Filing taxes as a "losing" professional gambler

[longtime1stime]

(apologies in advance if this is board clutter).

1) Combining my sportsbetting and poker wagers/sessions, etc. My net wins and losses is in excess of 1million on each side. The final net is roughly -5k. In addition to this I have borrowed approximately 25k in "personal loans" from friends and family(Yes, i am lucky to have people bail me out). During 2006 I paid back roughly 5k. I have paid back the remainder so far in 2007.

2) Being a "losing" professional(ironic) gambler means I don't have a ton of money to hire a cpa. Thus, with the abundant # of tournaments, sngs's, sportsbets I have wagered, and the subsequent mounting wins/loses this year, do you think there is any way I could prepare my taxes myself(i.e. turbo tax)? Or should i just send over my records to a cpa?

3) since i am a losing player, and filing as a "professional", as i have no other income sources this year, should I expect to shell out some dough to the IRS?

4) Is it even possible to file as a professional if you are a losing player? I have no other income. Would I have to file as unemployed?

I would greatly appreciate any help. I understand that i am up against it, however, I want to make sure my "losing ways" arent compounded by screwing up my taxes and owing uncle sam interest and penalty payments down the road.

TIA

[FatalError]

a CPA is going to run you less than 1k (tax deductable) to prepare your taxes

screwing up and getting auditted for what is obviously going to be a potentially red flagged return will cost you a lot more than that

[emptyshell]

From my understanding, there's no reason you can't file as a losing professional and you shouldn't owe anything. I would let the personal loans slide under the table as long as it didn't affect the friends and family members taxes.

As a practical matter, I would look at your bank statements and other records to see what would be a red flag, just to be aware of it. Although your description sounds like it would flag interest, that's not necessarily the case if the records don't show it.

I've never tried to fill out the forms as a loser, though. Hopefully some more knowledgable person could advise.

I wouldn't hire a CPA, though. A CPA doesn't keep you from being audited, and it would be ridiculous for the IRS to expect you to do so given your financial situation. Just do your honest best to fill out the forms properly. In the unlikely case you get audited, worry about it then. I did my own (I was a large winning player), and my guess is that I'm more capable than most of the people that I could pay to do it for me (from the advice that others have received from their supposed experts).

[Poker CPA]

You would need to understand fully the Statute of Limitations issues. Do some research, this can be nasty either way you go.

[pokerstudAA]

Definately file sch. C as a professional.

Your situation would suck to file on a 1040. You would claim 1 mil in income and then take 1.05 mil as itemized losses. BUT - your itemized deductions would be significantly reduced because of your high level of income. You would wind up paying a crap load of taxes on money you didn't really earn.

Definately go with the schedule C. With negative net income you also wont pay the self employment taxes.

[longtime1stime]

If I do taxes on my own, what program can I use to file sch. C?

Turbo tax? That's what i always used in the past when I worked.

[LotteryOrPoker]

[ QUOTE ]
You would need to understand fully the Statute of Limitations issues. Do some research, this can be nasty either way you go.

[/ QUOTE ]

You crazy little crack monkey! Are you going to over simplify the law as well?! Are you going to claim to be a tax attorney now?! What do the statute of limitations have to do with his question?! If you debate this I will give an entire list of reasons why the statute of limitations do not apply to him!

O.P. The better your records are, the cheaper it will be for an accountant to prepare your taxes. I have a friend who owns an accounting firm. He has a small business owner for a client who keeps absolutely horrible records. After the first year he had this guy for a client he gave him garbage bags. He told him to throw every receipt, bank statement, credit card statement, invoice (any financial record) for a year into the garbage bags. At tax time every year the accountant goes through the bags and sorts all of his records. It is expensive to do this, but the guy is incapable of keeping decent records so it is what he has to do.

Here is the irony of your question. Most accounts will probably charge you anywhere from $120 to a few hundred to do your taxes (depending on how complete your records are). You have gambled with over a million dollars in the last year, but you are unwilling to pay an accountant a few hundred to make sure your taxes are done right? This should not even be a question.

