Professional Gamblers

[Nicole]

I see that 17 members voted that they were Professional Gamblers.

Do you file as a Professional Gambler? Do you have any advice on doing so?

Losing my personal deductions by claiming winnings/losses takes a huge bite out of my profit.

[ecaroff]

I simply fill out a Schedule C showing the total dollars wagered and total dollars collected - usually over $500,000/year. However, if you show a loss then set the bottom line to $0 because you cannot show a loss. Include a note on the form saying this. I also may show the numbers of days I attended the track or bet over the Internet, the average wager and collect per day. You can also deduct any expenses that you have had. I've been doing this for over 25 years with no problem. Some states don't allow you to deduct Schedule A on your state taxes and thus if you record the information on 1040 and Schedule A you'll end up paying state taxes on everything wagered. You could actually end up owing more state tax then what you paid the feds.

[twindouble]

I simply fill out a Schedule C showing the total dollars wagered and total dollars collected - usually over $500,000/year. However, if you show a loss then set the bottom line to $0 because you cannot show a loss. Include a note on the form saying this. I also may show the numbers of days I attended the track or bet over the Internet, the average wager and collect per day. You can also deduct any expenses that you have had. I've been doing this for over 25 years with no problem. Some states don't allow you to deduct Schedule A on your state taxes and thus if you record the information on 1040 and Schedule A you'll end up paying state taxes on everything wagered. You could actually end up owing more state tax then what you paid the feds.

Your right on the State taxes. Not only that I wish the Feds would do away with those nuisance W2 G's. Everyone I know does the same thing you do claiming loses up to what they won so what's the point in having them, I'm talking anything over $600.00. What most fail to realize is you have good records to back up those loses if and when the day comes. Pain is the fanny in my opinion because most lose at the game anyway.

The other problem is becoming a professional gambler reporting the sums you speak of, you can be assured you go into a spec file because of the money laundering issue and other forms of racketeering, everything you do will be scrutinized. Yes I know, if you do everything by the book you'll be just fine but to me that's tough road to hoe, esp if you end up in the red along the way getting no deductions from the State. From what I understand you can't carry over loses year to year but you can take other expences like you say.

I think there's another status for professional gamblers, I think it has something to do with gambling as your only source of income. At one time it was referred as a gambling stamp that was issued. Not sure because it's been so long and things do change. After all, it's the IRS. :bang:

T.D.

[skate]

along this topic, does anyone have a list of the states that tax and those that do not.?

[twindouble]

along this topic, does anyone have a list of the states that tax and those that do not.?

Skate, this link was poster here but I forget who posted, I thought it was interesting when it comes to states as well. I have stacks of those sucking W2G's every year, that don't mean I'm killing them and making huge bucks but I get hit 5% here in MA win or lose. :mad:

http://www.gambling-law-us.com/

[toetoe]

Whatever part of the 14%-30% rake that goes to the state should get us lifetime exemptions from state taxes. Jeez. :mad:

[Tim]

I don't know anything about these guys but it's an interesting place to start looking.

http://www.rbstaxes.com/

Tim

[schweitz]

along this topic, does anyone have a list of the states that tax and those that do not.?

No state income tax in Texas-----I don't think Florida has one either---could be others.

[Tee]

Far as I know there are seven.

Alaska, Florida, Nevada, South Dakota, Texas, Washington and Wyoming.

[The Hawk]

I believe Delaware belongs on that list, doesn't it?

[trigger]

According to this ,there are 9 states that do not tax gambling winnings---see you there11
http://www.taxadmin.org/fta/rate/ind_inc.html

[rrpic6]

I was "forced" to file as a Professional Gambler in Ohio due to the 3-8% taxes involved. I could not deduct losses unless I established that I was an "expert" or totally knowledgeable on my "niche" of gambling, i. e. Horseracing. After a 4 year dragging out by the IRS, my case was presented before I was to go to court. I was able to prove my effort, expertise and daily wagering recaps.

