[bav]

knght has it right, and you probably did it wrong last year.

Unless you listed your profession as "gambler" and get the lion's share of your income from gambling, the IRS doesn't want you to use schedule C. You are supposed to report all of your winnings on the 1040 Other Income form, and deduct any losses on schedule A.

Which is financially better will depend on your specific situation. If you don't itemize today, basically you get completely screwed. If you had 100 gambling "sessions" during the year and were profitable to the tune of $5K in 50 of them, but lost $5K in the other 50, you have an issue. IRS demands you report $5K of income. It's that simple...you do NOT get to offset profits and losses. You MUST report $5K of income. Now...about those losses... you put those on schedule A. If you don't want to itemize then you just report $5K of income and they expect you to pay income tax on $5K even though you broke even for the year.

The advantage of the normal approach is you don't have to pay self-employment taxes. And if you already itemize and don't make TOO much, it's often a better deal.

The advantage to claiming to be a pro is you get to deduct your losses up to the amount of your winnings regardless of schedule A, and you can deduct other expenses like travel and hotel costs and poker books and whatnot. But...

The IRS is supposedly not at all friendly about letting people claim gambling as a business unless they are really supporting themselves through gambling. If you have a job that pays $50K/yr and you got $5K of poker income, you are not a professional gambler and the IRS may come get you. Do a little googling and you'll find a number of websites that go into all these details and include horror stories of people being raped by the IRS and tax courts.

This system is extremely broken and insanely unfair. But it's the law as currently interpreted by the IRS and the tax courts.