what they are saying in my PMs. Lets debate.

Now this is a perfect example of total BS. We find out we have a regular poster who works in the IRS, yet offers no help in significant issues like the "Neteller" tax situation, which I think is the number one issue. People need real help. In your opinion, have I been helpful in any way.

[Poker CPA]

My God its an internet forum, not a classroom. Taxes are serious, a kick in the butt is needed sometimes.

[frommagio]

[ QUOTE ]
Thats not what they are saying in my PMs. Lets debate.

Now this is a perfect example of total BS. We find out we have a regular poster who works in the IRS, yet offers no help in significant issues like the "Neteller" tax situation, which I think is the number one issue. People need real help. In your opinion, have I been helpful in any way.

[/ QUOTE ]

At least you're an equal opportunity azzhole. You insult the guys with questions, and when the IRS guy shows up, you insult him too.

How proud your mother must be.

[frommagio]

[ QUOTE ]
My God its an internet forum, not a classroom. Taxes are serious, a kick in the butt is needed sometimes.

[/ QUOTE ]

We agree on that much. If you act anything like this in real life, you've got some very unpleasant butt-kickings to look forward to - and real life butt-kickings hurt.

Time for you go grow up and fly straight. Ignorant and rude is no way to go through life.

[gurgeh]

[ QUOTE ]
Now this is a perfect example of total BS. We find out we have a regular poster who works in the IRS, yet offers no help in significant issues like the "Neteller" tax situation, which I think is the number one issue.

[/ QUOTE ]

What I said: "Can you explain why e-filing is more dangerous than paper filing?"

What you apparently read: "I am an expert. I know everything, but will keep all the secret knowledge to myself, bwahahahaha!"


Dude, how the hell would I know the answers to any of the (not very well thought out) questions you've asked? I work for the IRS as a low-level seasonal employee, therefore I know what they think of Neteller? I tell you I don't know anything about audits, and you demand that I answer questions about auditors? Are you on crack? I never claimed to be able to give tax or legal advice, but I at least helped generate some decent discussion with BigAl. You've claimed to be super helpful, but have fallen well short of that expectation.

[Poker CPA]

So an IRS tax guy doesn't like me, so what.

From - is there any tax issue you would like to discuss, a new issue or one that I was wrong on. I'll leave if you win .

[gurgeh]

Just a couple of things: I've heard (this from outside the IRS) that you can safely take a loss on self employment for two years in a row. Do they have different rules for gamblers (or anyone else for that matter) concerning number of years with a loss or income/expenses ratios? I don't know. But honestly, you can scare yourself silly about this wondering if you've entered too much in a certain field or you can just have good documentation saying why what you deducted is valid. Anyone who actually could tell you what might flag a return is not going to be able to do so, under what I would assume are very nasty penalties.

And back to all the fields not getting entered: If not all fields need to be entered on electronic forms, then they certainly wouldn't bother entering all the fields for paper forms, would they? My point is, I don't see the extra information as being helpful to the process by which they select returns for audit, I think it would just be extraneous. Should be easy enough for them to make sure the fields they care about are entered, and if something comes up, they can just look at the physical return.

[Poker CPA]

And the fellow with the, in his own words, clueless CPA. He waited to the last minute. He was 100% in control of that situation. "Unfortunate situation", you sound like his Mom. His Dad would kick in the azz. And he knew it too, he just didn't like me saying it.

[gurgeh]

[ QUOTE ]
So an IRS tax guy doesn't like me, so what.

[/ QUOTE ]

And so, painted into a corner by making rude, outrageous claims and insults, this is the best you can muster as a rebuttal?

VNP.

[Poker CPA]

And my goal is to help people "THINK" about their taxes, and the [censored] the IRS tries to hide from every one. And MUMs loves me dearly.

[Poker CPA]

What corner? You need more on "buckets"? Lets debate!!!!!

[BigAlK]

[ QUOTE ]
Just a couple of things: I've heard (this from outside the IRS) that you can safely take a loss on self employment for two years in a row. Do they have different rules for gamblers (or anyone else for that matter) concerning number of years with a loss or income/expenses ratios?

