Pay on withdraws or earnings?

[Russ Fox]

broiler is absolutely correct, and joeker is dead wrong about the rules for gamblers. It's your winning and losing sessions that determine your income. The balances that you maintain at online accounts are irrelevant.

One other point I'd like to expand on is broiler's comment regarding the IRS being allowed to estimate. This is correct; however, I don't think he goes far enough in stating this. The IRS is allowed to use "any reasonable method" to estimate income.

If someone doesn't report income, and obfuscates the issue, expect the IRS to look at your activity for your online accounts. 'But they can't get that information,' you think, because the companies are overseas. That's true (they are overseas), but the IRS can be a very tenacious foe. How does the money you win get to you? Do you use an ATM? A credit card? A bank? All have reporting requirements to the US government, and all (that act within the US) will obey a subpeona from the IRS. The government (IRS) can make your life miserable. And thinking they can't obtain information is a mistake that many tax evaders have made.

I've written an article for the 2+2 magazine (it will likely be in the February issue); this is one of the issues that I touch on. Frankly, I expect the IRS to target some poker player (or players). Poker players are celebrities, and celebrities make good targets (for the deterrance effect).

The tax laws for investors and gamblers are different. Blame Congress for that. But if you file incorrectly, *you* will face the consequences.

-- Russ Fox (EA)

---------------
Russ Fox
Co-Author, "Why You Lose at Poker"

[Sniper]

[ QUOTE ]
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Shouldn't a site not paying you, be handled the same as a theft? (itemized deduction, form 4684, etc)

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I've wondered about this. I've always assumed that winnings should only count if there is an actual opportunity to withdraw that money...

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Don't forget that for most players involved in a situation where a site doesn't pay... they are losing more $$$ than they won. [img]/images/graemlins/smile.gif[/img]

[5thStreetHog]

I was just wondering if joeker could pm me,i need help with my taxes.

[yad]

I have a close relative who is a professor of tax law at a major university.

I was asking him about this issue, and according to him it's something of a gray area. Aba, your CPA is taking an aggressive but not indefensible position (though it may turn out that he's wrong in the future -- no case law really exists in this particular area). So you are extremely unlikely to get into serious trouble for taking his advice, but there is the possibility you'll have to pay the difference plus some penalties later.

The key issue, as many have hinted at here, is the extent to which the money is "in your control" when it's sitting in the bank account of pokerstars or wherever.

[MasterLJ]

Don't mean to hijack, but I have no idea what the expectations are for a losing session deduction. Example: Session 1 I win $50, session 2 I lose $50.

I realize I cannot net out, I realize that I owe taxes on the $50 winnings, but my question is, can I expect the write-off from the $50 losing session to be equal to the taxes owed on the winning $50 session?

[Sniper]

[ QUOTE ]
Don't mean to hijack, but I have no idea what the expectations are for a losing session deduction. Example: Session 1 I win $50, session 2 I lose $50.

I realize I cannot net out, I realize that I owe taxes on the $50 winnings, but my question is, can I expect the write-off from the $50 losing session to be equal to the taxes owed on the winning $50 session?

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Only if you already itemize your deductions...

[joeker]

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It's your winning and losing sessions that determine your income. The balances that you maintain at online accounts are irrelevant.



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That's pretty much what I said, which makes me dead right

[scottc25]

OK i'll chime in since I am a CPA. You shopuld keep detailed records of your sessions. For online sessions the site, date, type of game and win/loss at a minimum.

For B&M you should have location, type of game and win/loss. Also it is even better if you have time of day and even table number. The table number may seem too detailed but I believe it would show the IRS in an audit the detailed type of records you keep.

For recreational players you have to report the income and then deduct losses on Schedule A. You can't net the two items.


In all reality are most recreational players going to do this, no. You have to way the risks with the benefits and decide if paying your fair share of taxes now is better than paying interest and penalties later (if you in fact get audited).

Your choice.

[wpr101]

[ QUOTE ]
OK i'll chime in since I am a CPA. You shopuld keep detailed records of your sessions. For online sessions the site, date, type of game and win/loss at a minimum.

For B&M you should have location, type of game and win/loss. Also it is even better if you have time of day and even table number. The table number may seem too detailed but I believe it would show the IRS in an audit the detailed type of records you keep.

For recreational players you have to report the income and then deduct losses on Schedule A. You can't net the two items.


In all reality are most recreational players going to do this, no. You have to way the risks with the benefits and decide if paying your fair share of taxes now is better than paying interest and penalties later (if you in fact get audited).

Your choice.

[/ QUOTE ]

So this means you if I won say $10,000 this year I would have to declare that I won $200,000 and lost $190,000? That doesn't make logical sense.

[MasterLJ]

And if you can't itemize... it sounds like you are royally screwed.