SE Tax Maximums?

[dtown_poker]

I am trying to figure out whether I should file as a professional or hobbyist and I have an SE tax question. I believe I know the answer, but I was hoping someone could confirm.

I have a full-time job. Let's say I make more than the maximum amount subject to social security tax at this day job (I think it's $80k-$90k or something like that, correct?).

I also play poker part time.

If I file as a pro, will I be subject to the social security portion of SE tax on my poker winnings? Since I already paid the full maximum amount from my day job, am I exempt from this tax?

Or is each job considered separate and I have a separate maximum for the poker? I think this is the case, but I'm not sure.

Basically, is the the $80-90k cap on social security tax on TOTAL income from all sources or is there an individual cap for each income source?

Any help would be appreciated.

[broiler]

SE tax is based on your earned income from all sources combined. The cap for 2006 on the Social Security portion is about $94,200 (didn't look it up, but it is $94,X00). Therefore, you would only be subject to the 2.9% Medicare portion of SE tax, if your regular job paid more than the SS limit.

[Megenoita]

You should file as a hobbyist if you make more at your regular job, especially if you make a lot more, than at poker. If filing in a certain way that is incorrect benefits you, the IRS may be inclined to get on you about it. I've heard cases on both sides, where someone got in trouble for filing as a pro when they should have been a hobbyist, and when they were a hobbyist who should have filed as a pro. Of course small chance of this mattering, but just FYI.

[yukoncpa]

[ QUOTE ]
You should file as a hobbyist if you make more at your regular job, especially if you make a lot more, than at poker.

[/ QUOTE ]

The amt of money you make at different "for profit" activities isn't an issue. The nature of the income is the issue. If you make 200,000 a year as a lawyer and another 5,000 a year running a concession stand for 1 month at the fairgrounds, the 5,000 would most likely be subject to at least medicair tax and should be reported on schedule C. It doesn't matter how small an income you make, it matters if you run your activity the way a business man would and if you intend to make a profit.
Now, if you're playing poker in the same careless way that people buy lottery tickets, in other words, choosing the cards you play based on friend's birthdays, then you don't have to pay self employment tax, because you aren't treating poker as a business. YOu should treat it as gambling income and report your gross wins on the front of your return and your gross losses on schedule A. If your income from poker is truly gambling income, than I would label it as such, no need to be overly specific.

[iceman5]

What about someone who has a job in which they dont pay ANY social security?

Would I have to pay the full amount of SE tax if I filed as a pro? (Up to $94K in poker winnings) And what exactly is the full percentage? Is it 15%?

[yukoncpa]

[ QUOTE ]
What about someone who has a job in which they dont pay ANY social security?

Would I have to pay the full amount of SE tax if I filed as a pro? (Up to $94K in poker winnings) And what exactly is the full percentage? Is it 15%?



[/ QUOTE ]


I’ve long since thrown away my tax manuals, but here’s from memory:
All SE tax equals Social Security and medicare. (Combined is 15.3%)
The only reason laborers don’t pay this amt is because employers match half
Out of the 15.3%, Social security is 12.4 percent of all earned income up to approx 94,000
Medicare has no cap and is 2.9% of earned income.

edit - as far as do you have to pay SE on all poker winnings, the answer is yes. But for these purposes winnings are net winnings after losses, less deductions, such as books, computer, applicable travel, etc.

[dtown_poker]

Awesome! Thanks for the replies broiler and yukon.

[yukoncpa]

Hi, dtownpoker

I feel that I had better make one clarification. On your OP, you asked if you should file as a pro or a hobbyist. I’ve bandied about the word hobbyist on some of my posts and I may have been a bit misleading. What I’ve meant is that hobby loss rules in the tax code are treated similarly to rules on wagering. But they are not the same. As a gambler, you would never file as a hobbyist. You would file with income from “gambling” (front of return) or you would file with income from the “ trade or business of poker, (or gambling)” ( as a pro), schedule C.
I’m making a minor clarification here. It’s just that I don’t want anyone to think that you would file as a “hobbyist”

[dtown_poker]

Cool...thanks for the clarification. I did pick the term up from searching through some old posts that you and other made.

Thanks again...I gots some extra money to spend this weekend now.