Taxes

[Beck]

I got me a real job, and I make a little extra spending cash playing poker. Who here thinks I should report these earnings to the MAN?

NOTE: I am not talking about professionals, I am talking about some part time poker fun/income.

[Miffed22001]

by law: yes.

My opinion: yes, its still income.

[andy-akb]

There is a legal answer for this where there is a limit to how much you can make before you need to pay taxes on it, I cant remember that number though.

But anyways, if you plan on getting that money using neteller or an echeck, etc. you better pay taxes on it. They have access to all that and there will be a trail. Better safe than sorry and with the penalties associated with tax evasion youd be pretty sorry if an audit came around.

Im meeting with a tax professional soon to talk about all of this and how Ill need to file so when that happens Ill try to make a post about what I learned from it and what Im going to do this year.

[bigred]

I voted always.

To paraphrase what Okietalker once said, sure taxes cost you poker money, but there's no price for a good night of worryfree sleep.

[Silly String]

Here's another question: Would the IRS consider bonuses/rakeback considered income? I guess I should be asking Chris Moneymaker this.

[griffey24]

Hey everyone,

This is my first post on FTR. I have been reading it for a while, and have certainly benefited from many of the posters here, so thank you for that.

With regards to taxes, I have always wondered something.

Suppose Player A wins $2000 from poker up to a month before tax season. then suppose in this last month he loses $1000 playing poker. He then only claims $1000 from poker income, since he lost some money in the last month.

Suppose Player B is a break even player up to a month before tax season. Then suppose in this last month he loses $1000 playin poker. Should he not be able to subtract this $1000 from whatever his other income is, since it is a "loss of income"?

What is the difference between losing $1000 from $2000 to $1000, and from $0 to -$1000? In both cases, there should be equivalent tax breaks.

Takehome question: Can a losing poker player not treat their losses as a subtraction from their regular income, and get tax breaks on this?

I apologize if my first FTR post ever makes no sense

[villagenut]

Check this out before relying on it but I think the income has to be over $600. I'm not for sure if online gaming falls under the IRS rules of "Gambling" but if it does, you can deduct the amout of losses up to your winnings. BUT, you have to have proof. Lets say your playing slot machines and deposited $1,000, lost down to $200 then hit a $700 jackpot. The casino would make you pay taxes on the $700 but, you could show where you had lost at least that much first so you could off set it. Poker may be different. Because you have several small wins that add up to a profit, you may just have to pay on the profit with no ability to write off any loss. Just keep good records of deposits and withdrawals. Another thing to keep in mind and check into is that most card rooms are offshore. So, the money may not be considered "income" until you withdraw it into an american account. Again check this out before relying on it.....

[andy-akb]

Here's another question: Would the IRS consider bonuses/rakeback considered income? I guess I should be asking Chris Moneymaker this.

Yes its income.

Suppose Player A wins $2000 from poker up to a month before tax season. then suppose in this last month he loses $1000 playing poker. He then only claims $1000 from poker income, since he lost some money in the last month.

Suppose Player B is a break even player up to a month before tax season. Then suppose in this last month he loses $1000 playin poker. Should he not be able to subtract this $1000 from whatever his other income is, since it is a "loss of income"?

What is the difference between losing $1000 from $2000 to $1000, and from $0 to -$1000? In both cases, there should be equivalent tax breaks.

Takehome question: Can a losing poker player not treat their losses as a subtraction from their regular income, and get tax breaks on this?

Im pretty sure you cannot report net gambling losses, you can only offset wins with losses to $0. So you cannot report a $1k loss and deduct that from your income AFAIK.

[martindcx1e]

everyone should see this...

http://www.pocketfives.com/DD6E4B33-...BE6A8AF8C.aspx

[Beck]

I figure that if I withdraw less then $600 bucks per year taxes do not need to be paid. If I deposit less then $1000 bucks a month into my bank account, it is quite unlikely that my bank will report these deposits and that I will be screwed by the IRS. But anything more should be properly reported to the IRS.

If I play in brick and mortar casinos, and cash out less then a certain ammount, that never has to be reprted to the IRS cause no one will ever know.

DISCLAIMER: these are just my opinions

-Beck

[andy-akb]

I figure that if I withdraw less then $600 bucks per year taxes do not need to be paid. If I deposit less then $1000 bucks a month into my bank account, it is quite unlikely that my bank will report these deposits and that I will be screwed by the IRS. But anything more should be properly reported to the IRS.

If I play in brick and mortar casinos, and cash out less then a certain ammount, that never has to be reprted to the IRS cause no one will ever know.