[/ QUOTE ]

Apples and Oranges.


[ QUOTE ]
And back to all the fields not getting entered: If not all fields need to be entered on electronic forms, then they certainly wouldn't bother entering all the fields for paper forms, would they? My point is, I don't see the extra information as being helpful to the process by which they select returns for audit, I think it would just be extraneous. Should be easy enough for them to make sure the fields they care about are entered, and if something comes up, they can just look at the physical return.

[/ QUOTE ]

You're missing the point I think. If you e-file all the data has to be complete that would be required on a paper form. The paper form, obviously, has all these fields entered too. By virtue of coming in electronically e-filed returns will have complete data in the IRS systems. The possibility exists that when paper forms are data entered that not every piece of data is entered. I don't know. However I could see only entering subtotals for some sections rather than every single number. This would be for cost efficiency reasons. Imagine the data entry savings over millions of returns. Yes, they have the original paper and possibly they image the original. But that isn't retrievable by computer systems which takes us back to the less data, less to find wrong with theory.

[Poker CPA]

"Time for you go grow up and fly straight. Ignorant and rude is no way to go through life."

This is nothing compared to being ignorant about taxes and your pocketbook. Take the Telephone Excise Tax refund, how about National Ponzi Scheme, the SS system. If SS was a private enterprise and did what the feds are doing, they would all be in jail. Do you know much money the IRS has from students who don't file a 1040. They don't file because it costs more to file the return than the refund itself. Instead of making it EZ to be exempt fed. withholding via a understandable W-4 form. They love that single and one exemption. And the Social Security benefit cut by Clinton, the first thing he did. Yet he claims he never cut SS benefits, he just made it taxable. People need every break they are legally intitled to and I will help anyone who wants to legally keep as much as he can. So I'm rude, big deal, at least I'm honest.

IRS doesn't fly st8, why should I.

[Poker CPA]

On the "hard copy" vs "e-file" matter. My software allows me to print the "IRS" copy or the "Preparers" copy. IRS wants the "IRS" copy and makes sure the software companies conform to their requirements. The "IRS" copy is generally 10-15 pages, collated in a certain way as determined by the IRS. Each page has a "Attachment Sequence No.". The preparers copy, EZ 50 pages, sometimes a 100. When the IRS reuests something, do the opposite. As long as line 63 is correct, its your return not theirs. The must have a storage problems becuase their auditors can't access the actual filed returns. File accordingly. I believe the IRS takes the IRS version only when e-filing. I could be wrong here but send your version, in any sequence you want.

[frommagio]

[ QUOTE ]
So an IRS tax guy doesn't like me, so what.

From - is there any tax issue you would like to discuss, a new issue or one that I was wrong on. I'll leave if you win .

[/ QUOTE ]

All I see in your posts are personal insults and poor grammar. Is that what you want to talk about? Why not talk about tax issues?

And now you ask me to discuss tax questions!

I suppose that I see where this is going - once you get a new mark talking about taxes, you come in and start calling him an azzhole, etc.

Nice hobby!

[NewGuy]

[ QUOTE ]
And the fellow with the, in his own words, clueless CPA. He waited to the last minute. He was 100% in control of that situation. "Unfortunate situation", you sound like his Mom. His Dad would kick in the azz. And he knew it too, he just didn't like me saying it.

[/ QUOTE ]

I think you're either misunderstanding or misrepresenting my situation, Poker CPA.

1) I said "he's clueless about filing as a gambling pro ". This is, for me, a relatively minor part of my overall tax return. For the important issues involving higher $ amounts, the CPA I'm using is quite knowledgable.

2) As I said earlier, my taxes were essentially done in full in February. I had 2 specific, poker-related questions that I thought I'd seek out some friendly advice on. a) What Business Code to use / What profession to use, b) whether to report a net or gross on Line 1 of Schedule C I hardly think I'm some lost cluless newb who waited until the last minute to learn anything about filing as a pro and is now in deep trouble, desparately seeking help for this horrible situation at the 11th hour.