Another post on this thread mentioned Gambling being an only job allowed. The IRS tried to insinuate this, but went about that in a backdoor way. they tried to determine that my Government job did not allow me enough time to be a Gambler. I was able to prove otherwise.

In the end, I did have to pay back Self-Employment Taxes on the years I showed a profit. Even though this came to about $12,000 it was better than the $140,000 I could have owed Ohio if i'd lost.

[ecaroff]

I hate to tell you this but the only way out of the whole mess is:

1. Do not make any wagers that will subject you to a W2G. NO Tris, No Supers, No Pick6's, No Pick4's, etc.
2. Do not ever deposit cash into your bank account. If you win - put the money in a home safe. Spent it causiously.
3. You never gambled on anything - right?

I'll add more later......................................

[Nicole]

I hate to tell you this but the only way out of the whole mess is:

1. Do not make any wagers that will subject you to a W2G. NO Tris, No Supers, No Pick6's, No Pick4's, etc.
2. Do not ever deposit cash into your bank account. If you win - put the money in a home safe. Spent it causiously.
3. You never gambled on anything - right?

I'll add more later......................................

LOL!! $2.00 Win & EX and hit the resubmit button one hundred times.

They love to punish us gamblers.

[ecaroff]

Yep - that's about right if you want to be safe!

[AngelEyes]

Lucky to be Canadian - no taxes on winnings. I think it's ridiculous that taxes need to be paid on winnings. Isn't it already included in the takeout ???

What do you get back when you lost everything including your family ???

Al Capone went to jail because of tax evasion - what a joke !!!!!

[Rob_in_MN]

5 years ago I made an honest mistake and did not claim one of my taxables from the Form W2-G. It was $1,100 win and the tax on the W2-G was a negligible $220 that I owed. After receiving threatening letters from the IRS I was then asked to pay fees and penalties that were DOUBLE the amount of the original tax I owed.

Since that time I have never been officially "audited" but every year I have received "corrections" to my taxes. Last year they sent me a 3 page letter advising me that I underpaid them by $7.60. Yep that's right. $7.60. :mad:

I cannot imagine the costs that they incurred to take a magnifying glass and a fine tooth comb through my return to come up with the $7.60.

The bottom line is that my advice to anyone is to never, ever underreport winnings because I have the feeling that for the rest of my life I will be "red flagged" every time I submit a return.

If you spend enough at the track my advise would also be to utliize the track to provide you with detailed accounting of not only your taxables, but also your wager history. My home track activity is tracked with a "Players Card" so I know at the end of the year how much I spent, won, lost, etc on a detailed report. I attach this to my return. Much easier than hanging on to losing tickets for 5 years.

I am fortunate enough to have a job that pays me very well and allows me the opportunity and time to spend 3 days a week handicapping so I've never listed my sole income coming from gambling.

[PatriotFan]

You're right about that TD. Every year I have to put aside more money for the State because they will not allow you to write off any losses unless you list your occupation as a gambler. I've had enough and have started plans to move to New Hampshire to get away from them.

[Valuist]

Angel Eyes-

You're exactly right. Its basically double taxation, which I thought was against the law.

[twindouble]

Angel Eyes-

You're exactly right. Its basically double taxation, which I thought was against the law.

That was funny, it's like saying taxation with representation is against the law. :lol:


T.D.

[rrpic6]

Rob in Mn says never to under-report winnings. That's the number one red flag for the IRS. My problems with the IRS actually increased when i tried to "correct" their determination of my reported winnings. They had a difficult time figuring out winnings from multiple wagers paying identical amounts of money more than one time. I actually tried to make it easier by filling out individual W2-Gs for the multiple winning wagers but was ignored for 6 months by the fine agents in Holtville, New York. My attempts to correct and INCREASE my total income was finally recognized with a one line statement. "Thank You for updating your income, now you owe an extra ....". These agents total incompetence later helped me to win my case over 3 years after.

