For pros / Schedule C filers, are you reporting total or using COGS?

[NewGuy]

In "How to Turn Your Poker Playing into a Business" by Ann-Margaret Johnston, she splits gross wins & losses.

The examples in the book have gross wins appearing under Schedule C Line 1 (Gross receipts or sales); "Cost of wagering" (or losses, I would assume) go in Lines 39 "Other costs" which is rolled into Line 42 "Cost of Goods Sold".

Gross profit (Line 5) is then Gross receipts - Cost of Goods sold.

I always assumed that just reporting your net win in Gross receipts (Line 1) and claiming $0 as Cost of Goods Sold (Line 4/42) was acceptable & cleaner.

Any opinions either way?

(FWIW, I should be submitting my forms to a CPA for review tomorrow but he's clueless about filing as a gambling pro so I assume he'll have no real insights on that part of my return. Since taxes are due in 4 days I don't think I'll have the time to line up a gambling taxes expert).

Thanks

[1p0kerboy]

[ QUOTE ]
gross wins appearing under Schedule C Line 1 (Gross receipts or sales); "Cost of wagering" (or losses, I would assume) go in Lines 39 "Other costs" which is rolled into Line 42 "Cost of Goods Sold".

[/ QUOTE ]

This one.

[plasphemy]

I haven't read a book that tells you to Net your winnings under Gross Receipts, they all say to seperate Win/Loss like you are explaning.

In the book I read, RBS Tax Services "The Tax Guide for Gamblers," it says to put your losses under Part V other expenses and seperate it for tournament entries, cash game losses, sports losses, etc. I assume that method is so you can list the expense instead of just saying "other."

[Poker CPA]

Line 1 is net. No ifs, ands or buts

[NewGuy]

[ QUOTE ]
Line 1 is net. No ifs, ands or buts

[/ QUOTE ]

Just to clarify, you are saying that if I have $150k in wins / winning sessions, and $70k in losing sessions, I should choose option 1

1) Put $80k in Line 1 (Gross sales ir receipts)

and NOT option 2 (per Johnston's book) ?
2) $150k in Line 1, - $70k in Line 42 (COGS) = $80k

[plasphemy]

You are contradicting the book I read...
It definitely separated wins and losses. It seems that you would have to... For example, you get $100k in W-2Gs but with tournament entries, your net is $20k. If you netted it, wouldn't that bother the IRS?

[Poker CPA]

Yes, but this is assuming that 80K = 80K.

[Poker CPA]

Screw the books, show me in the IRS regs and code sections. And the OP didn't mention W-2Gs. The only thing that matters is line 63 of the 1040, you don't get bonus points for following books. Line 63 is what we are being paid to do. Presentation is the key. 99% of all penalties are calculated off that line, not Sch C line whatever.

[Poker CPA]

Did you know that the third question, in a "face-to-face" audit, is "Mr Taxpayer is the tax calculated on your return true, accurate and complete and would you like change anything before we start". Tax liability is the key, not neatness. 80K is still 80K.

And BTW if you can't answer the question honestly, get representation.

[plasphemy]

So really... both ways would be fine as far as the IRS is concerned so long as the end result is accurate?

I spent a lot of time seperating wins/loss in PokerTracker. Netting it all on line 1 would have been so much easier.