ADW signer etiquette

[elhelmete]

Originally Posted by cj

I just don't see why anyone would not offset the winnings with losses whether a winner or loser on the year. If you are playing online, you already have all the proof you'll need. It really isn't hard and that is a lot of money to add to your income unnecessarily.

I think I'm getting it now...If I were pretty sure I'd somehow get all the withholding back, I'd pay out the others full amount that day and I'd end up with my share less 28% (that day) until tax time when I'd 'realize' the difference for myself?

[cj]

Originally Posted by elhelmete

I think I'm getting it now...If I were pretty sure I'd somehow get all the withholding back, I'd pay out the others full amount that day and I'd end up with my share less 28% (that day) until tax time when I'd 'realize' the difference for myself?

Personally, I'd hold the money until I did my taxes, then settle up, that is how I would handle it. I certainly wouldn't penalize myself.

[rrpic6]

Originally Posted by cj

There are states where you could have signers totaling 50k, show you lost 100k via the same ADW, and you have to claim the 50k as profit? I find that very hard to believe. Am I misunderstanding?

That's how the law reads in Ohio. Much of my past troubles with the IRS points to that law. I was only able to bypass it when I was declared a Professional Gambler (Horseracing only) back in 2002. And that was after years of appeals.

RR

[cj]

Originally Posted by rrpic6

That's how the law reads in Ohio. Much of my past troubles with the IRS points to that law. I was only able to bypass it when I was declared a Professional Gambler (Horseracing only) back in 2002. And that was after years of appeals.

RR

Crazy to have to go to those extremes.

[elhelmete]

Originally Posted by cj

Personally, I'd hold the money until I did my taxes, then settle up, that is how I would handle it. I certainly wouldn't penalize myself.

Thank you CJ. This whole conversation reminds me why I prefer to gamble "alone."

[startngate]

Federal law allows you to only take losses up to the total of your winnings. This assumes you are itemizing deductions.

Winnings are reported on 1040 line 21 as 'Other Income'. Gambling losses go on Schedule A line 28 as 'Other Misc Deductions'.

If you have $50k in reportable winnings, but lost $100k for the entire year, then you are going to net $0, not -$50k for tax purposes.

So if the OP can show losses to offset the winnings, he can minimize his total tax due.

Personally, I would pay the others the net amount immediately, and then give them their share of anything you get back by offsetting your losses come tax time.

[Delta Cone]

But what if you don't itemize deductions? You have to do that in order to apply the losses against wins. I am single and live in an apartment, with no medical expenses, mortgage interest or property taxes to deduct. I can't come up with enough itemized deductions that exceed the standard deduction. So my gambling losses can't be used to offset wins.

In addition, my great state of Illinois doesn't allow itemized deductions. So if I won, lets say $100k and had $100k of losses... to the Feds that would be zero. But to the state of Illinois, that's $100k of income I have to pay taxes on!

The solution, as I see it, is to use your effective tax rate. Take the total amount of taxes paid divided by your adjusted gross income (AGI). For example, if my AGI was $100k and I paid $10k in taxes, my effective tax rate is 10%. Nevermind what the marginal tax bracket is.

So I would keep 10% off the top for taxes, then divide the 90% remaining among the participants.

[moneyandland]

Originally Posted by cj

Racing is treated separately, you pay tax on winnings. If you are a net winner for the year, it will count against your income and any liability should be shared equally. Deduct the $10,000 from your reported winnings (not in real life, just as a test) and see how it affects your taxes. If it causes your tax liability to drop by $2,000 each person should be responsible for $500. You'd owe them all $200.

But, if you are a net loser on the year, you "get it back" whether you get a tax refund or not. The amount you paid is just applied against your tax liability for the year. If you don't pay your friends back, you are just using their money to pay your tax bill. In this case, each person would be entitled to an extra $700 come tax time. That is what is fair, at least in my opinion.

Now, whether you deduct a convenience fee is up to you!

You don't always get it back, because you can only deduct losses up to the amount of winnings, and only if you itemize your losses and you will lose the difference of the standard deduction vs itemized in taxes


Really Basic Scenario
first without gambling
Wages 100,000
standard deduction 6,100

Taxed on 93,900

with gambling W-2
Wages 100,000
w2 winnings 15,000
deduction 15,000

paying taxes on 100,000

[cj]

Originally Posted by moneyandland

You don't always get it back, because you can only deduct losses up to the amount of winnings, and only if you itemize your losses and you will lose the difference of the standard deduction vs itemized in taxes


Really Basic Scenario
first without gambling
Wages 100,000
standard deduction 6,100

Taxed on 93,900

with gambling W-2
Wages 100,000
w2 winnings 15,000
deduction 15,000

paying taxes on 100,000

That is why I said figure the difference between what you would pay in taxes with and without the 10 grand.

[Delta Cone]

Originally Posted by cj

There are states where you could have signers totaling 50k, show you lost 100k via the same ADW, and you have to claim the 50k as profit? I find that very hard to believe. Am I misunderstanding?

Illinois does not allow any deduction for gambling losses.

http://tax.illinois.gov/individuals/...btractions.htm

[Bettowin]

Originally Posted by elhelmete

If I've got a group of people betting with me through my ADW and we catch a signer with withholding involved, what's proper? I'm 99.99% a solo gambler, and don't like group bets, but it's going to be unavoidable for the KD party I'm having.

Hypothetical: 4 guys, equal shares in the wager. We catch a $10,000 win, 28% is held back on me, net is now $7200. We all get $1800?

You have 8 months and four people to collect enough losing tickets to offset your win or do what I do and don't win that big

[iwearpurple]

Originally Posted by moneyandland

You don't always get it back, because you can only deduct losses up to the amount of winnings, and only if you itemize your losses and you will lose the difference of the standard deduction vs itemized in taxes


Really Basic Scenario
first without gambling
Wages 100,000
standard deduction 6,100

Taxed on 93,900

with gambling W-2
Wages 100,000
w2 winnings 15,000
deduction 15,000

paying taxes on 100,000

15,000 is greater than 6,100. Therefore you would in fact itemize. 15,000 plus whatever other deductions you would have. You would not pay tax on $100,000

[Delta Cone]

Originally Posted by iwearpurple

15,000 is greater than 6,100. Therefore you would in fact itemize. 15,000 plus whatever other deductions you would have. You would not pay tax on $100,000

That is not correct. The example given was right. You misunderstood.

Without gambling, the income of $100k is reduced by the standard deduction down to $93,900 and you are taxed on that.

With gambling, the income is $100k plus $15k gambling winnings, or $115k total. The $15k gambling losses are taken as an itemized deduction, bringing the income down to $100k and you are taxed on that.

[moneyandland]

Originally Posted by iwearpurple

15,000 is greater than 6,100. Therefore you would in fact itemize. 15,000 plus whatever other deductions you would have. You would not pay tax on $100,000

what if there are no other deductions? thats the point you lose the standard deduction, a single healthy person renting will have very few legit deductions...

If it were as simple as just deducting losses, ticket signers wouldn't exist

[cj]

Originally Posted by Delta Cone

Illinois does not allow any deduction for gambling losses.

http://tax.illinois.gov/individuals/...btractions.htm

Right, but is that the same as offsetting your winnings to net out to 0? I tend to doubt it. The federal government doesn't allow deductions for gambling losses either.