[ecaroff]

Here's one for you........... The IRS states: "To deduct your losses, you must be able to provide receipts, tickets, statements or other records that show the amount of both your winnings and losses." Now I ask you - is that for the month, for the day, for the hour or for EACH and EVERY Wager? Legally you would probably have to pull out your diary and note every poker pot, every slot machine transaction and every throw of the dice.

[GameTheory]

Here's one for you........... The IRS states: "To deduct your losses, you must be able to provide receipts, tickets, statements or other records that show the amount of both your winnings and losses." Now I ask you - is that for the month, for the day, for the hour or for EACH and EVERY Wager? Legally you would probably have to pull out your diary and note every poker pot, every slot machine transaction and every throw of the dice.It's for each session -- a night of poker, etc. With horseracing, if you bet on the internet, getting a report of every wager is easy. At the track, you've only got the losers (unless you photocopy your tickets and cash them the next day), and only some of those because you've got losers on combo tickets you've cashed in as well. In that case, you should keep a log of your wagers, keep all your losing tickets and your track program for each day...

[hurrikane]

Rob_in_MN,
Takes about 10 yrs and if nothing happens they will leave you alone.
I fought out a case and won...I was audited everyyear for 10 yrs.
I guess I'm flying under the radar now. Haven't heard from them in over 5 yrs.
Of course now that I"ve said that......

Best thing I can say is deal in cash and keep away from the signers.

[Valuist]

Or pay the 10 percent and have somebody sign for you. You probably won't have to look to long at the track to find somebody willing to make a quick 10%.

[delayjf]

What kinds of deductions are allowed? I.E. can you deduct your mileage to/from the track? Meals if the track is over X miles away from home?

[hurrikane]

everything you can deduct for the cost of doing business.

Including,
contests - travel, room and meals
computer, downloads, software, data
part of your home for home business if you conduct your business at home
milage
etc.....

[rrpic6]

Rob_in_MN,
Takes about 10 yrs and if nothing happens they will leave you alone.
I fought out a case and won...I was audited everyyear for 10 yrs.
I guess I'm flying under the radar now. Haven't heard from them in over 5 yrs.
Of course now that I"ve said that......

Best thing I can say is deal in cash and keep away from the signers.

That's BRUTAL! But welcome to the Land of Idiots. That's how our Government works. I have lots of first hand knowledge. Many Agencies pay Employees just to watch others. The higher up you go, the less work and more watching. IRS Agents are given cases along with time limits to wrap them up. When appeals are made, they and their bosses get PISSED! The person appealing now gets to feel the wrath.

[Hosshead]

Or pay the 10 percent and have somebody sign for you. You probably won't have to look to long at the track to find somebody willing to make a quick 10%.Eureka - Hey that's it ! I'll retire, and become an Online 10%er !

I'll open accounts (with OP$) to enough places to get any bet/track down.
I give each person who has funded an account, the password, and walla', the money is sent to me, I take my 10%, send the rest to "you", and I deal with the taxes. Of course I'd be considered a professional gambler and all.

But- After cultivating a loyal cliental, I might then raise the % a smidgen.

Online 10%ER !
What do ya'all think ?

( Or did I overlook something? ) :confused:

[twindouble]

Eureka - Hey that's it ! I'll retire, and become an Online 10%er !

I'll open accounts (with OP$) to enough places to get any bet/track down.
I give each person who has funded an account, the password, and walla', the money is sent to me, I take my 10%, send the rest to "you", and I deal with the taxes. Of course I'd be considered a professional gambler and all.

But- After cultivating a loyal cliental, I might then raise the % a smidgen.

Online 10%ER !
What do ya'all think ?

( Or did I overlook something? ) :confused:

Yes, you can get arrested.

[Nicole]

Found this info on professionalgamblerstatus.com.


