US tax question

When you file your taxes, do you take the standard deduction or do you itemize your deductions?

If you have a regular job and not filing as pro gambler you will get ****ed.

Any losses you tried to deduct would be instead of the standard deduction, so unless they were more than standard deduction with your win also more then you will just have to pay taxes on the win, even if you overall broke even or even lost.

What the above two people said.

If your tournament win (ie the amount of form W2G) for e.g. is let say $50,000 and that's your only source of income then you can file as a professional poker player (or gambler), and show that amount on Schedule C as income and then show your expenses + losses on Schedule C as well. Schedule C is used when you are self-employed.

If you don't want to file as a professional/full time poker player gambler, then you have to deduct your losses on Schedule A. If you share #s and other info about yourself, maybe someone can give more details.

Good luck with THAT. Everything I've heard on the subject suggest you have to dedicate a substantial amount of time gambling to claim you're a professional, or the IRS won't buy it. I would think at least 1200 hours a year. Also, you have to pay employment taxes (Social Security and Medicare), and since you're "self employed", you have to pay both sides (15.3%). But you also get to subtract expenses, including education (such as your Upswing Poker or Run it Once membership), from your winnings as a professional. But if you're not spending a lot of time at it, those expenses will be minimal.

That said, if you won $50K in a tournament and that was your only income, you'd do better NOT to file as a professional, as you get the standard deduction off of the $50K and don't have to pay employment taxes (either side). If you have losses less than the standard deduction, you do better there, and if they exceed the standard deduction, you do the same there. You might get more than your losses if you can capture some other deductions such as mortgage interest and real estate taxes, which you wouldn't get with zero income.

The problem with not filing as a professional is when you have other income and deductions lower than the standard. The first $X amount of losses fills in the gap between your other deductions and the standard deduction. The amount over $X increases your deduction. In fact, you could lose money gambling, but sill pay more in taxes than you would have if you had never gambled.

As for OPs question, yes you add up all your losses and enter it on Schedule A with your other deductions. Keep all your tournament entry receipts as proof of those. If you did other gambling, the wins and losses there should also be added to your income/deductions.

Also, if OP has a nice tournament win earlier THIS year, then OP shouldn't wait until next year to send the IRS (and whatever State) "their" money. You have to file estimated taxes every quarter. If OP won in January, February or March, OP has to file/pay the estimated taxes by April 15th.

I am not saying for OP to do this, I am replying to what George said. Also worth mentioning, you can't alternate filing as a pro and then regular and choose which is best for that year. Once you are a pro that is your filing until you stop doing that.

all right, that's interesting. I am obviously not a pro gambler. I typically play more cash than tourneys but was wondering if since I started the year with a nice hit if I just do a lot of tourneys then they would be freerolls since my win was more than all the buy-ins I would have. probably not.

my father is my accountant and while he obviously will see my gambling documents I'd rather not start asking him gambling questions.

As for the first item, my statement is based of what I've heard over the years. To my knowledge the IRS hasn't made any public statements either way. What I've heard came from people with personal experience and I don't know the specifics. Basing advice on what someone got away with in the past is questionable. The IRS misses things all the time. Suffice to say, if you're a full time plumber and try to file as a professional gambler with 200 hours under your belt, it won't hold up to scrutiny, even if you're lucky and they don't call you on it the first time. Given the fact they're short-handed, they may never call you on it. But if they do, they might go back several years to make it worth their time. Do you want to risk that? Better to exercise good judgement to begin with, no?

As for the second, I'm not sure what to say about advice like that, but I'll give it a go. You're definitely supposed to file estimated taxes on the large win (or your quarterly income as a professional player). If you don't do it then there will be a penalty. And your advice seems to be to just pay the penalty for failing to do so. Which is fine if the taxpayer is fine with that (I knew someone who regularly did that because he couldn't be bothered with the estimated taxes and the penalty wasn't that high). But it could a problem for some in certain circumstances, I don't know. I do know that the IRS allows some leeway based on the tax burden the previous year, and failing to pay the estimated taxes might not matter. But it should be clear up front that your advice is to intentionally do something wrong because the penalty is minor.

Just because some software package allows you to do something doesn't mean it's correct. It's just doing calculations and filling in blanks. It's up to the user to input the correct information in the correct way. I wouldn't put too much credence on what software let's you get away with.

My brother is an accountant and knows little about this subject. You would need an accountant with expertise in this subject, which most don't have (it doesn't apply to many taxpayers and isn't worth the time of most accountants to learn). So it's probably worth your time to become knowledgeable yourself if you plan on gambling a lot in the future. There used to be a sticky post somewhere here on 2+2 which covered most of this. I don't remember where, and I don't think it's been updated, but it covers a lot. There are also some YouTube videos by gambling tax experts that cover this.

You don't put hours played on your taxes, that is information in your contemporaneous notes and logs that the IRS will never see unless they request more info or audit you.

Of course that is not advise for every situation, if you will owe a large amount, I would say pay the quarterly estimated. If it's not an huge amount you will owe and you benefit by holding it and paying the fee and interest, which isn't huge, then do that.

As far as hitting a jack pot or tournament for 50k, yea, maybe you should pay the quarterly, every situation is different. My sister runs a business and uses an accountant and never pays quarterly and happily pays the fees each year.

The software I use for many years is great and it's free for prepare and file, small fee is state is needed.

