Received Est. Tax Form 1040-ES For First Time

Lucky · #1 08-25-2006, 06:31 PM

I've been playing poker for supplementary income since 2003 and declared wons/losses and paid taxes each year 2003-2005.

I've been playing as sole source of income since April of this year. Today I get the 1040-ES in mail asking me for estimated tax by Sept15 and Jan 16. Some questions I have.

1. Can you recommend a good CPA in/near Green Bay, WI who handles gamblers filings?

2. Has anyone received these? did you receive it only after playing as sole income?

3. Based on their charts and my estimates, the amount I'll be paying on winnnings will be less than 20%. This cant be right. What am I missing?

4. Also, how do I estimate for different dates? Is Sept 15 one for all money I made from poker through then? and Jan for rest of 2006?

5. Is there any important info you can give me not included in questions above?

Thanks alot, this is new to me.

spatne · #2 08-26-2006, 08:34 AM

You're supposed to make 4 quarterly payments. The payment on Sept 15 is the third one, so you've missed two so far.

Basically, you're supposed to do this for any income that doesn't have taxes withheld. The US uses a "pay as you go" tax system, which is why the government withholds taxes from each paycheck. Estimated taxes are a substitute for withholding on income which doesn't come from an employer. If you overpay, you'll get the excess back as part of a refund. If you overpay too much, however, I think there's a penalty.

It doesn't matter if it's your sole source of income, or if you're filing as a pro-- you have to pay estimated taxes on your winnings. If you pay your taxes in one lump sum on tax day, you'll be subject to penalties and probably interest as well.

If you make only the 3rd and 4th payments, but make those payments large enough to cover everything you owe, I have no idea what will happen. Can anyone answer this? For example: if someone goes to Vegas in October and wins $10K, they'd only make one ES payment. How does the IRS differentiate between this person and OP who simply missed payments?

broiler · #3 08-26-2006, 09:47 AM

When a person has income that isn't earned evenly throughout the year, they have the option to calculate their estimated taxes on the installment method. The installment method essentially breaks up your income into the four quarters of the year and calculates the required payment based upon when the income was earned and the expected earnings for the rest of the year. Any person that is required to make estimated payments and does not have earnings in a steady stream during the year should consider the installment method to calculate their estimated tax payments.

Theodore Donald Kiravatsos · #4 08-26-2006, 11:37 PM

[ QUOTE ]

2. Has anyone received these? did you receive it only after playing as sole income?

[/ QUOTE ]

What I recall from reading the form, is that the general idea is that IF, on April 15th, you have to cut the IRS a check for over $1000, then you should be (have been) paying estimated taxes in installments.

So like, even if you have a job where you have taxes deducted, if you end up earning too much from other sources, and your work deductions aren't enough, you may have to use 1040-ES even though you are subject to other withholding.

A good way to end up using 1040-ES is to be a couple of DINKs with few deductions, but claiming one exemption on your W-4, each.

permafrost · #5 08-26-2006, 11:44 PM

The "less than 20 percent" that you mentioned is your income tax. I am not an expert but am guessing you will also have to pay SE tax, another 15+ percent.

JuntMonkey · #6 09-12-2006, 04:34 PM

Alright, so if I cashed in the main event, I have to make a payment by Friday, using 1040-ES? My grandfather is a tax preparer so it's not that big a problem, but I want to make sure I do owe the money now rather than April 15th. And could I pay it in installments, one now, one later this year?

mike3076 · #7 09-12-2006, 05:56 PM

or, just dont pay taxes.

Zele · #8 09-12-2006, 06:24 PM

[ QUOTE ]
The "less than 20 percent" that you mentioned is your income tax. I am not an expert but am guessing you will also have to pay SE tax, another 15+ percent.

[/ QUOTE ]

Maybe, maybe not. The issue of being compelled to file as a pro gambler hasn't really been tested yet, AFAIK. (Ironically, gamblers initally had to fight for the right to file as pro.) OP is probably especially safe from this tax given his poker is "supplementary income".

Zele · #9 09-12-2006, 06:25 PM

[ QUOTE ]
or, just dont pay taxes.

[/ QUOTE ]

Not cool.

permafrost · #10 09-12-2006, 07:24 PM

[ QUOTE ]
[ QUOTE ]
The "less than 20 percent" that you mentioned is your income tax. I am not an expert but am guessing you will also have to pay SE tax, another 15+ percent.

[/ QUOTE ]

Maybe, maybe not. The issue of being compelled to file as a pro gambler hasn't really been tested yet, AFAIK. (Ironically, gamblers initally had to fight for the right to file as pro.) OP is probably especially safe from this tax given his poker is "supplementary income".

[/ QUOTE ]

OP stated he was now "playing as sole source of income" and asked about "gambler" filings. I'm betting he will get the pleasure of paying SE tax which will probably put him over 20%.