Never paid taxes before... how much should I expect to pay?
 

I am planning on talking to a tax accountant (which is the same thing as a CPA, correct?), but the answer to this question affects how I should manage my bankroll. Also, I'm curious how much I'm getting screwed out of. [img]/images/graemlins/tongue.gif[/img]

So far this year I've made about $50K from poker, plus $10K in bonuses and rakeback. From what I've read, the IRS is pretty strict about letting people file as pros, so I'm going to assume by default that I will not be able to file as one. FWIW, I've played about 500 hours this year, and poker has been my only source of income.

I know that if I don't file as a pro, I can't net my winnings. So, unless someone knows an easier way with Poker Tracker, I'm just going to have to add up all the winning sessions/tables, and add up all the losing sessions/tables. Right now I'm going to take a very wild guess and say I've won $250K and lost $200K (does this sound like it could be about right?). Can anyone give me a rough estimate on how much I'm going to have to pay in taxes?

Thanks a ton.

Re: Never paid taxes before... how much should I expect to pay?
 

You are a "PRO"...RB and Bonus are income..Since you will be able to file as a "pro" attach print out from PT and add in your RB + Bonus...You will also be able to take deductions..When taking deduction be sure to document everything...

Re: Never paid taxes before... how much should I expect to pay?
 

If you made $60K in income and have no deductions or exemptions other than a single personal exemption (after taking the gambling loss deduction), you would have a federal tax liability of around $10,500.

My understanding is that if you file as a pro, you would have to pay self-employment payroll tax. I'm sure this amount would be much larger than anything you would save by netting your wins and losses and taking the standard deduction. So I'm not sure why you would want to file as a pro.

Re: Never paid taxes before... how much should I expect to pay?
 

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Also, I'm curious how much I'm getting screwed out of.

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Sneak peek at the new IRS Poker Tax Form:

Q1. How big is your bankroll? $ _________.__

Send ALL it in!


D$D

Re: Never paid taxes before... how much should I expect to pay?
 

[ QUOTE ]
You are a "PRO"...RB and Bonus are income..Since you will be able to file as a "pro" attach print out from PT and add in your RB + Bonus...You will also be able to take deductions..When taking deduction be sure to document everything...

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Damn. Really? 10,500? Jesus my whole net worth will be my bankroll because I'm going to have to take everything else out lol

Re: Never paid taxes before... how much should I expect to pay?
 

the IRS may make you file as pro as many non pros have been getting letters to file schedule C and pay self employment tax due to their gambling wins. So if you want to file as pro, that shouldn't be a problem.

Re: Never paid taxes before... how much should I expect to pay?
 

$10,500 = 17.5%. That isn't anywhere near as bad as I expected. I thought I'd have to be paying something like at least 30%. I've never had a "real" job so I really don't know anything about this stuff. What's a "single personal exemption"?

I think it'd be pretty cool to be recognized by the government as a pro, but obviously that's not worth it if I have to pay more. I don't know whether I'll have to file as a pro or not, so I'll just cross that bridge when and if I come to it (when I talk to a CPA, right?)

Re: Never paid taxes before... how much should I expect to pay?
 

Yeah, basically, those that have never paid taxes on their poker winnings are the ones that exaggerate how much you'll pay. I get deductions for my internet bill, any meals I order and eat while playing, any books or dvd's (don't get these anymore, but have in the past) any new cpu stuff...etc. Even deductions on my electric bill and stuff. Just like a personal business. You do have to pay higher taxes on social security and what not...but after deductions, you'll pay about 25-28 percent depending on how you end up for the full year. And yeah, its not bad at all...fair and square and you are paying your fair share of the taxes to society.

So, yeah, get a cpa (accountant) and get this stuff going. Its not nearly as painful as all these others make out (again, odds are, they aren't paying their taxes and have no idea-I'm referring to no one in this particular thread btw).

