Ed Miller's Tax Article

[oxymoron]

[ QUOTE ]
I busted my ass last spring working to comply with IRS guidelines that gambling income be reported on all winning sessions (as opposed to in aggregate). PokerTracker does NOT make this easy for anyone who multitables, moves tables, or takes very short breaks during a given session. In fact, the term 'session' does not have a tried and true definition for these purposes as far as I can tell, though Russ Fox has a good discussion of the matter on his web page.

Here's my question: for those of us careful enough to make a good faith effort to comply, is there an easier means of culling through PT data to aggregate our winning sessions (which we'll add to our AGI when filing) and losing sessions (which we may or may not be able to utilize as a deduction depending on how much the total is and whether we prefer to take the standard deduction). I gather that those users with a better understanding of database queries might be able to come up with a means of doing this in an automated fashion.

The way I did it in March was to print out my sessions from 2004 and go through them by hand linking the table entries that were from the same "session." I defined "session" as any poker playing that was immediately continuous with other poker play (e.g. I started at one table at 2pm and then added another at 2:15 while still playing the first table), or any poker play within 10 minutes of prior poker play (e.g. I started at 2pm, played one table until 2:45, took a 10 minute break to go to the john, and then resumed play at 2:55). Once I'd linked the sessions, I used a calculator to add up the total for each session. I aggregated all the winning sessions and all the losing sessions separately, and had my numbers. Then I did it all again to make sure it was right. This process SUCKED and was very time consuming.

The aggregate of the winning sessions was almost 200% of my net win if I recall correctly. High variance play will do that to you -- you often have big winning sessions and big losing sessions, so the delta between the two will be large. A player with lower variance might have aggregate winning sessions of maybe only 150% of his actual net win. So a high variance player who has a net win of $10,000 might actually owe more taxes than a low variance player who has won $12,000. Yuck! Lesson: if there are ways to maintain EV while lowering variance (and I know usually trying to lower variance is a folly), you may actually profit by doing so because your tax liability is reduced. Keep that in mind.

So, has someone come up with a better approach for adding up winning and losing sessions? As an aside, I'm a small fry in terms of the amount of money involved in my poker play -- I didn't have more than 2K hands at any level above 3/6 in 2004, and my overall winnings/aggregate session winnings were fairly deminimus relative to the salary from my real job... less than 10%. I gather this is a much bigger problem for online pros who make the big bucks.

[/ QUOTE ]

I'd really like to hear an answer to this and to the question about whether it is best to have a local CPA versus an out of state CPA. I really do not play enough yet for what I do to make a difference but I want to inform myself and begin doing the right thing as early as possible.

Thanks in advance and thanks for the great topic.