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Originally Posted by Delta Cone
To be 100% legal you would have to report all winnings and losses... these would net to zero in a break even situation, obviously.
Assume you report no winnings and deduct no losses on the grounds that you "broke even." The IRS could get you for filing a false return. But they are clearly not going to go after people who don't do this, as there is no tax to collect in any event. No profit=no tax
The real problem here is that in Illinois there are no itemized deductions. The IL return just picks up your adjusted gross income from the 1040 and gives you a few limited deductions. So if you were 100% honest on the federal return and reported, lets say $100,000 of winnings and $100,000 of losses (no net federal tax), the state of IL would ignore the losses and consider you as having $100,000 in additional income, taxed at 5%.
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In Ohio the Tax Rate gets as high as 8%. The only way around this for myself was to file as a Professional Gambler. It enables yourself to become Self Employed, with the ability to write off expenses as well as losses. In 2002 after three years of haggling with various IRS offices and Agents, my day in Court came, actually a Pre-Arbitration setting, a decision was made and I was permitted to file in this manner. However, twice in the past six years some budding new IRS agents have flagged my returns and tried to disallow this. Of course they had no knowledge of my hearings. Each time it took about six months to clear these new mistakes, Luckily I've kept the original decision nearby, to play the ultimate trump card!
RR
PS In the original 2002 case I was helped by bumbling Agents that could not understand multiple winning W2-G Forms. They must have thought it was like a lottery where no one would play the same numbers more than one time.
