IRS Audit

[catalyst]

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sometimes when read sites like woot.com (cheap deals on cool stuff, us only) etc i sort of feel jealous of amerikanskis. but then i watch an episode of Cops, read a story or two about IRS and check out some pics of raptor and durr running around with guns and suddenly i feel pretty content with living in europeland.

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Wow, if you're [censored] dumb enough to think that the people you see on COPS represent a good sample of the people in the United States, please stay in Europe. You might be able to sum up the south that way, but travel to the coasts and America is NOT like that...

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I like how you basically call this guy ignorant because he assumes that what he sees on Cops is what life is like in The United States. Then, you proceed to say that the show Cops pretty much sums up the south. You, sir, are an idiot.

[SmackinYaUp]

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sometimes when read sites like woot.com (cheap deals on cool stuff, us only) etc i sort of feel jealous of amerikanskis. but then i watch an episode of Cops, read a story or two about IRS and check out some pics of raptor and durr running around with guns and suddenly i feel pretty content with living in europeland.

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Wow, if you're [censored] dumb enough to think that the people you see on COPS represent a good sample of the people in the United States, please stay in Europe. You might be able to sum up the south that way, but travel to the coasts and America is NOT like that...

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I like how you basically call this guy ignorant because he assumes that what he sees on Cops is what life is like in The United States. Then, you proceed to say that the show Cops pretty much sums up the south. You, sir, are an idiot.

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Exactly. Funny post really. I repeat, stay in Whore Island.

[RunyonAve]

This thread has reached this point:

[DING-DONG YO]

Taxpayer documentation

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how do you document neteller, can you just get a lump of all your transactions with them over the year?

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Yes you can. As long as your neteller transactions match up with what is going in and out of your bank account, you’re good. That should be adequate documentation for the IRS.

Now, that being said, you should really be recording your wins and losses by session and not by neteller activity. There is some debate on what constitutes a “session” and the opinions range as follows, session =

- Every time you stop playing at a table, that’s a session
- Your net win/loss for a day is a session
- Your net win/loss for a week is a session

Why does it matter? It matters when reporting net wins and losses, see “how to report income” below.

Who must file

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You should file regardless of what you make; However, you will only have to pay taxes if you make more than $7,550 (in 2006). You'll have to fill out a 1040 (you can get it on www.irs.gov). All the instructions are on that website on how to fill it out.

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This is true, but to clarify, that 7,550 is TOTAL income from ALL sources. Not just poker. Don’t think you have to file if you only made 5K from poker and 50K from your real job. I think that is obvious, but just making sure.

audit flags

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one of the ways the IRS can become interested in you is if someone at your bank flags your account for receiving a lot of large transfers, overseas stuff, anything that looks suspicious. in that case yes, the IRS would have access to your bank records. and if they didn't already have it, once they decide to audit you they will get them if they want them.

also, if you've been paying quarterly deposits as the person quoted in the OP has, and have filed for several years with poker income, the IRS knows about how the online system works and knows what to ask for. so it's not surprising at all that they're interested in his third party stuff.

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NT! Is right for the most part. However, the IRS would not automatically have access to your bank records. They would schedule an audit and if your documentation didn’t jive, they could subpoena your bank records. One way or another, they’ll get it.

offshore accounts

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I did not know this was true. If this is true, then another tax law is that you are required to report an offshore account with more than a 10k balance. Well if you put down that you have an offshore account then your probability of an audit goes up exponentially. So if you don't report, but still get checked out then won't they knock you for not reporting that you had an offshore holding of more than 10k?

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Not reporting an offshore account with more than 10K is a pretty big effing deal and could be a felony in and of itself. If you have more than 10K in your neteller account at any time during the year, you should report it to the IRS. There are some detailed posts in legislation about this.

http://forumserver.twoplustwo.com/showfl...rt=all&vc=1


HOW TO REPORT POKER INCOME

There are two acceptable ways to report poker income to the IRS and one unacceptable way that people use anyway. I’ll cover all 3.

ACCEPTABLE – HOBBY INCOME This is very simple. Wins go in “other income”, losses go as an itemized deduction. If you already itemize, you only pay income on your net wins, if you do not already itemize, you may have to pay taxes on a portion of your gross wins. Also, some states do not allow a deduction for ANY losses. IL is one. That’s right, you have to pay tax on all gross gambling wins for state (not federal) purposes in IL.

How you record session wins and losses is also important if you choose to file this way. The more sessions you record, then the more wins and losses you will have and the higher your gross income and losses will be.

Benefits are:
- No self-employment tax

Drawbacks are:
- Possible phaseout of other itemized deductions (but not deductions for poker losses, those will not be phased out) if your poker wins push your gross income too high
- If your other itemized deductions get phased out, your poker wins may push you into a tax bracket higher than the one you were in before
- If you don’t have itemized deductions other than gambling losses, then you basically lose the ability to deduct your losses up to your standard deduction

ACCEPTABLE – SCHEDULE C (small business) This is what to use if you feel your poker playing consistutes a small business. You file your revenue (net wins) minus expenses (trips to casinos, neteller fees, etc.). You pay tax in the net. The drawback to this method is that you must pay self-employment taxes on this amount which is a little over 15%.

Benefits:
- report poker activity net
- can deduct some reasonable poker related expenses

Drawbacks
- self-employment tax

NOT ACCEPTABLE – Net on line 21, other income

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i line 21'ed (or whatever it is) my net in 2005. it was only 4 digits, i dont think they care. if i get audited, worst case they say i owe more, and I pay more+interest. best case, i saved 30% on 5 digits.

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This is no good. Do not file this way. It is not an acceptable way to report gambling income.

For a detailed discussion of gambling.

http://www.irs.gov/taxtopics/tc419.html

Interesting court case where a pro gambler took the IRS to court and won.

http://forumserver.twoplustwo.com/showfl...rt=all&vc=1

NOTE: Thanks to broiler in legislation for helping me brush up on some of these issues.

[RED_RAIN]

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Now, that being said, you should really be recording your wins and losses by session and not by neteller activity. There is some debate on what constitutes a “session” and the opinions range as follows, session =

- Every time you stop playing at a table, that’s a session
- Your net win/loss for a day is a session
- Your net win/loss for a week is a session

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Talking to my CPA who researches gambling, #2 option here is the way to go. It needs to be reasonable, which she says #2 is, #3 and going above to like a month or year which some try will not hold up. #1 she says is overboard and overkill.

Take my thoughts for what they are worth

[DING-DONG YO]

#2 is the most reasonable option, I agree.