These are I believe relatively minor issues about which I was naive enough to think "hey there are some helpful & knowledgeable people on 2+2 who might shed some light on what the best way to handle this issue could be, I'll try there". I'm quite sure any return I filed either breaking out my gross wins or netting them together on Line 1 would have been reasonable, and I doubt using the 999999 code would have shuttled my return off to Audit Central.

Based on the fact that there are differing opinions regarding how to break our gross/net (one reply said losses/cost of wagers should go in COGS, one said line item costs in Part V, others said just net them into line 1), I think it stirred up a worthwhile discussion that other Schedule C files could benefit from. There wasn't really a need to let this thread degrade.

My taxes are 100% accurate, I'm reporting my poker wins accurately down to the precise dollar, and as you said, line 63 is what matters. I got that right. While I am NOT worried about an audit since I have not cheated an iota, I was interested in reducing the odds of an audit occurring while still being entirely accurate and honest, since I am aware they are costly (in both time and money spent).

I just hoped to take advantage of the potential insights of like-minded poker players who might want to spend 30 seconds being helpful and sharing some knowledge they might have. I wasn't looking for someone to help me THINK on some deep level about the earth-shattering metaphysics of taxes. I was just looking for simple, simple answers to 2 simple simple questions. What an azz I was. /images/graemlins/smirk.gif

[Poker CPA]

I'm happy you posted. He could do research and get back to you in March, maybe the day after you met in February. But April 14th you're here looking for answers, something is wrong. So your taxes will be done by your accountant on the 17th. I say extension,. Reason: he needs time to do his research and doesn't feel comfortable. A schedule C is not a simple problem. Hope to hear from you on the 18th. Maybe inform the other posters, not me of course, about the service, tips and results. Prove me wrong.

[Poker CPA]

Seriously From, lets debate. I'll be nice, loser leaves.

[NewGuy]

[ QUOTE ]
He probably knew there would be no shortage of jerks willing to kick him in the butt, but he tried anyway. The inevitable result transpired; he wound up in communication with someone like you.


[/ QUOTE ]
Yup. But after searching through the "what occupation should I use" thread and seeing such helpful replies as "Jedi" and "Pimp", I thought there might be other people like myself who genuinely wondered what the downside might be to filing as a "pro gambler".

I was certainly surprised when I dug into the gross/net question on Schedule C. 2 of the most popular gambler tax guides directly contradict each other, and they disagree with Poker CPA's (and others) advice to net. Which II think just reinforces the point that there's not really only one correct way to file this information, and that if you make a genuine honest attempt to report accurately, you shouldn't worry too much.

I do think amidst all the usual 2+2 pissing contests some interesting info came out of this thread:
a) filing electronically MAY significantly increase4 the chance of an audit
b) people seem to be of the opinion (though they won't directly state this, nor say why, nor support with data) that using "gamble" or "poker" in your occupation for Schedule C also increases audit possibilities
c) there are different schools of thought on how much detail to provide to support your net gambling profit/income, and I haven't heard a truly compelling argument from any of them as to why their method is "better"

2+2 is a great place to find nuggets of info if you're willing to sift through the garbage to find them

[NewGuy]

[ QUOTE ]
I'm happy you posted. He could do research and get back to you in March, maybe the day after you met in February. But April 14th you're here looking for answers, something is wrong. So your taxes will be done by your accountant on the 17th. I say extension,. Reason: he needs time to do his research and doesn't feel comfortable. A schedule C is not a simple problem. Hope to hear from you on the 18th. Maybe inform the other posters, not me of course, about the service, tips and results. Prove me wrong.

[/ QUOTE ]

There is nothing WRONG. Man you are nothing if not dramatic.

I'm quite familiar with filing using a Schedule C, having done so every year since 1994. I think even you will agree that which Business Code / occupation I use is indeed a minor issue. There is nothing WRONG (insert dramatic music) about looking for information about what to fill in here might be prudent.

