Another Tax Question

[Track Collector]

As a handicapper with significant wagering activity over the past few years, I have previously reported my racing business activity on schedule "C". Although I have completed some research on the internet, I would be very interested to hear from forum readers regarding the following:
(a) Do you have any recommendations on tax preparation services who are very familiar with all the specifics of wagering as a business?
(b) Does anyone have any experience in classifying their racing business as an LLC, and the benefits that go with it?

Please feel free to send me a private message if you are not comfortable leaving a public-viewable response.

Thank you in advance for any feedback!

[jeebus1083]

H&R Block's TaxCut program is second-to-none. I had to claim gambling winnings on my taxes last year for the first time, so I got a crash course in the 1040 Long Form. Made life so much easier.

Unfortunately (and probably for the good as far as refunds are concerned), 2007 didn't produce a signer, so it's back to the 1040EZ this tax season.

[jonnielu]

As a handicapper with significant wagering activity over the past few years, I have previously reported my racing business activity on schedule "C". Although I have completed some research on the internet, I would be very interested to hear from forum readers regarding the following:
(a) Do you have any recommendations on tax preparation services who are very familiar with all the specifics of wagering as a business?
(b) Does anyone have any experience in classifying their racing business as an LLC, and the benefits that go with it?

Please feel free to send me a private message if you are not comfortable leaving a public-viewable response.

Thank you in advance for any feedback!

Which are you trying to accomplish?

1. Separate the wagering activity from yourself as a taxpayer.

2. Create a corporate entity, so that expenses in conduct of the activity can be deducted to reduce the tax burden.

3. Incorporate as a way to possibly eliminate withholding.

4. Completely shelter the income from taxation.

jdl

[Track Collector]

Which are you trying to accomplish?

1. Separate the wagering activity from yourself as a taxpayer.

2. Create a corporate entity, so that expenses in conduct of the activity can be deducted to reduce the tax burden.

3. Incorporate as a way to possibly eliminate withholding.

4. Completely shelter the income from taxation.

jdl

Yes --> 1,2
??? --> 3
No --> 4

I want to comply completely with all the tax laws, while taking advantage of all legal avenues (including those unique to professional handicapping) which reduce tax liability and improve bottom-line profitability.

[jonnielu]

Yes --> 1,2

If this is the goal, a type C corporation would give more advantages, since it is taxed on it's own income (i.e. profit). Profit can be reduced with legitimate expenses that you benefit from having control of, thereby reducing tax burden for the corp.

An S type and LLC organization, have income pass thru the corp. to you, to be taxed at a higher rate. (self employment)

??? --> 3

The question would be, does the "supposed" withholding requirement apply to a corp. since a corp. actually is required to pay a tax on income (i.e. profit) to retain it's status (corporate priviledges). Unlike the citizen, who must determine and authorize withholding himself.

No --> 4

I want to comply completely with all the tax laws, while taking advantage of all legal avenues (including those unique to professional handicapping) which reduce tax liability and improve bottom-line profitability.

A competent CPA would be able to best advise you on which organization would give you the most latitude. Perhaps talk to CPA's that might specialize in each type of organization to compare the pro and con of each. This would also allow you to get a handle on the competence of any.

Personally, I'd be all over #4, but that is just me.

[Track Collector]

Personally, I'd be all over #4, but that is just me.

My answer of no to #4 was based on defining "shelter" as simply hiding income from the IRS in a way that is not legal. If the "shelter" is legitimate and legal, then I'm all for it. :)

[jonnielu]

My answer of no to #4 was based on defining "shelter" as simply hiding income from the IRS in a way that is not legal. If the "shelter" is legitimate and legal, then I'm all for it. :)

To hide income from the IRS would be showing some respect for the concept that your earnings are their concern. And, hiding income is an activity that only a taxpayer would engage in, so therefore hiding income could evidence an assumption on their part that you are a taxpayer.

Actually, the word "barrier" is much more appropriate then "shelter", probably a good example of how you get trained to even use words that would imply that you are doing something that is "not allowed" by those who are without power in the first place.

With regard to Title 26 U.S.C. taxes, your citizenship would be the barrier.

jdl

[YokohamaMary]

I would tend to think the only real benefit to doing this would be to allow you to carry forward losses to future years (or offset your other earnings with your gambling losses) as opposed to only allowing gambling losses to the extent of your capital gains.

Why do you want to do this (because if you are a consistent winner isn't the amount of tax you pay approximately the same?)