Kodfish

Re: Never paid taxes before... how much should I expect to pay?
 

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What's a "single personal exemption"?

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Basically, you get one exemption for each of yourself, your spouse, and your dependents (usually your children). So an unmarried person with no children gets one exemption. For each exemption, a certain amount of your income is not taxed at all. This amount changes every year...I believe for 2007 it is $3400. The exemptions can be generally be taken regardless of any other deductions taken, although I think it gets phased out at very high income levels.

So if you made $60K, you are only taxed on $56.6K after the exemption.

Re: Never paid taxes before... how much should I expect to pay?
 

Has anyone ever been audited for not paying taxes on their poker earnings? I have recently been way more succesful and am starting to worry about the amounts I am not being taxed on.

Re: Never paid taxes before... how much should I expect to pay?
 

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Has anyone ever been audited for not paying taxes on their poker earnings? I have recently been way more succesful and am starting to worry about the amounts I am not being taxed on.

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Willfully failing to report income on your tax return is a crime. Not just audited, people have been criminally charged for failing to report gambling income. It would have to be a pretty big amount before you would have to worry about jail, but even without a jail sentence the fines will break you. I'd put the rough cut off point at about 10K, less than that and just the IRS will take your money, more than that and you can expect the DOJ to take some money too. Over a 100K and a trip to "club fed" is quite likely.

Skallagrim

Re: Never paid taxes before... how much should I expect to pay?
 

I'd try to breakdown your Pokertracker database by day and consider each day a session. Talk to your accountant, but I think that is a reasonable approach to defining a session.

Re: Never paid taxes before... how much should I expect to pay?
 

I'm in exactly the same situation as DMoogle (a few k less in earnings though), and paying $10,700 sounds like a TON. That's going to be like 60% of my effective online bankroll. ugh poker is so much harder when you factor in taxes.

Is there anything I should do to help lessen the damage of tax day (other than not spending anything)? I will be paying this all in a lump sum on April 15, correct? Do I just need to accept that my roll will be cut in half once per year?

Re: Never paid taxes before... how much should I expect to pay?
 

[ QUOTE ]
I'm in exactly the same situation as DMoogle (a few k less in earnings though), and paying $10,700 sounds like a TON. That's going to be like 60% of my effective online bankroll. ugh poker is so much harder when you factor in taxes.

Is there anything I should do to help lessen the damage of tax day (other than not spending anything)? I will be paying this all in a lump sum on April 15, correct? Do I just need to accept that my roll will be cut in half once per year?

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Consult a CPA.

If there is a chance you are filing pro or will be considered a pro by the IRS you should be filing quarterly. If you do not file quarterly there are additional penalities and interest.


D$D

Re: Never paid taxes before... how much should I expect to pay?
 

thanks for the help, just called my parents to get an appointment with their guy soon.

Re: Never paid taxes before... how much should I expect to pay?
 

[ QUOTE ]
Is there anything I should do to help lessen the damage of tax day (other than not spending anything)? I will be paying this all in a lump sum on April 15, correct? Do I just need to accept that my roll will be cut in half once per year?

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You likely should be paying quarterly estimated taxes. The way to lessen this is to plan ahead. This is done for people with regular jobs via payroll deduction. You simply have to do your own payroll deduction. If you made a gross salary of $100K at a "real job", would you spend $100K and then wonder where to get the ~$40K for taxes on 4/15? As you'd only see your net pay, you'd likely based your spending and savings on that net amount. If you treat your poker income the same way, you should be fine.

Re: Never paid taxes before... how much should I expect to pay?
 

You said you "made" 50k from poker. Does this mean you got paid out 50k? If not, I was under the impression that you only get taxed on what you get paid out of your poker account. Like stocks, you dont pay taxes until you actually cash out. You pay taxes on the amount you withdrew into your checking account or through WU or whatever method you used. This would be listed in "other income" on 1040 (if you did not file as a pro). Then if you itemize you can claim the losses. If you dont itemize that means the standard deduction was more than your losses anyway so you wouldn't want to itemize and count your losses.

