Poker, the IRS, Law, and Self Emp Tax

[Russ Fox]

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I was under the impression that legal precedent (as well as some old threads here) has shown that NO PERSON is REQUIRED to file as a professional even if the IRS asks them to in order to receive more money for the self-employment tax.

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A couple of years ago the IRS began cracking down on individuals who reported most of their income as "other income" without filing a Schedule C. The IRS believed (rightly) that many individuals were trying to get out of paying the self-employment tax.

The rule for being a professional gambler comes from the Groetzinger decision : "...if one's gambling activity is pursued full time, in good faith, and with regularity, to the production of income for a livelihood, and is not a mere hobby..." you're a professional.

The IRS has been successful in making gamblers who have no other source of income and who are not full-time students file as professionals. Since the Groetzinger decision specifies that you be "full-time" in order to be a professional gambler there's a clear conflict.

So you can be forced to file as a professional if your primary source of income is gambling and you're not a full-time student.

None of what I'm writing here is meant as tax advice; see your own tax professional.

-- Russ Fox