How to claim winnings and how to fix it if you haven't before...

[Cubicle]

Hello, I started playing online poker last year and made about 3K playing NL25. I am a 21 year old student and have a real job on the side. Now I am making about 8K per month playing NL400 and I need to know how I am supposed to pay taxes on this.

I can not use myself as a dependent, as my mother claims me.

I make way more in poker than I do at my real job. So, I am not sure what form to claim this on or how to do it.

I'd also like to know how to fix one's previous years tax return if one didn't claim poker winnings. Any help would be greatly appreciated.

[Holden97]

[ QUOTE ]
I am making about 8K per month playing NL400... I can not use myself as a dependent, as my mother claims me.

[/ QUOTE ]
Generally, you may not claim a person as a dependent if the person's gross income equaled or exceeded the exemption amount for the tax year, and you generally must provide more than half of that person's total support during the calendar year. Your mom might want to rethink claiming you as a dependent.

[ QUOTE ]
I make way more in poker than I do at my real job. So, I am not sure what form to claim this on or how to do it.

[/ QUOTE ]
Sounds like poker is a business for you. Look for Form 1040, schedule C. Read posts in this forum. I'd be surprised if >90% of your questions haven't already been answered.

[ QUOTE ]
I'd also like to know how to fix one's previous years tax return if one didn't claim poker winnings.

[/ QUOTE ]
Form 1040X. Search www.irs.gov for that.

[Cubicle]

Thanks for the quick reply. I was doing a little research on irs.gov and kept coming across this.

Gambling winnings. You must include your gambling winnings in your income on Form 1040, line 21. If you itemize your deductions on Schedule A (Form 1040), you can deduct gambling losses you had during the year, but only up to the amount of your winnings.

Wouldn't this be preferrable to filing a Schedule C?

[Holden97]

It might be better strictly based on the math. However, the wins and losses are based on sessions, which is a very poorly defined term in the tax law. That being said, you are to add all winning sessions together and report them on line 21 and report all losing sessions on Sch A.

Schedule C probably gets you some additional expenses to deduct.

The decision to report poker earnings (winning and losing sessions) on schedule C or to report winning poker sessions on page 1 and losing poker sessions on schedule A should not be based on which one provides a mathematically better answer -- a lower tax liability. The decision should be based on an analysis of whether the taxpayer is indeed playing poker as a professional. Many helpful resources (links to cases, anecdotal evidence regarding IRS experiences, etc.) for that analysis have been provided in these forums.