Furthermore, if you have had any money withheld at casinos, paid in quarterly, etc. and ended up negative you may very well have money coming back. If Congress passes some kind of tax relief/rebate you may end up with a several hundred dollar check if you file. The cost of using an accountant may very well pay for itself.

One of the ironic things in this forum are all of the people who ask what they can do to lower their chances of being audited. There are more than 21,000 IRS agents who audit people (these are full time jobs). They do several million audits a year, over a million RANDOM audits. Keep your records in tact and accurate because over the course of a life time you stand a VERY good chance of being audited. If you screw the IRS and you get caught, you can face severe penalties and people who cheat on taxes do go to prison.

[Poker CPA]

It applies, lets debate

[LotteryOrPoker]

If his income did not exceed $8,450 he does not need to file! He has zero tax liability, therefore he has no obligation to file at all! If he is married that amount goes up to $16,900. Since he breaks no laws if he doesn't even bother to file why does a statute of limitation apply?

The advantages of filing:

[ QUOTE ]
• Earned Income Tax Credit. The Earned Income Tax Credit is a federal income tax credit for eligible low-income workers. The credit reduces the amount of tax an individual owes, and may be returned in the form of a refund.

• Telephone Tax Refund. The telephone tax refund is a one-time payment available on your 2006 federal income tax return, designed to refund previously collected long-distance federal excise taxes. It is available to anyone who paid long-distance taxes on landline, cell phone or Voice over Internet Protocol (VoIP) service.

• Additional Child Tax Credit. This credit may be available to you if you have three or more qualifying children or if you have one or two qualifying children and earned income that exceeds $11,300. The Additional Child Tax Credit may give you a refund even if you do not owe any tax.

• Health Coverage Tax Credit. Limited to certain individuals who are receiving certain Trade Adjustment Assistance, Alternative Trade Adjustment Assistance, or pension benefit payments from the Pension Benefit Guaranty Corporation.

[/ QUOTE ]

You will be able to pass Accounting I by the time I am done with you crack monkey!

[Poker CPA]

whats the purpose of the law?

[Poker CPA]

Does it protect the taxpayer or the IRS?

[longtime1stime]

[ QUOTE ]
If his income did not exceed $8,450 he does not need to file! He has zero tax liability, therefore he has no obligation to file at all! If he is married that amount goes up to $16,900. Since he breaks no laws if he doesn't even bother to file why does a statute of limitation apply?

[/ QUOTE ]

i'm confused, so you are suggesting I don't even file? i thought filing under any and all circumstances was always recommended.

Moreover, CPA's and tax experts are a dime a dozen. How in the heck am i supposed to find one i'm confident will do my return correctly? I'm single, rent, no investments(yes, i'm a real winner). All that i'm going to put on my taxes is gambling winnings and losses. and my net is going to be negative. I have no idea what i could deduct, nor do i think this applies considering I have made no money in 2006.

[LotteryOrPoker]

I listed the reasons why you should file. I was simply stating you were not required to file, therefore statutes of limitation mean nothing.

If you want to find a competent accountant you should ask around. Surely you know someone that uses a CPA.

[LotteryOrPoker]

[ QUOTE ]
Does it protect the taxpayer or the IRS?

[/ QUOTE ]

How do you get so far off topic? Good God.

[Poker CPA]

You should file;

1. If you're confident that you did have a loss for the year, then an audit would be very good. Once they see how good your records are, they likely will not come back. Of course, this is very good for future tax planning. A "no change" audit is gold
2. The "failure to file" penalty is quite high, 25% after only 5 months. Mistakes happen, you're not perfect, maybe no taxes, maybe not. Its not worth the chance and you want an audit.
3. The SL starts the minute you file and in 3 years, the return is generally audit free. This provision is for your benefit, take advantage of it.

As I see it, you have nothing to lose and a few good things can happen. Good Luck

[LotteryOrPoker]

[ QUOTE ]
Mistakes happen, you're not perfect, maybe no taxes, maybe not. Its not worth the chance


[/ QUOTE ]

This is the best thing that has been said in this thread. That is why you hire an accountant. You would hate to get audited in two years, find out you made an error and you actually had a tax liability.

