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#1
09-13-2007, 01:05 PM
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Incorporating yourself as a Professional Gambler:
My Las Vegas based accountants who do not specialize in professional gambling, but represent a few professional gamblers; recommended I set up a S-Corp to tunnel my gambling income through. They said this would save me money, had some extra legal protections and make them more money (cost money to incorporate, cooperate taxes more expensive then schedule C). So this how I was planning on filing this year but now I have some cause for concern.
I recently finished reading “How to turn your poker playing into a business” by Ann Johnston, CPA. In the FAQ at the end of her book in the FAQ it says, “Q: I am a pro. Can I incorporate myself? A: A person that is a professional gambler cannot incorporate themselves. There are many court cases where professional athletes have wanted to do this. The IRS feels that you are a personal service that you cannot have someone else perform, such as Michael Jordan cannot get someone to take his place. The same goes a pro that is not able to “substitute” their ability with someone else.” I for one think that successful poker/blackjack skills are learned skills and not one that requires that much innate ability. I think with enough studying (comparable to the amount to achieve a though college degree), anyone can become a successful gambler and take my place in the corporation. I’d say being a professional gambler is somewhat similar (albeit easier) to running an investment fund which obviously file as corporations (this is at least a closer comparison then calling me a professional athlete.) But what I think doesn’t really matter; has there been any cases where the IRS has taken a professional gambler to court for incorporating themselves and any CPAs/Attorneys have anything to add? Also anyone know a better forum to post this? 
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#3
09-13-2007, 01:41 PM
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Re: Incorporating yourself as a Professional Gambler:
I'm not a tax expert or anything, but I can't see what you gain my incorporating. My understanding was that corporations are subject to double taxation, i.e., the corporation is taxed on earnings, and the income drawn from the corporation is taxed as income tax. I might be wrong about that though.
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#4
09-13-2007, 01:48 PM
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Re: Incorporating yourself as a Professional Gambler:
[ QUOTE ]
talk to a CPA [/ QUOTE ] Did you read my post? I did talk to and have a CPA. The CPA who authored this book and specializes in taxes for poker players disagrees (and i sent an email to my cpa simlair to this post). I am just wondering if anyone else had any information.
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#5
09-13-2007, 01:48 PM
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Re: Incorporating yourself as a Professional Gambler:
[ QUOTE ]
I'm not a tax expert or anything, but I can't see what you gain my incorporating. My understanding was that corporations are subject to double taxation, i.e., the corporation is taxed on earnings, and the income drawn from the corporation is taxed as income tax. I might be wrong about that though. [/ QUOTE ] The main goal is to save money on self-employment taxes.
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#7
09-13-2007, 03:01 PM
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Re: Incorporating yourself as a Professional Gambler:
[ QUOTE ]
[ QUOTE ] I'm not a tax expert or anything, but I can't see what you gain my incorporating. My understanding was that corporations are subject to double taxation, i.e., the corporation is taxed on earnings, and the income drawn from the corporation is taxed as income tax. I might be wrong about that though. [/ QUOTE ] The main goal is to save money on self-employment taxes. [/ QUOTE ] This doesn't really work. S-corps are for businesses where there are appropriate pay scales. For example, if you owned a dry cleaning business, you could pay yourself 60K/year because that is what a dry cleaning manager would make roughly. So if your business made 100K, you can shield 40K from self-employment taxes. That doesn't work for poker because you can't go and get hired at a fair wage. There is no industry standard. I believe the IRS frowns on people incorporating as an S corp and paying themselves a salary well under the total income of the corp in situations like these. This is ahy pro athletes can't incorporate and pay themselves 100K when they earn millions. I'm no expert, just sharing what I've learned. Krishan
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#8
09-13-2007, 03:04 PM
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Re: Incorporating yourself as a Professional Gambler:
Oh and the legal protection is useless. IF you run a real business, you generally have some liabilities which under a LLS has some personal risk. That's not true of conventional professional gamblers. Ask you CPA the specific legal protections afforded by an S corp and you should see you don't need them.
Krishan
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#9
09-13-2007, 03:13 PM
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Re: Incorporating yourself as a Professional Gambler:
[ QUOTE ]
[ QUOTE ] talk to a CPA [/ QUOTE ] Did you read my post? I did talk to and have a CPA. The CPA who authored this book and specializes in taxes for poker players disagrees (and i sent an email to my cpa simlair to this post). I am just wondering if anyone else had any information. [/ QUOTE ] Sorry I wasn't clear. Either get a 3rd opinion and/or talk to one who knows for sure. My initial feeling is to agree with Ann and Krishan (I have no tax accounting experience)
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#10
09-13-2007, 04:21 PM
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Re: Incorporating yourself as a Professional Gambler:
I’m starting to feel that my cpa had me incorporate just to make her some extra money (She also runs a business that sets up all the corporate papers). Needless, to say this makes me pretty angry. Will see what she says in response to my questions.
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