There is no way for the IRS to know how much you have in your offshore accounts. All they can know is how much you have been paid out into your checking account.

Re: Never paid taxes before... how much should I expect to pay?
 

[ QUOTE ]
You said you "made" 50k from poker. Does this mean you got paid out 50k? If not, I was under the impression that you only get taxed on what you get paid out of your poker account. Like stocks, you dont pay taxes until you actually cash out. Then you pay taxes on the amount you gained over the original amount invested.

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Wrong!!! First of all, I'm not the one who make $50K (I made more), so this may not be to me. I'll answer anyway. You're taxed on your earning on a session-by-session basis. The IRS does not consider this investment income.

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Because there is no way for the IRS to know how much you have in your offshore accounts. All they can know is how much you have been paid out into your checking account.

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Your taxes aren't based on what you think the IRS knows.

Re: Never paid taxes before... how much should I expect to pay?
 

TE, what about the person who bets sports mostly. Would they need to keep track of every bet made?

Re: Never paid taxes before... how much should I expect to pay?
 

Say you're a winning online player and you dump all of your winnings in the slots or live action???? You don't get a reciept showing how much you lost...

Also, PT isn't going to be 100% accurate. You have to take tourney buy-ins and when you played on a different CPU into consideration as well. Couldn't you consider deposits as losses and cashouts as gains?. Why would you have to break down each day and count it as a session?

Re: Never paid taxes before... how much should I expect to pay?
 

I claimed for the first time last year and made roughly the same. I paid quarterly this year but the 10k was about what I paid in taxes and soc security and medicare w/h. I did put 10k into a SEP IRA and 5k into an HSA account to lower mhy taxes. Also deducted home mortgage interest, charitable contributions, and flight travel for the six or so live events I played in. Hope that helps.

Re: Never paid taxes before... how much should I expect to pay?
 

I'm glad I found this thread, because I have several questions of my own I'd like to address to those who might be able to answer them in this thread. Hello Engineer, Skallagrim, obg, by the way, and thank you for your continued insights and advancement of our cause.

I am sort of "just starting out" as a full-time (professional) player, and early this year I had a few crap jobs, but I've been playing as my only income since July. Next year I will be a full-time professional and will file as such. However, my plan for THIS year is to just meet with a CPA around when I get the W2s from the grinds and explain my situation and let them do my return and help me plan a strategy for filing in future years as a pro. Will this be acceptable in the eyes of the IRS, since I had the jobs earlier in the year and thus could not rightly file as a professional this year?

Also, the method of accounting I am using is a spreadsheet I designed myself which is very in-depth and will cover all aspects of my future Schedule C earnings. I do not use Pokertracker; the IRS does not stipulate it by name as the only accepted record-keeping instrument, I hope? In my own spreadsheet, every session on every table is recorded complete with buy-in, stakes, and final amount, and netted to show a profit or loss, which is also recorded. I just keep a notebook beside me and record all my activities by hand and transfer them later to my database. If anything, I would think this would actually be preferable to the IRS, as I will be able to produce not only a computerized record of my quarter's profits, but also a hard (handwritten) copy which will match it to the cent. Does this sound legit?

Anyway, if anybody has even read this long post, I'd appreciate any useful comments or criticisms from any more experienced professionals (or any serious players well-versed in the tax issues associated with winning play) in this forum, or any helpful ideas generally. I'm going to bed now, but I'll check back in later, prolly with some more long-winded questions. Thx everybody. Peace.

Re: Never paid taxes before... how much should I expect to pay?
 

Your record keeping process sounds pretty good to me. The daily notebook alone should stop any IRS audit in its tracks.

