Poker Pro Tax question

Cent · #1 03-27-2006, 07:22 PM

Hello All,

I've recently become a professional poker player, and have questions regarding taxes. I understand most pros don't report their winnings to the IRS. What's the best way to go about this?

thanks in advance,
Cent

kslghost · #2 03-28-2006, 07:05 AM

Uh, pros definitely report their winnings because since they deal in large dollar amounts, their winnings actually get reported to the IRS. You have to fill out forms and crap.

You may be referring to the fact, (as I've apparently heard) that pros report net winnings, not winning sessions. This means that they fall under a small tax bracket than they would have reporting winning sessions and taking deductions from losing ones.

I'm far from an expert on this, but I'm pretty damn sure they do report their winnings (or end up like Matusow... not that he went there for taxes...)

Duck Rabbit · #3 03-28-2006, 04:28 PM

When reporting your earnings for the year, do you only report what you have withdrawn from your online account and into netteller or bank? If not that way, how do you keep an accurate record of exactly how much you made in the year?

LeadbellyDan · #4 03-28-2006, 05:38 PM

I thought you don't have to pay tax on any gambling winnings. This may only be in the UK.

Zele · #5 03-28-2006, 10:09 PM

You understand wrong. In the US, anyone (pro or not) who does not report income from gambling is committing a possibly serious crime.

Lottery Larry · #6 03-30-2006, 03:17 PM

[ QUOTE ]
Hello All,

I've recently become a professional poker player, and have questions regarding taxes. I understand most pros don't report their winnings to the IRS. What's the best way to go about this?

[/ QUOTE ]

Best way to go about not reporting your winnings? Don't duck taxes, that's the best way.

Guthrie · #7 03-30-2006, 07:56 PM

The best way to not report your winnings to the IRS:

Don't report your winnings to the IRS.

cardsharkk04 · #8 03-31-2006, 02:41 AM

Not to hijack, but when I went to an accountant I showed her my transactions histories from party, we just added up all my deposits and withdrawals (assume zero in my pp acount on jan.31) and that was my taxable income on the 1040. Seemed incredibly simple. But I thought that you were supposed to keep track of and report the winnings/losses from every session, not the deposits and withdrawals. Does my accountant know what she is doing??? Could I get screwed over? It seems like the number would be the same as long as there is nothing in my account at the end of the year.

BGnight · #9 03-31-2006, 02:43 PM

Thread is offically hijacked! I went to a CPA to pay my last years winnings. I had all my neteller inflows and outlflows and what pokertracker session summaries I was able to scrounge up. She consulted with her partners and decided just to net it and put it under other income as "gambling winnings". This kinda surprised me, but I'm not gonna argue since I have a large professional firm backing me if I get audited. She made copies of my neteller and my PT sessions and said these are back ups to show how we came up w/ the numbers.

DING-DONG YO · #10 03-31-2006, 03:02 PM

Alright, CPA weigh in. Sorry to continue the hijack.

technically you are supposed to

1 - use the gross method and report wins as other income and losses as an itemized deduction or

2 - file a schedule C.

Scenarion 1 drawbacks - Your income will push you into a much higher tax bracket and the itemized deductions will wipe out your standard deduction (if you use it) and you may be subject to AMT due to your large deductions in relation to your large income.

Scenario 2 drawbacks - An extra 15% off the top for self-employment tax

Those are the only 2 100% kosher ways to do it.

Now, many CPAs have been recommending that people just net their winnings. They have done this for probably the following reasons:

1 - (assumption) You are in a VERY VERY low risk category for an audit if your combined AGI (income) is less than 100K.

2 - The firm feels confident that if the IRS was to challenge this, the firm could either

A - plead ignorance, calculate it using scenario 1 and pay the difference. "Ooops, our bad" approach
B - A very headstrong CPA would realize there is probably not a judge in the country that would compel a taxpayer to follow scenario 1. The current system may be the law, but is grossly inequitable as there is not a single other business activity that requires income to be reported in this way. The "good luck, IRS, take us to court and find a judge that will enfore this" approach. Remember tax court judges DO NOT work for the IRS.

I would like to hear if anyone who has an AGI over 100K has still been recommended to net by a CPA.

Hope this helps some.