Filing as a "pro" - minimum number of hours required?

[AZplayer]

Just had a mid-year checkin with tax advisor who has been doing a bit of research on filing as a pro vs. as a hobbyist. For the most part, I was on track with the requirements from an IRS perspective (documentation/tracking, goal to produce a livelihood, etc.)

One thing I had NOT heard before was that one of the tests the IRS uses is whether you are doing it "full-time", which in their book equates to an average of 35 hours per week. (Obligatory self-deprecating comment: Fortunately, they can't measure poker skill otherwise they'd have pity on me and send me a big fat refund.)

So far this year I only have about 900 documented hours AT THE TABLES, but I could document several hundred other hours in a variety of "legitimate poker business-related activities" to get up to the threshold.

Do any of you who have previously filed as a pro know more about this? TIA

[+EV]

AZ,

So you don't have a 9-5 job? That is the thing that keeps me from filing. I don't derive the main source of income from poker. I meet every other requirement.

I think that the IRS uses their "guidelines" but that if you meet the majority they will not usually hassle you. But they definately care if you make more money doing something else. I don't understand why they don't allow for "part time" work that is not hobby related.

+EV

[AZplayer]

Correct, no 9-5 job. 18+ years of corporate life is enough, TYVM.

As is often the case with IRS regulations, whether we agree with them or not, or whether they make sense to us, matters little unfortunately. :-(

[+EV]

[ QUOTE ]
Correct, no 9-5 job. 18+ years of corporate life is enough, TYVM.

As is often the case with IRS regulations, whether we agree with them or not, or whether they make sense to us, matters little unfortunately. :-(

[/ QUOTE ]

Congrats on getting out of the corporate world! Are you "retired" then? I am working at a 9-5 and hope to quit it to invest in real estate full time. I also am considering going back to school for an MBA. Either way though, it seems like being a "pro" is not an available option for me, since it seems like doing anything at all that makes money other than playing poker, you can not file as a pro.

It does suck that I meet every requirement other than having a day job though. I would love to net my poker income!

Regards,
+EV

[AZplayer]

Um, I am NOT an expert at all in taxes, and obviously if you follow any advice on an internet board without follow up you deserve what you get.

That having been said, my understand is that no one can "net" their poker income. You report "hobby earnings" on one part of your return, and then, possibly, depending on your individual circumstances, you can add your losses to your itemized deductions UP TO the amount of your gambling earnings. That has nothing to do with whether you meet the requirements of a professional poker player.

[TheEngineer]

Pro filers net their income.

[Shoe]

There is not a 35 hour per week requirement. However, this is definitely a grey area and 35+ hours per week would definitely help your case to file as a pro.

The first year I filed as a pro, I had worked about 6 months full time, and had about 6 months of poker playing full time. My tax advisors reviewed my documents (I don't know the exact number of hours I played but it was all documented), and found a similar case to mine where you are allowed to have a full time job and still file as a pro.

I believe the only requirements the IRS lists on their website is that you need to prove that you are putting in a significant amount of time where the sole purpose of that time is for profit (i.e., not for fun/hobby). If you are playing a lot of hours and that is your main/sole source of income, you can definitely file as pro.

Otherwise, do kids who work part-time at McDonald's get to file that income as a hobby because they only worked 20 hours per week? That arbituary 35 hours per week could be used as a guideline, but is by no means written in stone. Hell, most of the "full-time pro's" here don't even get 35 hours per week in.

Edit: adding to what broiler said, I'm not sure if the case he referenced is the same one my accountant found or not. Also, you may want to consider time spent studying the game, reading these boards as time spent towards your profession.

[MegaDisgruntled]

I hate this forum, just buy this book and you will not need anything else.

http://www.amazon.com/Turn-Your-Poke.../dp/0977486206

[broiler]

The best case for working and being a professional poker player at the same time would probably be Tschetschot (TC Memo 2007-38). Mrs. Tschetschot had a full-time job that paid $49k and played in nine "poker series" tournaments. She won $13k playing poker and had losses and expenses in excess of that amount. The Court deemed her to be a professional despite the time and money difference between her poker income and regular job.

[Russ Fox]

A big issue that impacts the o.p. is whether or not he wants to file as a professional. Professionals pay the self-employment tax, amateurs don't. Many gamblers find that being a professional causes their tax bills to increase.

Indeed, the IRS has finally figured out, after years of resisting almost anyone filing as a professional gambler, that they can collect quite a bit of money by forcing many to file as professional gamblers. The IRS has a program where they examine returns to see if gambling income is the primary source of income (i.e. taxpayer's livelihood), and the taxpayer is not filing as a professional. The IRS send out a letter audit to those individuals. There have been several 2+2 posters who have written about this in the past.

The best advice I can give is what the o.p. has done--discuss this with your own tax professional as everyone's situation is different. He or she can evaluate what you should or shouldn't do.

-- Russ Fox