[longtime1stime]

Thanks for your help. One question. You wrote:

[ QUOTE ]

3. The SL starts the minute you file and in 3 years, the return is generally audit free. This provision is for your benefit, take advantage of it.

[/ QUOTE ]

What is "sl"? I'm sure this is basic. I'm a newb, enlighten please.

[LotteryOrPoker]

[ QUOTE ]
Thanks for your help. One question. You wrote:

[ QUOTE ]

3. The SL starts the minute you file and in 3 years, the return is generally audit free. This provision is for your benefit, take advantage of it.

[/ QUOTE ]

What is "sl"? I'm sure this is basic. I'm a newb, enlighten please.

[/ QUOTE ]

SL is a type of Mercedes.

[Poker CPA]

The SL is the Statute of Limitmations I refer to earlier. Required reading for business people. Don't think in terms of filing a return every April 15th, its more like "another one bites the dust". Tomorrow, 2003 bites the dust, Yippee.

[Jeff W]

Have you had previous years where you filed a return as a winning professional gambler? If not, the IRS might make life hard on you.

[yahboohoo]

[ QUOTE ]
The SL is the Statute of Limitmations I refer to earlier. Required reading for business people. Don't think in terms of filing a return every April 15th, its more like "another one bites the dust". Tomorrow, 2003 bites the dust, Yippee.

[/ QUOTE ]
The statute of limitations you're referencing only applies to three of the more minor tax laws, and assumes any offense was committed no later than April 15, 2004. Someone could have filed for an extension or a late return.

The following is from the US Department of Justice’s Criminal Tax Manual (http://www.usdoj.gov/tax/readingroom/2001ctm/07ctax.htm) under “Section 7: Statute of Limitations”:

No person shall be prosecuted, tried, or punished for any of the various offenses arising under the internal revenue laws unless the indictment is found or the information instituted within [3 to 6] years next after the commission of the offense...

The statute of limitations for the most popular offenses:

Tax Evasion - 6 years
Failure to Pay - 6 years
Failure to File a Return - 6 years
Filing a False Tax Return - 6 years
Failure to Keep Records - 3 years
Failure to Supply Information - 3 years

[longtime1stime]

[ QUOTE ]
Have you had previous years where you filed a return as a winning professional gambler? If not, the IRS might make life hard on you.

[/ QUOTE ]

This will be my first year filing a return as a professional gambler(or other subtle name for profession). Why do you think the IRS will make life hard on me?

[Poker CPA]

I think you're wrong on the "tax evasion" and "Failure to File a Return". But to tired to care. Evasion never closes and "not filing" never opens. Good luck

[emptyshell]

For some reason, these people have a lot of anxiety around taxes. I hate sending the check, but considering that I'm filing completely honestly, I don't feel scared (maybe I should be?) Hiring a CPA still seems like a worthless expense in your case, considering the negative net income.

Just use TurboTax like millions of the rest of us. It's fine. I'm not sure what's the minimum version you can get with a Schedule C. I used "Deluxe Maximizer" (a step up from Basic) that had it. Piece of cake.

[Russ Fox]

Warning about statute of limitations: Many states have statutes of limitations that are longer than the federal statute of limitations. California's is four years (generally), for example.

-- Russ Fox

[yahboohoo]

[ QUOTE ]
I think you're wrong on the "tax evasion" and "Failure to File a Return". But to tired to care. Evasion never closes and "not filing" never opens. Good luck

[/ QUOTE ]
For someone whose name is Poker CPA, I'd expect you know this (http://www.usdoj.gov/tax/readingroom/2001ctm/07ctax.htm#7.01). Scroll down and read "7.01 Limitations Periods for Common Tax Offenses."

I'm not the source. The DOJ is.