DISCLAIMER: these are just my opinions

-Beck

What happens if you are audited and the IRS see all these $1k deposits to your bank account? If you are putting the money into your neteller account or bank account then you should be paying taxes simply because there is a clear trail of the money and if you ever get audited you are fucked. If you arent going to pay your taxes, which I do not condone at all, then dont put the money in your bank account, keep it in cash.

[martindcx1e]

I figure that if I withdraw less then $600 bucks per year taxes do not need to be paid. If I deposit less then $1000 bucks a month into my bank account...

doesn't a little under 1k monthly easily surpass the $600 per year mark?

[Aces]

There is some seriously incorrect advice/opinions in this thread. As Martin advised, at least read the P5 article or do some more research and/or consult a tax professional if necessary.

A few cliff-notes:
You cannot net gambling gains and losses unless you declare yourself a professional gambler. This is not particularly easy.

If you do not declare as a pro, you must claim all winning sessions as income and deduct losing seesions on Schedule A. So you could net only 1K but have 50K in additional income and 49K in deductions. The additional income may also kick in the AMT(Alternative Minimum Tax) if your income is high enough. You could even owe money if you lost money for the year via gambling.

Keep detailed records of every session or you could get burned in an audit.

Just a few important points, please do your own research....

[The Izebox]

Does the government have access to Epassporte records as well?Is that the same sort of thing as netteller?

Im confused because isnt epassporte based out of a foreign country?

[martindcx1e]

Someone correct me if I'm wrong here:

The proper way to file your tax return if you want to report your poker winnings is do everything like normal except...

#1 - Use Form 1040 & Form 1040 Schedule A
#2 - On line 21 of 1040, fill in your gross winnings
#3 - On Form 1040 Schedule A (line 27), fill in your gross losses (only up to the extent of your wins)
#4 - If your gross losses are less than your standard deduction, then don't elect to itemize
#5 - Continue like normal

Note: You can find your gross wins and losses by adding them up from the "Position Stats" tab in PT.

[griffey24]

Hey again,

I'm not sure how many Canadians are on this forum, versus Americans.

But does anyone know if the way poker income is treated in Canada is different than how it is treated in the States?

[martindcx1e]

i thought gambling winnings weren't taxable in canada?

[griffey24]

i thought gambling winnings weren't taxable in canada?

Wow really? That would be sweet if its true.

I'm surprised all you poker players don't move up here if thats the case!

[2_Thumbs_Up]

Go Sweden and tax free gambling. As long as the gambling site is located in the European Union (as in Gibraltar) we don't have to pay anything for our winnings. But if it's located somewhere else, We're supposed to pay 30% taxes on all won pots (basically 30% rake, imagine that). We have some messed up laws, but I didn't write them. I really wouldn't mind paying taxes on my net winnings. I don't see a reason to treat any income differently.

[Beck]

I figure that if I withdraw less then $600 bucks per year taxes do not need to be paid. If I deposit less then $1000 bucks a month into my bank account...

doesn't a little under 1k monthly easily surpass the $600 per year mark?

those were 2 separate examples.

It is just the bank will not report the deposit if it is under a certain value. I believe it is $1000, but it may even be more

[Warpe]

Hey again,

I'm not sure how many Canadians are on this forum, versus Americans.

But does anyone know if the way poker income is treated in Canada is different than how it is treated in the States?

http://www.flopturnriver.com/phpBB2/...axation+canada

[Beck]

just to let you all know, I called neteller today, and a few questions: Here are the answers

1) They are located in Canada
2) They do not divulge any information to 3rd parties
3) they have no idea what the IRS is!

sounds pretty damn safe place to keep your cash and not have to fork any over to Uncle Sam

[martindcx1e]

just to let you all know, I called neteller today, and a few questions: Here are the answers

1) They are located in Canada
2) They do not divulge any information to 3rd parties
3) they have no idea what the IRS is!

sounds pretty damn safe place to keep your cash and not have to fork any over to Uncle Sam

then what's the difference between keeping it there or in the poker site itself?

[Beck]

what I am saying is you can have them send you a check which you can cash without notifing the government about it, meaning no taxes. Just make the withdrawls less then $1000 bucks

[Jager]

What if you got your neteller check, the went to canada to cash it? This way it would never go through the US banking system....?

[andy-akb]

those were 2 separate examples.

It is just the bank will not report the deposit if it is under a certain value. I believe it is $1000, but it may even be more

The amount is $10k, but intentionally sizing your deposits to get around that amount is a crime in itself.

what I am saying is you can have them send you a check which you can cash without notifing the government about it, meaning no taxes. Just make the withdrawls less then $1000 bucks

http://www.tightpoker.com/partypoker/
http://www.pocketfives.com/0DDCB02F-...17367089F.aspx

Neteller is a publicly traded company, they are not going to turn down a request for information from the IRS.

