How will part-time players survive a regulated poker site?

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The simplest and most straight forward approach is for the regulated sites to produced a standardize IRS report form and you would collate this together for all the sites you play at and submit it.

Once poker is regulated the IRS will inform the poker sites on the format it wants for US players, and will no doubt have a master list of all US players and there winnings/losing amount.

[emptyshell]

There are some states where (for *state* income taxes) you have to file a schedule C (pro gambler) to deduct losses. That's true now, so it wouldn't be any worse if a site was regulated.

If your gross winnings are actually significant relative to your other sources of income, you are not likely to face problems filing a schedule C.

I also haven't heard of anyone getting nailed for not paying taxes on gross unW2ed gambling winnings when there is a net loss. Although it is unfortunate that it is technically illegal, sometimes the end result matters more.

[4_2_it]

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Not really. They tried to get the gambling loss deduction eliminated a few years ago, calling a massive giveaway to the gambling industry.

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Incidentally, one of the reason behind this was the tacit acknowledgment that nobody actually did their taxes the prescribed way.

With poker being the new hot item and thousands of people making/declaring six figures, that has very likely changed now, though.

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Agreed.

The part time poker player who makes $100k as a car salesman by day and an extra $5k a year playing Omaha at night probably isn't risking much by netting. Change the $5k to $100k and this guy is just asking for trouble.

[pr0crast]

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Guys, get a grip, you will pay taxes on what you net, I've won lots playing live and online. I have an accountant, and all we do in april is figure out, roughly how much did i net?, ok can i roughly prove it?, fine. Then there is like one line on the tax for where i write , gambling winnings = 100k. End of story. chill out.

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Your accountant sucks, if he's telling you to net out amounts on your federal tax form.

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Meh, mine does the same thing for poker winnings, and he specializes in gambling tax, and he's never lost a single audit.

Bottom line is, do you know what an online "session" is? Neither does the government. Therefore you can twist it to mean a year, a month, a week, whatever. The govt cant pwn you for misinterpreting a word that they refuse to define - they will lose that argument.

[Kurn, son of Mogh]

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Well that is good news that losses can be deducted for part-time players. I should have a little more faith in our tax system I think [img]/images/graemlins/smile.gif[/img]

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Don't get too happy. Losses are reported as an itemized deduction. Thus, a part time player who does not already itemize will get overtaxed on his play by the amount of the standard deduction. Most break-even casual players who do not already itemize will stop playing once they see that they're being taxed on phantom winnings.

There's also the specter of inflated AGI impacting things like Roth contributions and the evil Alternative Minimum Tax.

[Skallagrim]

I am a lawyer, not an accountant. Willfully failing to report actual income is a crime. If you net and report your yearly winnings (and are telling the truth) then you have prevented a charge of tax fraud.

If you get audited, the IRS wants back up for your figures. I suspect that if you can back up your figures OK and paid the correct tax, that will be the end of the story.

The whole "sessions" thing is an IRS regulation, not a law. They can use it to try and invalidate (and thus lower) your claim of losses if you dont have "sessions" properly recorded. This only happens if there is an audit. And can only result in an increase in what they claim you owe. And really is only applicable to pros who file as pros.

But since online "sessions" are not defined, and clearly not the same as a live session (where you sit at one table with x amount and leave with y amount) I think you would be in a very good position to argue that just netting for the year is OK - SO LONG AS YOU REALLY HAVE THE RECORDS TO BACK UP YOUR STATED AMOUNTS, whatever form you keep them in.

Skallagrim

[JPFisher55]

Skall, I'm not sure that you are correct about the netting sessions. I have read recent court cases that have ruled that the IRC requires a taxpayer to report gambling winnings as income and deduct gambling losses as an itemized deduction. I read a case where a municipal court judge, in Utah I think, was convicted of income tax evasion because he failed to report his gambling winnings as income even though his net sessions added to a loss.
However, I have not read any good definition of a gambling session. I keep records by the day and I think that will suffice as a session.

[Skallagrim]

You are right JP about netting "sessions" and I should have been more clear that I was only speaking of online winnings, not live - the rules for live play have been settled for years and should be followed as written: session records, not netting. And of course you are right that, unless you are filing as a pro, winnings are income and losses are itemized deductions.

My opinion was strictly for online play where defining a "session" is next to impossible, especially if you multi-table.

The possible Utah judge case supports my basic principle, though, always report your income correctly; violating that rule is the big no-no. And that means if you are not a pro and made any real money at any time, declare it and then itemize as deductions the losses from other times.

Thanks for the clarification.

Skallagrim

[JPFisher55]

Skall, I don't know if anyone knows what a session is for online gambling. I guess that the IRS will opine that each table entry and exit is a session. However, I doubt that they will want to test this view in court. I keep records by the day and I think that the IRS will accept that method. But I do not really know for sure.
If we ever succeed in getting legal, for certain, online poker, then the next goal for the PPA would be to change the tax law to only consider net gambling winnings as income. Then you could net and report the net as income.
In a better world the US would join the rest of the Western world by not taxing gambling winnings. Except then the US would have value added taxes, higher income tax rates and maybe higher gas taxes. If only the size of the US government could be reduced. Oh well, one can dream.

[Robin Foolz]

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Willfully failing to report taxable income is a crime.

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