Do talk to a CPA, however, there are things like offshore account reporting, estimated taxes, Alt. Min. Tax, self employment tax, and a host of others that you will need to be aware of. Plus any 1/2 decent CPA will find you more in deductions than the cost of their service.

Very good start IMO.

Skallagrim

Re: Never paid taxes before... how much should I expect to pay?
 

What are the penalties for not Paying taxes on amounts around 20k?

Re: Never paid taxes before... how much should I expect to pay?
 

This forum needs to have a ban on posts that either suggest or ask for suggestions on how to commit blatantly illegal acts.
Poker players do not help their cause by implying that they wish to participate in tax evasion.

Re: Never paid taxes before... how much should I expect to pay?
 

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This forum needs to have a ban on posts that either suggest or ask for suggestions on how to commit blatantly illegal acts.
Poker players do not help their cause by implying that they wish to participate in tax evasion.

[/ QUOTE ]

What cause are you referring too? These posts are viewed by other poker players, not people that regulate the legality of online poker. What other people do with their money should be none of your concern.

Re: Never paid taxes before... how much should I expect to pay?
 

[ QUOTE ]
[ QUOTE ]
This forum needs to have a ban on posts that either suggest or ask for suggestions on how to commit blatantly illegal acts.
Poker players do not help their cause by implying that they wish to participate in tax evasion.

[/ QUOTE ]

What cause are you referring too? These posts are viewed by other poker players, not people that regulate the legality of online poker. What other people do with their money should be none of your concern.

[/ QUOTE ]

People not paying their taxes should be a concern of everyone else in the country. DUCY?

Re: Never paid taxes before... how much should I expect to pay?
 

Out of curiosity, where'd you get $10.5K from? I asked someone (not someone particularly knowledgeable, but nonetheless someone who pays their taxes), and they said that I should be looking at paying about a third of my income.

Re: Never paid taxes before... how much should I expect to pay?
 

I think the 10.5k is just federal taxes. State taxes are on top of that 10.5k number.

Re: Never paid taxes before... how much should I expect to pay?
 

[ QUOTE ]
Out of curiosity, where'd you get $10.5K from? I asked someone (not someone particularly knowledgeable, but nonetheless someone who pays their taxes), and they said that I should be looking at paying about a third of my income.

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I got that number by looking up the current federal income tax rates and exemptions and applying them to an income of $60K. This information is easily accessible on the web.

As someone else noted, you will also probably have to pay state income tax, which varies widely by state (although this will be substantially less than your federal tax, and a few states have no income tax). If you file as a pro, you will also need to pay payroll tax, which most people have to pay on all of their wages.

The person who cited the 1/3 figure was probably thinking of either the total of all these taxes combined, or the marginal tax rate on your highest level of income. But the federal income tax only hits 1/3 on taxable income over $160,000 per year.

Re: Never paid taxes before... how much should I expect to pay?
 

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
This forum needs to have a ban on posts that either suggest or ask for suggestions on how to commit blatantly illegal acts.
Poker players do not help their cause by implying that they wish to participate in tax evasion.

[/ QUOTE ]

What cause are you referring too? These posts are viewed by other poker players, not people that regulate the legality of online poker. What other people do with their money should be none of your concern.

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People not paying their taxes should be a concern of everyone else in the country. DUCY?

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Why would it concern you if someone else was breaking the law(the law they are breaking isn't physically threatening you, ldo)? Have you ever paid taxes on your poker winnings? Are you even a winning player? If so, what % are they taking from you?

Re: Never paid taxes before... how much should I expect to pay?
 

I made about 60k from poker last year and I owed around 20k after penalties. I did not file as a pro.

The penalties rise the longer you wait.

To calculate your total winnings and losing sessions you need an excel spread sheet.

Use poker tracker to export to it. Then you use a function to add up all of the numbers.

Mine were like 400k winnings, 340k losing roughly.

This is the correct way to do it.

Re: Never paid taxes before... how much should I expect to pay?
 

