question about quarterly tax

TStoneMBD · #1 03-06-2007, 12:28 PM

i am very confused about paying quarterly tax as a poker player.

last year i filed as a non-professional, but this year i realize that i will have to file as a professional.

i sent a check to the irs in april of last year, for the previous years winnings, but have since then not sent any checks to the irs. was i supposed to? do i owe any interest?

i am going to send another check this april to the irs for last years winnings and file as a professional. however, i dont know if im supposed to pay quarterly tax or how that works. this year i may have a losing year. i am already down overall and plan on playing many large tournaments this year while having alot of business expenses in regards to hotel fees.

last year i cashed for 215k in a tournament in october. my income from last year is almost certainly going to be higher than this year unless i cash in another tournament.

how can i pay quarterly taxes if im anticipating a potentially losing year?

thanks alot for helping me, as mentioned im very confused.

TimM · #2 03-06-2007, 01:11 PM

The only advice you should ever consider in a situation like this, is to see a professional tax preparer. Mine saved me many times his fee vs. how I would have filed.

If you owe tax a second year in a row, you will likely have to pay interest penalties. usually not a huge amount, but calculating these are not so simple. As a poker player I'm thinking it's best to absorb these penalties anyway, as it's better to have use of the money throughout the year in your bankroll. I got my bankroll crippled in 2006 by paying both 2005 tax in full and 2006 estimated taxes in the same year. Ask your tax preparer about this and see if they agree. Just don't get in a situation where you make a lot of money one year, then after Jan 1 lose what you've saved up to cover the taxes.

plasphemy · #3 03-06-2007, 01:13 PM

Just went through this myself...

You will owe an underpayment penalty. You can find information on how much from form 2210 on irs.gov.

It isn't a large amount, more of a <sigh> payment.

You can reduce it if you made far more in 2006 than in 2005.

turbotax.com has a good estimated tax program that I'm using for 2007.

iceman5 · #4 03-06-2007, 01:48 PM

Just use Turbo Tax. Its very easy and it will tell you if you need to file quarterly and if you do, it will print out the coupons you need to send in with your quarterly payments.

jively · #5 03-06-2007, 05:06 PM

On the underpayment form, you can annualize your income, deductions, and tax payments. If you were basically breakeven and then had a large income event in October, you should have made an estimated payment by Jan 15 of the following year. So, the penalty and interest would not be as bad than if you didn't annualize.

For 2007, you should make the best estimate you can, send in the first estimated payment, and re-estimate each quarter based on how you are doing. It's not all that easy but I guess that's what you have to do. If you then annualize, you should have no problems with underpayment.

-Tom

crzylgs · #6 03-06-2007, 05:19 PM

[ QUOTE ]
Just don't get in a situation where you make a lot of money one year, then after Jan 1 lose what you've saved up to cover the taxes.

[/ QUOTE ]

QFT

ps [censored] me to death.

Poker CPA · #7 03-06-2007, 06:06 PM

There are no penalties, just an interest payment. It comes out to about 8% on an annual basis. Its confusing and the IRS tries to scare the crap out of you with their "mumbo jumbo" wording. THERE IS NO REQUIREMENT TO PAY ESTIMATED PAYMENTS.

To do a quick calculation of the interest (the IRS calls it a penalty), its 4% times tax due, give or take.

The scope of your question is to broad to give a complete answer, in this type forum. But if your tax is $5,000, just pay on April 15th. The interest will be about $200, which I'm sure you can makeup on prudent investing or cardplaying.

This issue is EZ for an experienced preparer, but its just to complex to explain in full. I hope this helps.

bcblack · #8 03-06-2007, 08:03 PM

[ QUOTE ]
There are no penalties, just an interest payment. It comes out to about 8% on an annual basis. Its confusing and the IRS tries to scare the crap out of you with their "mumbo jumbo" wording. THERE IS NO REQUIREMENT TO PAY ESTIMATED PAYMENTS.

To do a quick calculation of the interest (the IRS calls it a penalty), its 4% times tax due, give or take.

The scope of your question is to broad to give a complete answer, in this type forum. But if your tax is $5,000, just pay on April 15th. The interest will be about $200, which I'm sure you can makeup on prudent investing or cardplaying.

This issue is EZ for an experienced preparer, but its just to complex to explain in full. I hope this helps.

[/ QUOTE ]

TY so much for posting that. You are my hero!

MegaFossil · #9 03-06-2007, 09:54 PM

Instead of starting a new thread I thought I'd post my situation here b/c it kind of ties in:

Last year I was learning the game and this didn't make any money at all. This year, I've done very well and anticipate a nice year, maybe even close to 6 figures in profit. I don't go to school and haven't had a job in 2 years. This will be my first year filing taxes. Do I have to file quarterly or can I just make a payment for 07 in April of 08. The reason I ask is b/c usually for quarterlies I believe they are estimated payments based on previous years, but I don't have any previous years of profit. Obviously I would prefer to make one lump payment next year as opposed to pulling money out of my bankroll this year for 1Q 07.

What do you guys advise?

Thanks.

jively · #10 03-06-2007, 10:52 PM

[ QUOTE ]
Last year I was learning the game and this didn't make any money at all. This year, I've done very well and anticipate a nice year, maybe even close to 6 figures in profit. I don't go to school and haven't had a job in 2 years. This will be my first year filing taxes. Do I have to file quarterly or can I just make a payment for 07 in April of 08. The reason I ask is b/c usually for quarterlies I believe they are estimated payments based on previous years, but I don't have any previous years of profit. Obviously I would prefer to make one lump payment next year as opposed to pulling money out of my bankroll this year for 1Q 07.

[/ QUOTE ]
You are correct; since you didn't pay tax last year, you do not have to file estimated payments. You would be wise to take some money out of your bankroll, and put it into a money market earmarked for next April.

-Tom

P.S. Disclaimer - I am not a tax professional; check with a professional.