When I met with my CPA February, we did discuss my return and review a draft. As I wrote in my post, there are at least 3 different approaches to how to report gambling earnings on Line 1. You happen to disagree with the 2 most popular authors of gambling tax guides (i.e., net in Line 1). I happen to agree with the method you advocated and particularly disagree with Ann Margaret-Johnson's approach of using COGS. I certainly don't need an extension to make that decision.

Do you REALLY think it's the end of the world if other Schedule C filers disagree and break out their costs in Part V on Schedule C (e.g., costs of wagering)?

I think you're just debating for the sake of debating, which is fine, but there's no need to try work people into a lather that they might be filing WRONG. Any reasonable occupation (Gaming specialist / online gamer / tournament professional / poker player) won't land you in jail or force an audit; any reasonable Business Code (including 999999) is fine; any accurately reported profit / win which has documentation available to support it (which mine is) is fine.

[Poker CPA]

c. is based on your individual facts and circumstances. Each taxpayer is unique. Good Luck

[NewGuy]

[ QUOTE ]
c. is based on your individual facts and circumstances. Each taxpayer is unique. Good Luck

[/ QUOTE ]

I'm not sure what could be so unique / different about all the online poker pros filing Schedule C's to change what occupation / business code / Gross sales approach that would be acceptable to use.

But I do appreciate for the good wishes.

[Poker CPA]

its due to activities outside of poker, the whole package, not just one schedule C. Keep notes, you may need them later. Good luck.

[gurgeh]

[ QUOTE ]
[ QUOTE ]
Just a couple of things: I've heard (this from outside the IRS) that you can safely take a loss on self employment for two years in a row. Do they have different rules for gamblers (or anyone else for that matter) concerning number of years with a loss or income/expenses ratios?

[/ QUOTE ]

Apples and Oranges.

[/ QUOTE ]

You sure about that? So far I've heard rumors and conjecture, and that's all.


[ QUOTE ]
[ QUOTE ]
And back to all the fields not getting entered: If not all fields need to be entered on electronic forms, then they certainly wouldn't bother entering all the fields for paper forms, would they? My point is, I don't see the extra information as being helpful to the process by which they select returns for audit, I think it would just be extraneous. Should be easy enough for them to make sure the fields they care about are entered, and if something comes up, they can just look at the physical return.

[/ QUOTE ]

You're missing the point I think. If you e-file all the data has to be complete that would be required on a paper form. The paper form, obviously, has all these fields entered too. By virtue of coming in electronically e-filed returns will have complete data in the IRS systems. The possibility exists that when paper forms are data entered that not every piece of data is entered. I don't know. However I could see only entering subtotals for some sections rather than every single number. This would be for cost efficiency reasons. Imagine the data entry savings over millions of returns. Yes, they have the original paper and possibly they image the original. But that isn't retrievable by computer systems which takes us back to the less data, less to find wrong with theory.

[/ QUOTE ]

Actually, I think you missed the point. The point is: They get the data they care about either way. If it's something that would be entered from an electronic return but would not be transcribed from a paper return, then in all likelihood they don't care about it whether they have it or not, and wouldn't be using it to screen for audits. Also consider this: What is more cost effective- requiring two sets of audit rules, one for the paper returns and one for electronic returns, or a single set that works for both types of returns?

[BigAlK]

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
Just a couple of things: I've heard (this from outside the IRS) that you can safely take a loss on self employment for two years in a row. Do they have different rules for gamblers (or anyone else for that matter) concerning number of years with a loss or income/expenses ratios?

[/ QUOTE ]

Apples and Oranges.

[/ QUOTE ]

You sure about that? So far I've heard rumors and conjecture, and that's all.

[/ QUOTE ]

Actually I'm not sure. I believe that you're right. Showing a loss for some period of time when self-employed or, the more likely, having a business on the side that requires filing sched C in addition to a regular job will raise a red flag. Whether that is generally 1, 2, or 10 years I don't know. I would expect someone filing as a professional gambler would raise a red flag more quickly and more easily. For example what do you think the chances are that you'd get away with showing a loss the first year you file as a pro? This can definitely happen with a business the first year without attracting attention.