Ok, new tax question, I'm sure its been asked before... been living in Europe for 8 months so far this year but am a US citizen, only income 50k in poker earnings as my sole source of income, how do I go about paying the taxman? Also, online gambling is "slightly" illegal in my country of residence... should I pay taxes here too?

Re: Never paid taxes before... how much should I expect to pay?
 

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
This forum needs to have a ban on posts that either suggest or ask for suggestions on how to commit blatantly illegal acts.
Poker players do not help their cause by implying that they wish to participate in tax evasion.

[/ QUOTE ]

What cause are you referring too? These posts are viewed by other poker players, not people that regulate the legality of online poker. What other people do with their money should be none of your concern.

[/ QUOTE ]

People not paying their taxes should be a concern of everyone else in the country. DUCY?

[/ QUOTE ]

Why would it concern you if someone else was breaking the law(the law they are breaking isn't physically threatening you, ldo)? Have you ever paid taxes on your poker winnings? Are you even a winning player? If so, what % are they taking from you?

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Because every tax dollar the that someone else doesn't pay adds to my share of the national debt, and thus my tax liability in the future.
Why should I have to pay your share of the tax burden?
As a citizen of the country, I have a stake in our national government, and tax cheats are stealing from that stake.

I am not a professional player, but I have reported and paid taxes on poker winnings the past two years, and will this coming year as well (I didn't play poker outside of very low stakes home games before this). In the past, I did not keep very good records, and had to report a good-faith estimate of my winnings. This year, I have recorded everything much more completely, so I can report a very accurate amount.

Re: Never paid taxes before... how much should I expect to pay?
 

[ QUOTE ]
Why would it concern you if someone else was breaking the law(the law they are breaking isn't physically threatening you, ldo)? Have you ever paid taxes on your poker winnings? Are you even a winning player? If so, what % are they taking from you?

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It concerns me if someone else breaks the law and then posts about it on open forums, as it will cause problems for all of us. I realize you weren't asking me, but I'm a winning player and I pay my taxes. For me, it runs a bit over 1/3 (my marginal rate, as my wife and I each have "real" jobs).

Re: Never paid taxes before... how much should I expect to pay?
 

pay your taxes because you have to and jail isnt fun
but these moral people are hilarious
the govt robs you blind and you act like "we're doing our part"
The tax laws for gamblers are even more absurd than normal income tax laws
I pay my taxes so avoided being pounded in the ass in jail not to feel like im contributing to society

Re: Never paid taxes before... how much should I expect to pay?
 

So what do you do if you played at sites that did not or do not support PT?

Re: Never paid taxes before... how much should I expect to pay?
 

[ QUOTE ]
[ QUOTE ]
You said you "made" 50k from poker. Does this mean you got paid out 50k? If not, I was under the impression that you only get taxed on what you get paid out of your poker account. Like stocks, you dont pay taxes until you actually cash out. Then you pay taxes on the amount you gained over the original amount invested.

[/ QUOTE ]

Wrong!!! First of all, I'm not the one who make $50K (I made more), so this may not be to me. I'll answer anyway. You're taxed on your earning on a session-by-session basis. The IRS does not consider this investment income.

[/ QUOTE ]

By the way, I wrote "Wrong!!" as strongly as I did only to nip this idea in the bud, not to disrespect the person to whom I was replying.

Re: Never paid taxes before... how much should I expect to pay?
 

What's the IRS definition of a professional gambler? Is it based on how much you play? Whether you have another primary occupation? I believe you must file a schedule C for a sideline business, even if you make more in a full-time job. What makes playing poker a business vs a hobby?

I'm modestly profitable this year, have spreadsheets and Pokertracker as record-keeping, and want to stay legal. It's still small-change compared to my full-time job, though.

Re: Never paid taxes before... how much should I expect to pay?
 

i dont even use PT any more
i have records or wins and losses but not a 5 million hand database
I dont thinkt he irs requires one