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

[Poker CPA]

Broiler

Any benefits to the accrual basis of accounting? Or are you totally "locked into" cash basis?

[broiler]

I don't know why you would want to beat a dead horse. Russ Fox and I already gave you a full list of reasons and explanation of how cash is pretty much the only basis of accounting for professional gamblers.

[Merkle]

Without doing additional research I would accept Broiler statement that losses don't carry over.

Was there anything else I said that was incorrect?

[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]

[ QUOTE ]
That is why I will never cash out again.

[/ QUOTE ]

Cashing out has absolutely nothing to do with whether or not you have gambling income. If you're an online player, your winnings on the site(s) during the year determine your gambling income.

The tax rules for gambling are, in this case, very clear.

-- Russ Fox

[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

[Poker CPA]

Broiler

Please, the tax advantages of cash over accrual for the pro poker player.

[broiler]

I agree completely with your point about the desires of the OP as to how he and his tax advisor should proceed. His line of questioning led me to believe that he wanted to file as a professional and that his goal was to make sure that he met any existing requirements.

I've found in the last 5 years or so that the IRS treats any significant amount of income listed as "other income" as subject to SE tax. Sure, it catches people that clearly have only one source of income and are likely professionals, but it also catches a significant number of recreational players. This process lets the taxpayer correct the problem through fighting a notice, rather than have the IRS try to make an honest determination of who should file as a professional.