My new CPA says I should file as a corporation???

[Legislurker]

You can do it, what happens if they decide to audit you is a different matter. Im not aware of a court case where an online pro who used a corporation in an OFC without income taxes has been audited. Im not sure it would fly in a particular state. Esepcially if you have one where gambling as a business is defined as a crime.

[Steve Giufre]

[ QUOTE ]
You can do it, what happens if they decide to audit you is a different matter. Im not aware of a court case where an online pro who used a corporation in an OFC without income taxes has been audited. Im not sure it would fly in a particular state. Esepcially if you have one where gambling as a business is defined as a crime.

[/ QUOTE ]

I'm not sure either, but its defintely something that more than a few CPA's are recomending these days. I've talked with two pretty good ones in CA, and both have suggested that I do this, and have said it has worked out well for other clients. I can believe it could get a little tricky if you were audited, although I've been told otherwise.

Looking past this and s-corp seems to be the best way to go. You accountant is right, you dont have to pay self employment tax, and you can write off all your gambling related expenses. One more thing to consider is whether or not you may need to borrow some money at some point down the road for a house or whatever else. If thats the case you are probably better off filing under some vague occupation and paying on your winnings rather than putting professional gambler on that line. Banks arnt crazy about lending money to gamblers.

[Todd Terry]

Incorporating and filing as a sub S seems highly unorthodox to me (an attorney with basic knowledge of the tax law, but not an expert in it). I would want a signed opinion letter from an attorney, not an accountant, if I were to do it, which based on my current state of knowledge I would not. I'm not saying it's clearly wrong, it's just very unusual, and undoubtedly would not be looked upon kindly by the IRS if anyone noticed.

Over the years, I've heard many stories about CPAs giving wrong, completely illegal advice to clients. The clients and CPAs almost always get away with it because the chances of being audited are so low. But sub S's whose sole purpose is to minimize SE taxes and professional gamblers both seem to be areas of current interest to the IRS.

[Russ Fox]

S Corporation owners who work for the company must (with very limited exceptions) pay themselves a "reasonable" salary. And that means a W-2, with employment taxes withheld. This is a point of emphasis for the IRS in their current enforcement efforts.

As to incorporating (as a professional poker player), can it be done? Yes. Is it the right thing to do? It's possible that it's right, but it's probable that it's not. Everyone's situation is different, and this is something that each individual would need to discuss with his or her professional tax adviser and probably his or her attorney.

-- Russ Fox

[CaptVimes]

[ QUOTE ]
S Corporation owners who work for the company must (with very limited exceptions) pay themselves a "reasonable" salary. And that means a W-2, with employment taxes withheld. This is a point of emphasis for the IRS in their current enforcement efforts.


[/ QUOTE ]

QFT

In the tax update seminar I was at last weak we spent over an hour talking about the recent slew of reasonable compensation cases being pursued by the IRS over the last year.

[SgtJake]

Russ,

Honored that you've posted in my thread. "Mastering no limit" was the first poker book I read and the one that helped me the most. Several of my friends have purchased the book on my recommendation.

Back on topic....what is the recommended way to file if your only source of income is from poker? (link?)

[Russ Fox]

Thank you for the kind remarks about Mastering No-Limit Hold'em.

[ QUOTE ]
Back on topic....what is the recommended way to file if your only source of income is from poker? (link?)

[/ QUOTE ]

Unfortunately, your question isn't easy to answer. Tax is not a one-size-fits-all profession. It sounds like you're a professional ("all income from poker"), which indicates a Schedule C. But that's not always the case.

The Groetzinger decision governs whether or not you should file as a professional. However, other issues such as your state of residence, whether you gamble online or in casinos, whether you're a full-time student, other businesses, other sources of income, etc. can and do impact how you should file. A professional tax preparer should ask the questions needed to determine what's right for your situation.

It's impossible for me to post an answer to your question. I don't know you, and the full facts of your situation. And without that, I'd just be guessing.

-- Russ Fox

[Legislurker]

The whole point of filing in an OFC is that the corporation pays YOU and buys your house and car. The IRS can't force you to divulge the nature of the corporation or even who owns it.
Especially if the money never comes into the US. Im not saying its "legal" its just a lot of effort on their part to prove illegality that they may totally avoid. Getting the information would take a LOT of time and expense, so as long as you cna account for how you got all yoru assets, or show that the corporation owns it, youre pretty safe, but i wouldnt say ironclad.

[DeadMoneyDad]

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other sources of income, etc. can and do impact how you should file. A professional tax preparer should ask the questions needed to determine what's right for your situation.

[/ QUOTE ]

I understand your general reluctance to give tax advice both for free and with out a full understanding of all the facts at issue. You are a professional.

But on one point of "other income" does much depends on the active vs passive nature of the "other income"? In all other regards I feel farily comfortable, but the nature of this source of income compared with the amount of reportable "active on-line (majority) and active live (minority) poker income" vs passive income is the heart of my question.

I couldn't get a straight answer from repeated tries from the IRS.



D$D

[RikaKazak]

I know more than one poker player that has formed an S-Corp.