What if you got your neteller check, the went to canada to cash it? This way it would never go through the US banking system....?

The trail is still there and the IRS could still get the information from neteller themselves instead of the banks.

Honestly guys, you live in this country and use the services that come with it so man up and pay the taxes. Whether or not you agree with how high they are is one thing, but if you disagree with them then do something about it but dont become a felon in the process.

[martindcx1e]

not that i'm advocating tax evasion but i'd like to know if anybody has ever heard of someone getting in trouble for not paying taxes on their poker income. has anyone ever heard of this actually happening or do all the people who make a decent amount just pay their taxes?

[Beck]

those were 2 separate examples.

It is just the bank will not report the deposit if it is under a certain value. I believe it is $1000, but it may even be more

The amount is $10k, but intentionally sizing your deposits to get around that amount is a crime in itself.

what I am saying is you can have them send you a check which you can cash without notifing the government about it, meaning no taxes. Just make the withdrawls less then $1000 bucks

http://www.tightpoker.com/partypoker/?fix
http://www.pocketfives.com/0DDCB02F-...17367089F.aspx

Neteller is a publicly traded company, they are not going to turn down a request for information from the IRS.

What if you got your neteller check, the went to canada to cash it? This way it would never go through the US banking system....?

The trail is still there and the IRS could still get the information from neteller themselves instead of the banks.

According to NEtteller, cause I personally spoke with them, they say they do not disclose any information to 3rd parties. Also I asked, what about the IRS, their response is "I don't know what that is". Just to inform you, they are based ouyt of Canada

-Beck

[Jager]

Has anyone ever looked into setting up an offshore trust? People set them up as retirement funds. The money is only taxed AFTER it is brought into this country. I read that 1 out of every4 americans who make over $100,000 per year have either an offshore trust or offshore account to defer their taxes. I even herd of people who use these then retire out of the country...

Anyone ever of any poker player trying this?
Also if Neteller is Canadian would that qualify as offshore?

[andy-akb]

According to NEtteller, cause I personally spoke with them, they say they do not disclose any information to 3rd parties. Also I asked, what about the IRS, their response is "I don't know what that is". Just to inform you, they are based ouyt of Canada

-Beck

You spoke with somebody who is probably paid near minimum wage to answer support questions, they dont even know what the IRS is. The operator probably thought you meant other people, etc, not a government organization. Do not take what a support person says as a company statement, imagine where that would put Partypoker whose support answers change every other response.

From the Neteller COO:

"Right now, we operate in a regulated environment and we are compliant with all Canadian and U.S. reporting regulations," he [Herman] said. "By eliminating organized programs such as ours, where everything is very trackable and accountable, you will cause a black market that will create opportunities for less-than-scrupulous individuals and companies."

Also, that pocketfives thread talks about almost this exact subject.

Has anyone ever looked into setting up an offshore trust? People set them up as retirement funds. The money is only taxed AFTER it is brought into this country. I read that 1 out of every4 americans who make over $100,000 per year have either an offshore trust or offshore account to defer their taxes. I even herd of people who use these then retire out of the country...

Anyone ever of any poker player trying this?
Also if Neteller is Canadian would that qualify as offshore?

Ehh, thats a sketchy area to get into and from what Ive read the IRS has really cracked down on offshore account and almost all of the tax haven countries now fully cooperate with the IRS. Also, you have to report any offshore account with greater than $10k [AFAIK], so this is still tax evasion.

[Beck]

I guess there is no way around it. I have to pay taxes

[Jdog]

Has anyone ever looked into setting up an offshore trust? People set them up as retirement funds. The money is only taxed AFTER it is brought into this country. I read that 1 out of every4 americans who make over $100,000 per year have either an offshore trust or offshore account to defer their taxes. I even herd of people who use these then retire out of the country...

Anyone ever of any poker player trying this?
Also if Neteller is Canadian would that qualify as offshore?

In that case you can just set up a IRA and earn interest while your at it.

[TerryToma]

i am struggling with this issue. plus im a student so i havent filed taxes in years. do i hire an accountant to help? at this point im up maybe 15k for the year.. what sort of taxes would i pay?

