Am I missing something?(Tax question)

[Tcom66]

Another first time poker tax payer here. Just got done working through the forms and was somewhat bummed by what myself and TurboTax keep comming up with for what I owe.

Basically my winnings added up to ~10k and my losses were ~7.5k. I entered 10k on line 21(form 1040) and deducted 7.5k on line 27 of Schedule A. Tax owed was ~1400.

Doing the forms over again without poker winnings included I calculated that I owed essentially zero. 1400(tax payed)/2500(net profit) = 56%. Can I really be getting hit for 56% of my winnings? I'll spare you the calculations but the state (CA) was about the same deal, cutting into my profits even more.

Has anyone else had anything like this? Did I forget to cross a "t" or dot an "i" somewhere? They don't hit you for that high a % or you guys wouldn't play, right?

The only thought I had is that because I'm itemizing instead of taking the standard deduction I'm essentially losing out on ~3200 in deductions (5000 standard d. - 1800 state income tax). If I was to take the 3200 off of my taxable income that would take the amount I owe down to ~700. 700/2500 = 28% which sounds about right. Unfortunately I don't see how you could do this.

Any help or comments from someone who is in the same boat or sees something obvious that I'm doing wrong would be much appreciated.

Tyler

[Niediam]

Thats really how it works.

Try finding other things you can deduct now that you are itemizing.

[Confused1]

Or file it on Schedule C - as a pro

If you have a profit motive (you made one, that's probably good enough proof - check the IRS definitions), then you can claim as a pro. Show a profit, don't go nuts and deduct below the zero line or deduct things you can't. You'll have to pay self employment, but with your standard deduction, you should still come out a lot better than what you're showing.

[Niediam]

If you are audited and you file a Schedule C while you have a normal job the IRS is going to throw a fit.

[kslghost]

Basically if you have a job and play poker on the side, you're gonna get taxed a lot on your poker winnings. That's the most unfortunate thing that I'm discovering. (I have no job though).

[DING-DONG YO]

[ QUOTE ]
If you are audited and you file a Schedule C while you have a normal job the IRS is going to throw a fit.

[/ QUOTE ]

You can still make a strong case that you're a pro. Draw up a business plan for your poker play and keep track of what training you have done (books, 2+2 posting). These things will help make a very strong case that you take this as a serious business and you are in it for a profit motive. You can make a very strong case that you're a pro.

The IRS may have a fit, but you can take them straight to court if they do. Don't back down if you're right and taking the IRS to court when you are right and have a strong case isn't a bad idea. Just don't get so freaked out by the whole "OMG, I'm going to court with the IRS" thing.

[krishan]

[ QUOTE ]
If you are audited and you file a Schedule C while you have a normal job the IRS is going to throw a fit.

[/ QUOTE ]

This is [censored] in my opinion.

Krishan

[MNpoker]

I paid a 60%+ marginal tax rate on poker winnings last year.

Live in MN. Got hit by AMT (The state part alone was over 30%).

Next year I'm reporting as a pro. If I go to tax court I go to tax court. [I have a full-time job]

[Niediam]

[ QUOTE ]
[ QUOTE ]
If you are audited and you file a Schedule C while you have a normal job the IRS is going to throw a fit.

[/ QUOTE ]

You can still make a strong case that you're a pro. Draw up a business plan for your poker play and keep track of what training you have done (books, 2+2 posting). These things will help make a very strong case that you take this as a serious business and you are in it for a profit motive. You can make a very strong case that you're a pro.

The IRS may have a fit, but you can take them straight to court if they do. Don't back down if you're right and taking the IRS to court when you are right and have a strong case isn't a bad idea. Just don't get so freaked out by the whole "OMG, I'm going to court with the IRS" thing.

[/ QUOTE ]

For most people that would cost more money than just doing their taxes how the IRS wants. /images/graemlins/frown.gif Another dumb thing about this system.

[DING-DONG YO]

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
If you are audited and you file a Schedule C while you have a normal job the IRS is going to throw a fit.

[/ QUOTE ]

You can still make a strong case that you're a pro. Draw up a business plan for your poker play and keep track of what training you have done (books, 2+2 posting). These things will help make a very strong case that you take this as a serious business and you are in it for a profit motive. You can make a very strong case that you're a pro.

The IRS may have a fit, but you can take them straight to court if they do. Don't back down if you're right and taking the IRS to court when you are right and have a strong case isn't a bad idea. Just don't get so freaked out by the whole "OMG, I'm going to court with the IRS" thing.

[/ QUOTE ]

For most people that would cost more money than just doing their taxes how the IRS wants. /images/graemlins/frown.gif Another dumb thing about this system.

[/ QUOTE ]

What would cost more money? Going to court or schedule C?

And going to tax court isn't like going to regular court. It is one of the few places where a reasonably informed person could even represent themselves. You could also get a tax CPA to represent you. It is the one court where someone besides a lawyer can represent you.

And don't disagree with me please anyone. I am a CPA and am correct that a CPA could represent you in tax court.

[Niediam]

Going to court.

And not having proper representation will greatly reduce the chances of you winning even if you say the exact same thing in the exact same mannor.