#1
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Tax Help for a Newbie
So Im trying to get my taxes done and using Turbo Tax if I have a total winnings of $12k and total losses of $7k for a net total of $5k in winnings my taxes are going to come to $1k. This is my only income and this seemed extremely high to me for $5k total income as last year I paid $38 in taxes on $5k in non-gambling income.
Are Turbo Tax's numbers about right or are they definitely off? Im filing in Massachusetts although I go to college in New York (Ive heard Massachusetts is very harsh on gambling taxes could I file in New York?), should I get an accountant and can anyone give me any insight on finding an accountant who can deal with this kind of issue cost appropriately? |
#2
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Re: Tax Help for a Newbie
Sounds like you are in a 20% bracket.
I am not a CPA but that seems pretty reasonable. fyc |
#3
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Re: Tax Help for a Newbie
Does the fact that its gambling income account for it being taxed that much higher? Am I being taxed as if I am in then $5k income bracket or $12k income bracket?
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#4
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Re: Tax Help for a Newbie
When you figure gambling winnings and gambling losses for tax purposes, it is figured out as two separate numbers, not as one net number.
Your losses can be itemized up to the amount of your winnings. If you have $12K in winnings and $7K in losses, it still comes out to $5K, but you're deducting $7K as opposed to the standard deduction of $5,150 (if you don't itemize) or as opposed to the "up to the amount of your winnings" rule for $5,000 (in this instance) when using a net figure. I'd go back and redo it using the two separate numbers and not the one net number and see how it goes. It should be better. Enjoy. |
#5
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Re: Tax Help for a Newbie
[ QUOTE ]
Sounds like you are in a 20% bracket. I am not a CPA but that seems pretty reasonable. [/ QUOTE ] Actually it seems too high. Your taxable income should only be $5,000 minus whatever exemption you qualify for. This should put you in the 10% bracket, and Federal tax due should be $500 or less. If the rest is coming from state tax due, then it can make sense. If you live in Mass but only go to school in NY, I think you should file in Mass. But definitely look that up / get more opinions on that... -Tom |
#6
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Re: Tax Help for a Newbie
My federal taxes are aproximately $500 but my state taxes are another $450 plus a penalty for having over $400 in unpaid taxes according to Turbo Tax (?). Ive heard that Massachusetts is particularly harsh on poker players is there any way I can file as a New York resident? (Ive been in Massachusetts maybe 1 month out of 12 in the past year although I am a dependent of my parents who live in Massachusetts).
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#7
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Re: Tax Help for a Newbie
[ QUOTE ]
When you figure gambling winnings and gambling losses for tax purposes, it is figured out as two separate numbers, not as one net number. Your losses can be itemized up to the amount of your winnings. If you have $12K in winnings and $7K in losses, it still comes out to $5K, but you're deducting $7K as opposed to the standard deduction of $5,150 (if you don't itemize) or as opposed to the "up to the amount of your winnings" rule for $5,000 (in this instance) when using a net figure. I'd go back and redo it using the two separate numbers and not the one net number and see how it goes. It should be better. Enjoy. [/ QUOTE ] This method (required by the IRS) seems to be grossly unfair for persons with children because if followed, most people will lose their child tax credit. The child tax credit is based on the adjusted gross income (which includes the 'gambling winnings' but does not include the 'gambling losses' which are on Schedule A). SO- a hypothetical example: person with 3 kids wins $1000 over the year ($201,000 winnings, $200,000 losses) By claiming this $1000 winning the way the IRS wants you to do it, the person just lost $3000 in child tax credits because the adjusted gross income was artifically inflated and exceeds $110,000. Maybe I missed something here? Any CPA types out there? |
#8
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Re: Tax Help for a Newbie
There are no gambling losses allowed as a deduction in MA and probably not allowed on the Fed. due to your dependency.
You're being taxed on nearly the full amount of income, again due to dependency; meaning few write offs and deductions for you, those go to your folks. Your best bet talk to Mom and Dad and see what works out the best for all involved, if they are taking a big deduction on you because you're in school, you'll probably just have to bite the bullet. Likewise, if you have no means of proving residency in NY, things could come back to bite you, although at your income level, it is unlikely it would be worth the effort to audit you. I would look into the MA penalty, there is generally a provision for big jumps in income related to estimated payments. |
#9
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Re: Tax Help for a Newbie
Not sure if this is addressed to my post above?
I am not the dependent child in this case. I would be the person with children who has to claim gambling winnings as defined by the IRS. And I think that could cause me the loss of certain credits- namely the child tax credit |
#10
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Re: Tax Help for a Newbie
[ QUOTE ]
This method (required by the IRS) seems to be grossly unfair for persons with children because if followed, most people will lose their child tax credit. The child tax credit is based on the adjusted gross income (which includes the 'gambling winnings' but does not include the 'gambling losses' which are on Schedule A). [/ QUOTE ] Correct. This method is unfair to that, and to anything else that is based on AGI. Gambling may disqualify you for Roth IRA conversion eligibility, Roth IRA contribution eligibility, medical expense deductions, charitable contributions, and casualty loss deductions. You also may find your exemptions and itemized reductions reduced. I guess you can call your senator and congressperson to tell them how unfair it is. Good luck! -Tom |
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