An individual professional gambler's expenses relating to his trade or business are usually fully deductible under IRS Code §162 as "above the line" items. Thus, unlike recreational gambler, most of an individual professional gambler's expenses (within reason) are deducted on Schedule C rather than as itemized expenses on Schedule A.

The expenses are deductible only if they are ordinary and necessary expenses and they are directly connected with or pertain to the trade or business. An expense is "ordinary" if it is customary or accepted in the taxpayer's business. A "necessary" expense is appropriate and helpful to the business; it doesn't have to be indispensable or essential. Adequate records documenting your expenses should be maintained.

These expenses can include but are in no way limited to:

tax advice fees
subscriptions to gambling magazines and newspapers
gambler guides and books
seminars and ongoing education (if not merely qualifying a recreational gambler to become a professional gambler)
dedicated telephone usage and long distance
cell phone, pager and messenger fees
wireless gaming fees
cable fees
on-line services and connection fees
gambler tip services & newsletters and news service fees
gaming chat room fees or subscriptions
office rent (but not if paid to yourself)
office supplies, postage, bank charges and wire fees
certain club memberships, dues and fees
clerical and record keeping expenses
wages paid to your spouse, kids, or parents for their assistance
interest expense paid:
on loans used for maintaining professional gambler's positions
including, in certain circumstances, your credit card interest
passive investment in separate gambler entities is subject to the limitation on IRS form 4952
depreciation & the 50% bonus depreciation, on furniture, television, computer equipment and software
computers & equipment 5 year life (Rev Proc 87-56)
office furniture & fixtures 7 year life (Rev Proc 87-56)
it is penny wise and pound "audit bait" foolish (or just plain ignorance) taking a deduction using other periods such as 3 year lives (which by law is basically limited to horses ( §168(e)(3))
50% bonus depreciation rule may expire on 12/31/2004
up to $102,000 of "§179 deduction" in 2004 ($105,000 in 2005) in lieu of depreciation (if proper election is filed)
computers, other equipment, software and furniture qualify.
automobiles and SUV's on a car chassis with unloaded GVW of 6,000 pounds and SUV's on a truck chassis , Trucks & Vans with a loaded GVW over 6,000 pounds may be eligible for §179 (through 10/22/2004)
Effective 10/23/2004 SUV's weighing 6,001 to 14,000 pounds may be eligible for §179 to a maximum of $25,000. SUV's over 14,000 pounds or holding a driver + 9 passengers still have the $102,000 limitation.
$102,000 limit (as adjusted for inflation) is scheduled to revert to $25,000 on January 1, 2006 (on 10/22/04 this provision was extended to January 1, 2008)
to qualify for the annual $102,000 /$105,000 §179 deduction you must spend less than $410,000 in 2004 ($420,000 in 2005)
travel and automobile expense
auto mileage rate 2006 up to four cars at a time @ 44.5¢/mile
note that the medical & moving mileage rates are 18¢/mile
the charitable purposes mileage rate is 14¢/mile, there's special rates for Katrina
auto mileage rate 2005 up to four cars at a time @ 40.5¢/mile thru Aug. Sept to Dec @ 48.5¢
note that the medical & moving mileage rates are 15¢/mile thru Aug. Sept to Dec @ 22¢
the charitable purposes mileage rate is 14¢/mile, after Aug 24th there's special rates for Katrina
auto mileage rate 2004 up to four cars at a time @ 37.5¢/mile
note that the medical & moving mileage rates are 14¢/mile
the charitable purposes mileage rate is 14¢/mile
auto mileage rate 2003 one car at a time @ 36¢/mile
note that the medical & moving mileage rates are 12¢/mile
the charitable purposes mileage rate is 14¢/mile
home office expenses1.
maid service and cleaning
unreimbursed expenses (if business entity's papers are properly documented)
on-premises athletic facilities (if your business entity is properly designed)
deductible retirement plans, including the Single-Participant 401k on wages (click here for more) (if the business is properly designed)
a non-deductible Roth IRA in lieu of a regularly deductible IRA
fully deductible medical & health care expenses or even a §501(c)(9) VEBA trust (if the plans are properly designed)
child care and other §125 cafeteria plan deductions (if the plan is properly designed)
other fringe benefit plans (if the plans are properly designed)
50% deductible restaurant meals had with friends who are fellow daytraders, lawyers, bankers, advisors
50% deductible gifts to friends and entertainment with people who are fellow gamers, lawyers, bankers, advisors
all the above with your spouse (if business purpose is properly documented and conducted)
100% deductible §119 professional gambler's daily pizza and Chinese take-out meals (if your c-corp or other entity is properly designed)
100% deductible §119 professional gambler's monthly residence rent payments (if your c-corp is very strictly and properly designed)
Most start-up and early organization expenses incurred after October 22, 2004 for an entity are fully deductible, rather then being amortized over 60 months as the earlier rule required.