[LotteryOrPoker]

[ QUOTE ]
I think you're wrong on the "tax evasion" and "Failure to File a Return". But to tired to care. Evasion never closes and "not filing" never opens. Good luck

[/ QUOTE ]

Failure to File a Return 26 U.S.C. § 7203 6 years 26 U.S.C. § 6531


Tax Evasion 26 U.S.C. § 7201 6 years 26 U.S.C. § 6531

[LotteryOrPoker]

[ QUOTE ]
[ QUOTE ]
I think you're wrong on the "tax evasion" and "Failure to File a Return". But to tired to care. Evasion never closes and "not filing" never opens. Good luck

[/ QUOTE ]
For someone whose name is Poker CPA, I'd expect you know this (http://www.usdoj.gov/tax/readingroom/2001ctm/07ctax.htm#7.01). Scroll down and read "7.01 Limitations Periods for Common Tax Offenses."

I'm not the source. The DOJ is.

[/ QUOTE ]

You might be right about this, but you are usually wrong. You were well known as one of the most routinely incorrect and annoying people at pokah! Don't come over here getting too excited because you correctly cut and paste once.

[Poker CPA]

Read this carefully yahboohoo, keeping in mind the IRS can extend the statute any time. They need consent from the taxpayer, but the taxpayer rarely puts up a fight, because the IRS can issue a 90 day letter denying any and all transactions on the return. "Complete" and "completion" are key words. The statute starts when the IRS has knowledge of the tax crime. So its 6 years from that date, not the filing of the return, and they can extend any time they want. So the effect in tax crime cases, the statute never opens for the taxpayer, thus he will always be at risk, no matter when he files. This part of the IRS code protects the IRS, not the taxpayer. This is what got Al Capone and is the auditors worst nightmare, to have criminal charges and they accidently allow the 6 years to lapse. I hope you agree.

Generally, the statute of limitations begins to run when an offense is
completed. Toussie v. United States, 397 U.S. 112, 115 (1970).
Prosecutors should be aware that not all tax offenses are completed upon the
filing of a tax return. For example, in a tax evasion case where the
affirmative act of evasion is a subsequent false statement to IRS agents,
the crime is completed at the time the false statement is made, not when the
false return is filed. United States v. Goodyear, 649 F.2d 226 (4th
Cir. 1981). Consequently, careful examination of the various elements is
required to determine when a specific tax offense is completed.

[Poker CPA]

So the SL protects both the honest taxpayer and the IRS. I assume OP that you are honest, thus my advice to file. And like I said, on the 18th, 2003 is history. I hope you change your opinion on my profession, we can be quite helpful on a varity of issues.

The best of Luck

[LotteryOrPoker]

I don't want anyone to think I am picking on yahboohoo unfairly, so let me explain. yahboohoo and his gay lover (I have nothing against gay people, I am merely pointing out the facts) started a witch hunt crusade against Ricky Zelim who played by the name Stang (some numbers afterward) at PokerRoom.

You may have seen this young poker player on television at WSOP circuit event. Anyway, it came out that Stang was playing in an MTT and got knocked out. His cousin was playing in the same MTT and after he was knocked out Stang took over playing his cousins account.

Whether this was actually what happened or it was multi accounting is aside the point. yahboohoo's gay lover attempted to crucify this kid who was only like 19 at the time. It turns out yahboohoo's partner in crime had admit to multi accounting and his whole crusade was really over a personal beef with Stang. It had nothing to do with a sense of fairness.

Then yahboohoo's partner in crime attempted to attack (and even publicly threated to turn in) Stang for using his cousins ID (which is where the Ricky Zelim name comes from) because he was not 21.

Threatening to turn someone in for using a fake ID to play poker is disgusting and turns my stomach. The multi accounting was bad, but threatening to snitch on someone for something like that because of a personal beef and to attack them for something the moral crusader had done as well is a bunch of BS.

yaboohoo and his "gay lover/partner in crime" are hypocrites, snitches and lower than pond scum in my opinion. Watch your back around this guy.

[yahboohoo]

[ QUOTE ]
You might be right about this, but you are usually wrong. You were well known as one of the most routinely incorrect and annoying people at pokah! Don't come over here getting too excited because you correctly cut and paste once.

[/ QUOTE ]
Off-topic accusations, slander, malice, goading and insults. Lovely. Spoken like a fellow pokah flunkie.

So are you going to plague every post of mine because of some perceived greivance from years ago? Get over it...

[LotteryOrPoker]

It is only slander if it is not true.

[Sniper]

This thread has certainly gone a bit far a field now...