IRS changes my 2005 taxes to 'pro', charges me self-empl tax

[I_C_ALL]

As for leaving it as is, you would still be able to use the standard deduction. Your winnings and losses go on a separate area of the 1040, I believe section A. You list all your income and expenses for a business.

In my opinion, being labeled as a professional is preferred especially if you plan on doing this for a while and actually make a good amount of money doing it. You can/should set up a corporation and have a SEP IRA setup for retirement planning and tax purposes. You can contribute 25% of your net income(business) up to $42,000. Alot better than the relatively small IRA contribution amounts.

Spend the money and sit down with a CPA. Make sure he understands gambling taxation. Alot of scary threads on here about CPA who don't know their @ss from their elbow with gambling income.

Also, don't forget this: http://www.onlinepokerfaq.com/guide/tax-fbar-90221.html

That link also has good tax info in their. Click around.
Happy Holidays

[geormiet]

yeah that was me. I also made a follow up post saying that the IRS took about 1 month and then let me know they accepted my letter.

BTW that is not the final letter I sent, I can't find the copy at this moment, but PM me if you want to see it.

[SuaSponte]

youch! the home office exemption is a big red flag and almost ensures an audit. careful with that one. the requirements are tricky and exacting and they nab people on that sh*t all the time, at least according to my tax prof.

[sports_quant99]

[ QUOTE ]
youch! the home office exemption is a big red flag and almost ensures an audit. careful with that one. the requirements are tricky and exacting and they nab people on that sh*t all the time, at least according to my tax prof.

[/ QUOTE ]

In no way does it "ensure" an audit. It increases the odds, but only to something slightly above 1%. I've claimed the home office deduction for the last 10 years, and never been audited.

[modnareno]

Bumping this because I had the exact same thing happen as the OP today.

I don't think i will be able to dispute that it - i was not a student or anything like that.

Will I be able to find any easy things that I can go back and take as deductions since I have to file as self-employed?

[mj2]

i just got the same letter also. but how did you get charged only $2,100 for reporting $25k? i was charged $2,900 for reporting $20k.

[CaptHomer]

If they are going to charge you SE tax for 'Other Income' then you might as well claim poker as your profession.
Refile your 2005 taxes. Put your poker income on Schedule C. On that schedule you can claim all your poker related expenses that were mentioned earlier. You can still take your standard deduction in addition to your poker expenses.
If you don’t have any poker expenses that you can prove then your tax will still be the same as the IRS claimed. The total amount of any SE tax would be 7.65% (SS and Medicare) of your net income just like if you were an employee somewhere plus another 7.65% as an employer contribution (you, since you are the employer). If you plug the 25k into Schedule SE and multiply net income by .9235 and then by .153, that comes out to $3,500.
If they sent you a letter saying you only owe $2100 then it sounds like you are better off with what they said.
Don’t know how they came up with it.

Capt. Homer

[NewGuy]

[ QUOTE ]
If you plug the 25k into Schedule SE and multiply net income by .9235 and then by .153, that comes out to $3,500.
If they sent you a letter saying you only owe $2100 then it sounds like you are better off with what they said.
Don’t know how they came up with it.


[/ QUOTE ]

1/2 of self-employment tax is deducted from your taxable income (Form 1040, line 29 I think). This doesn't explain the drop from $3500 to $2100 though.

[reecelights]

[ QUOTE ]
You can still take your standard deduction in addition to your poker expenses.


[/ QUOTE ]

I was self-employed, working freelance for 9 years and this is absolutely true. You report your NET income from self-employed activity AND can still take you standard deduction.

I need to be more diligent about gas and toll receipts to and from Atlantic City myself.