[KrazyBluffer]

If this is "really" considerd income, then it must be treated like self-employment.
You are your own boss!!
So basically , is the govenment willing to give me a business loan to become a pro gambler???
Not only that, but everything related to gambling is now tax deductible since it would be considered a business.
Now I can deduct a portion of my house as a business, my mortgage, interest, telephone bill, hydro, computer expenses, internet, office supplies, gas, water, take-out food bills, and for people that play brick , car expenses (cost of car, miles driven to the casino, gas, oil changes) .
In the end my business would be losing money lol.
But in Canada lottery and casino winnings are not taxed so I have nothing to worry about.

[martindcx1e]

i am struggling with this issue. plus im a student so i havent filed taxes in years. do i hire an accountant to help? at this point im up maybe 15k for the year.. what sort of taxes would i pay?

#1 - Use Form 1040 & Form 1040 Schedule A
#2 - On line 21 of 1040, fill in your gross winnings
#3 - On Form 1040 Schedule A (line 27), fill in your gross losses (only up to the extent of your wins)
#4 - If your gross losses are less than your standard deduction, then don't elect to itemize
#5 - Continue like normal

Note: You can find your gross wins and losses by adding them up from the "Position Stats" tab in PT.

you can find these forms here---> http://www.unclefed.com/IRS-Forms/index.html

[martindcx1e]

If this is "really" considerd income, then it must be treated like self-employment.
You are your own boss!!
So basically , is the govenment willing to give me a business loan to become a pro gambler???
Not only that, but everything related to gambling is now tax deductible since it would be considered a business.
Now I can deduct a portion of my house as a business, my mortgage, interest, telephone bill, hydro, computer expenses, internet, office supplies, gas, water, take-out food bills, and for people that play brick , car expenses (cost of car, miles driven to the casino, gas, oil changes) .
In the end my business would be losing money lol.
But in Canada lottery and casino winnings are not taxed so I have nothing to worry about.

this is only if you file as a professional. you don't have to file as one if you don't want to. hobby poker income does not encounter self-employment tax.

[givememyleg]

i have a part time job and dont go to bed worried. i just pretend the money doesnt exist. i might withdraw 100-500 here and there but never enough to become suspicious... i don't think.

[TerryToma]

i have a part time job and dont go to bed worried. i just pretend the money doesnt exist. i might withdraw 100-500 here and there but never enough to become suspicious... i don't think.

what if you start making more $$ in poker, and what if you get a full time good paying job and get audited in 10 years?

[martindcx1e]

what exactly happens in an audit? can anyone simply explain the process?

[mrhappy333]

what exactly happens in an audit? can anyone simply explain the process?

yes, from what I've heard....
Audit:
1. get some sand and broken glass
2. get a large baseball bat
3. get some glue
place glue all over bat and then dip this into the glass and sand
4. after this is dry, shove it up your ass.
when finished. give the government all your money
now follow step 4 again

[DaNutsInYoEye]

If you keep good records and made a good faith effort to pay you taxes correctly and in full then you should have nothing to worry about.

[martindcx1e]

what exactly happens in an audit? can anyone simply explain the process?

yes, from what I've heard....
Audit:
1. get some sand and broken glass
2. get a large baseball bat
3. get some glue
place glue all over bat and then dip this into the glass and sand
4. after this is dry, shove it up your ass.
when finished. give the government all your money
now follow step 4 again

lol that made me laugh, but i'd still like to know. guess i'll just google it...

[givememyleg]

i have a part time job and dont go to bed worried. i just pretend the money doesnt exist. i might withdraw 100-500 here and there but never enough to become suspicious... i don't think.

what if you start making more $$ in poker, and what if you get a full time good paying job and get audited in 10 years?

I don't have to worry about making more money in poker. It's so rigged.

[yorib]

I recently went through a very simple audit (that had nothing to do with poker income). In 2004 when I filed our (me and my wife's) taxes I forgot to report my investment income for the year. The IRS also misplaced my wife's W2 (implying that we had paid no taxes on her earnings). We were sent a package detailing where their calculations disagreed with ours. They referenced investment information that was sent to them by Fidelity (the investment broker). The amount that they estimated I owed drastically overstated my investment income (they assumed that the entire amount I received from Fidelity was income, rather than knowing exactly how much was income v. a withdrawal of my original deposit).

I carefully recomputed how much I should owe them reflecting the investment income. The amount was about 10% of what they had estimated and did not trigger any penalties (besides interest at 5% for late payment). Had I been off by more than 10% I'd have had to pay an additional 25% (I think) as a penalty.

My estimate was ultimately off by like $50 and the whole matter was cleared in a few months. Never met any IRS agents in person and it really wasn't that big of a deal. (Though my wife was seriously worried. Her company also does some govermental work and she was concerned that this might blacklist her).

All in all, as long as you make a good faith effort everything should turn out fine.