Initially I was thinking you couldn't show a gambling loss, but realize that might not be true if you file as a professional. I don't know. Of course showing a loss is no different than showing break even unless you have other income that the loss then offsets. If your other income is significant, especially if it is from a regular job, I wonder what the odds are it would go unchallenged, even if you'd filed as a professional in past years showing a profit.

You're right, it's all conjecture and speculation. I don't have the answer. But I think (yes, don't know) that a professional gambler is unlikely to be given the same leeway as other self employed people filing sched C. Hence the apples and oranges comment.


[ QUOTE ]
Actually, I think you missed the point. The point is: They get the data they care about either way. If it's something that would be entered from an electronic return but would not be transcribed from a paper return, then in all likelihood they don't care about it whether they have it or not, and wouldn't be using it to screen for audits. Also consider this: What is more cost effective- requiring two sets of audit rules, one for the paper returns and one for electronic returns, or a single set that works for both types of returns?

[/ QUOTE ]

You make good points here and may well be right. However consider this logical historical progression. (Caution -More conjecture and speculation involved although some is definitely fact.)

1) All forms come on paper. We'll only enter certain key fields on our computer system. We've always got the paper to go back to for details and entering everything will be too labor intensive/costly.

2) We've got all this data. Maybe we can search the data and base some of the audits on suspicous data instead of just picking a certain percent at random.

3) Wow. This flag for audit thing is working out well. Let's keep analyzing the data and finding more ways to ferret out potential audit situations. We'll just keep refining this process and it will get better and better.

4) This internet/email/computer thing is really taking off. Maybe we can get someone else to do the data entry for us. Let the tax payers pick up the cost to have H&R Block do the data entry. We'll tell them how much quicker they'll get their return and they'll jump all over it. If it works out we'll expand this and let them e-file using their own computer.

5) We're getting all the detailed data from these e-filers and have to store it. As long as we've got it maybe we can refine our audit rules to take advantage of this data when we have it. But entering all the data from the paper forms would still be too costly. We'll keep doing them the same. We'll keep pushing people toward e-filing and eventually it won't matter anyway.

The conjecture part of this is that I don't know whether or not all data is currently or always has been data entered from paper forms. It appears that PokerCPA has information that is isn't. The rest is known fact or a logical, even reasonable, progression. Still some conjecture, but not out of line with how these things generally go. Especially for a large organization where a minor change can have a major financial impact.

[MyTurn2Raise]

[ QUOTE ]
Normal disclaimers that I'm not an accountant or a tax expert, blah, blah, blah. Didn't even stay at a Holiday Express last night.

However FWIW I havet filled out several schedule Cs for myself and family members. The cost of goods sold lines make sense only if you're selling goods. Any advice that has you filling out this section for a service/entertainment/whatever the hell kind of business a professional gambler fits in doesn't make sense. In fact I'd be inclined to take everything else in the book as suspect based on this advice. COGS only applies to a retail, wholesale, or manufacturing business. Something that actually sells goods.

[/ QUOTE ]

FWIW, I put the sum of my winning sessions on the gross profits

I put the sum of my losing sessions under other expenses and categorized them as gambling losses

I listed my profession as professional gambler, which is much more true for me with my sportsbetting and poker

I listed my code as 713200, because none of them really worked and that was closest

[frommagio]

[ QUOTE ]
Seriously From, lets debate. I'll be nice, loser leaves.

[/ QUOTE ]

OK, let's debate. The question I'm interested in is the following: Should 2+2 members be gratuitously rude to folks who come to this forum in good faith, asking for honest advice? You can represent the "yes" position, and I'll take the "no" position.

Since you initiated the gratuitous rudeness, I'll let you take the first shot.

[Poker CPA]

you win

[frommagio]

[ QUOTE ]
you win

[/ QUOTE ]

Thank you for the quick concession.

[mo42nyy]

i mailed my taxes yesterday, but just took another look at my sched c
i entered my poker winnings on line 5 as other income instead of line1
I dont see why this would be a problem
Hopefully this doesnt somehow [censored] me