Because of this favorable "trade or business" treatment, a professional gambler's net profits are subject to Self-Employment tax, under IRS Code §1402 (a)(3)(A)

Taxpayers who qualify to file as Professional Gambler Status may "elect" such classification each year by a filing an appropriate tax return with the IRS.

[Nicole]

5 years ago I made an honest mistake and did not claim one of my taxables from the Form W2-G. It was $1,100 win and the tax on the W2-G was a negligible $220 that I owed. After receiving threatening letters from the IRS I was then asked to pay fees and penalties that were DOUBLE the amount of the original tax I owed.


I had the same problem. I left 2 of 59 off mine three years ago. I filed an amendment and paid my penalty.

What I don't think players realize is that your supposed to pay quarterly taxes on your winnings. Another penalty!

[twindouble]

I had the same problem. I left 2 of 59 off mine three years ago. I filed an amendment and paid my penalty.

What I don't think players realize is that your supposed to pay quarterly taxes on your winnings. Another penalty!

The quarterly or estimated tax don't kick in unless your a professional gambler, then I think that happens when your income hits what ever the ceiling is. With large payoffs on the horses they automatically withhold taxes on guys like me anyway. All businesses are suposed to file estimated taxes based on prior returns. That ceiling I mentioned might not exist today.

T.D.

[Nicole]

The quarterly or estimated tax don't kick in unless your a professional gambler, then I think that happens when your income hits what ever the ceiling is. With large payoffs on the horses they automatically withhold taxes on guys like me anyway. All businesses are suposed to file estimated taxes based on prior returns. That ceiling I mentioned might not exist today.

T.D.

True, if your claiming your status as a professional gambler you should be set up as a business & paying estimated taxes. I'm referring to players like myself. Because I didn't pay taxes during the year on my winnings (except for those signers over 5k) I've had to pay underpayment penalties.

The federal income tax is a pay-as-you-go tax. You must pay the tax as you earn or receive income during the year. There are two ways to pay as you go.

Withholding. If you are an employee, your employer probably withholds income tax from your pay. Tax may also be withheld from certain other income, including pensions, bonuses, commissions, and gambling winnings. In each case, the amount withheld is paid to the Internal Revenue Service (IRS) in your name.

Estimated tax. If you do not pay your tax through withholding, or do not pay enough tax that way, you might have to pay estimated tax. People who are in business for themselves generally will have to pay their tax this way. You may have to pay estimated tax if you receive income such as dividends, interest, capital gains, rents, and royalties. Estimated tax is used to pay not only income tax, but self-employment tax and alternative minimum tax as well.

This publication explains both of these methods. It also explains how to take credit on your return for the tax that was withheld and for your estimated tax payments.

If you did not pay enough tax during the year either through withholding or by making estimated tax payments, you may have to pay a penalty.

[twindouble]

Nicole;

Nothing depresses me more than reading the tax codes so I leave that to others, at this point I just want to enjoy what I do plus I like the idea of not being noticed when it comes to the Feds or State.


T.D.