This is a simple tax estimate calculator that might help. Just add your Tournament score onto the income part and then you can switch to itemize from standard and play around with it.

https://www.nerdwallet.com/taxes/tax-cal...

Do you have a source for those 1200 hours and does that include studying time? If so, how do you prove that?

Not that it matters because it was ages ago and I lived in a country that didn't tax gambling winnings at that time but in the years were poker was my sole source of income I never even got to 1000 hours of play in a year.

I've owned my own businesses since 1996. You do not have to pay estimated taxes in year 1 of being subject to them.

IRS.gov

Now with that said, let's say you won 12K and you are in the 30% tax bracket, so you pay 4K in taxes. The next year you should pay 1K per quarter. If you bink another tourney, you're covered and your estimated payments for the next year will be based on that tax amount. If you don't score, the 4K is returned and their are no quarterly payments required for the next year.

Here is a link to the IRS.gov estimated tax quiz. Just take it and report back.
EstimatedTax Quiz

If I get a chance, I'll take a look-see to try and find where I heard that number. But I think that was an estimate from the source because there is no statement from the IRS on the subject. That said, if gambling is your only source of earned income, a smaller number should suffice. How can the say you're not a professional if that's your only job? I assume that the problem comes when you spend a significant amount of time doing one thing and try to claim you're a professional at another thing where you spend a lot less time (the IRS may claim it's a hobby). But then again, a person could have a full time job and a part time business on the side (such as landscaping) and still get to treat the business as self employed, no?

If it was me, I'd include study time. You "prove" the hours you play and study time by entering the relevant information in a bound book as you go. But this is only to prove that you spend significant time at it should you be challenged (used also to show wins/losses). If you were a professional sports bettor, almost all you your time would be spent studying, doing research, finding the best line, etc., and not time actually spent placing bets and driving to and from the sports book.

Well, here's a wrinkle of which I was unaware. In some circumstances the IRS will require you to file as a professional, unless you're a full time student or retired. Apparently, they don't want you to avoid the 15.3% self-employment taxes:

https://www.youtube.com/watch?v=ps_U0SaT...

The relevant information starts at 18:10.

He pulled the number 1200 out of thin air. There is no significance to it.

Relevant resources:

Main thread
https://forumserver.twoplustwo.com/57/ge...

Book on taxes
https://www.amazon.com/Turn-Your-Poker-P...

Russ Fox tax blog
http://www.taxabletalk.com/

Business expenses deductible
https://pokerfuse.com/features/in-depth/...

have filed as a pro gambler for over 25+ years , I have gotten audited , as one of the years a huge gain was a 6 figure put option short term capital gain .

got told this .

1. if a significant part of your income is gambling related ,filing a schedule C and being able to net out your gains is no problem.

2. if you are a w2 employee and try the same ,you will get flagged often if you try to deduct and net out gambling results instead of using it as an itemized deduction

3. it will be easier to pass through if you are self employed as you already have a schedule C and can do a second one.

Irs uses automated screeners to flag for auditing , if you can stay under the radar you have a chance of getting it passed through ,but it's risky if gambling is NOT your primary source of income and they will make you amend it to a 1040x with taking out the schedule C.
imo worth the risk

I do 20 tax returns a year for friends and family for free so I know my way around them.

It might have been from this video, where the CPA states that the prevalent thought among those who have written books on the subject is that to be considered a substantial amount of time gambling, you would need to spend from 30-40 per week gambling, although 30 hours is over 1500 hours for the year (I might have goofed on the math or heard 1200 somewhere else). That is, if you have other earned income such as a job. I already pointed out that the IRS may mandate you file as a professional if your history suggests you are in fact a professional gambler, especially if you have no other earned income. I wouldn't put too much emphasis on the exact number of hours, as the whole picture is probably relevant. If you had a part time job for eight hour per week, 20-30 per week gambling might be enough, especially if the bulk of your income came from gambling. If you worked 40 hours or more per week, then 30 hours gambling may not be enough, especially if it's a small part of your total income.

https://www.youtube.com/watch?v=uO9vJG5H...

Starting at about 15:27.

I'm a CPA, there is some good advice in this thread and some really really bad advice. I would advise you to speak with a tax professional aka a CPA for your gambling income questions.

FWIW most CPA are pretty terrible when it comes to gambling tax laws

mack a little guidance? was i ok on my opinion?

we arent holding you to anything, but which ones are the good post?

thanks in advance.

welcome to the USA tax system. it isn't citizen friendly.

fwiw this the official USA tax code regarding this situation:

I.R.C. § 165(d) Wagering Losses — Losses from wagering transactions shall be allowed only to the extent of the gains from such transactions. For purposes of the preceding sentence, in the case of taxable years beginning after December 31, 2017, and before January 1, 2026, the term ‘losses from wagering transactions’ includes any deduction otherwise allowable under this chapter incurred in carrying on any wagering transaction

when I worked in tax as a professional until sometime whenever in the past, everything after bolded did not exist. but I do know that "chapter" means the entire IRC which means that any regular expenses can be deducted vs. poker winnings as long as you can prove that poker is a business for you and not a past-time/hobby/leisure time activity. anyone else trying to claim poker losses/expenses must itemize to claim vs. the income.

if you feel you can file as a professional poker player, you would use Schedule C to report the poker wins & losses. losses would include any normal business expenses (i.e. entry fees, travel expenses, education..).