What is my responsibility to income taxes as a professional poker player?
Nick P asked:
I have been playing poker professionally for the past few months and semi professional for awhile before that. I’m wondering what my responsibility is going to be to income taxes? Obviously the government is going to wonder how my house payment is being paid every month when I’m not showing any taxable income. What am I going to have to do come next tax season? Would it be a good idea to somehow launder my income by opening up a front business? Any advice will be appreciated.
Thanks in advance!!
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February 5th, 2010 at 6:37 pm
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If you are a professional gambler, i.e you derive a substantial portion of your income from gambling activities on a regular basis, then you file as self-employed and report your earnings and expenses on Schedule C and pay the self-employment tax via Schedule SE.
Gambling winnings are reported to the IRS via Form W-2G so they will be looking for them either on line 21 of Form 1040 (for the casual gambler) or Schedule C (for the professional gambler).
Causal gamblers can take a miscellaneous itemized deduction on Schedule A for gambling losses up to the amount of reported winnings if they keep METICULOUS records. Professional gamblers report their wagers — typically the “nut” going into a tournament — as a business expense on Schedule C. The record-keeping requirements are similar for the pro.
There are a couple of significant differences beyond the deductions of losses. Casual gamblers do not pay Social Security or Medicare taxes on their winnings as they are not treated as earned income. (Nor do they get any benefit from them at retirement time or if they become disabled.) Professional gamblers do pay the Social Security and Medicare taxes. (But they DO get benefit from them when they retire or become disabled.) Professional gamblers can also deduct other related business expenses such as travel, hotel, 50% of necessary meals, etc. that the casual gambler cannot deduct.
There’s no need to set up a sham company to “wash” the income. If you are a professional gambler then you ARE a business by IRS definition. Any attempts to build walls around what you are doing will only bring unnecessary attention down upon you if they see it as suspicious. Why make something innocent appear suspicious? As long as your gambling activity is legal, i.e. sponsored tournaments in venues where gambling is legal, there’s no need to hide the fact that your income is from gambling.
February 7th, 2010 at 6:12 am
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Uh, not showing any taxable income? You are planning to not report your poker income? BAD idea!!!!
Your responsibility is to keep very good records of all of your gambling activity and expenses, and report accurately on your tax return. The poker income is income to you. Rules are different if you’re playing poker professionally than if you’re a casual player – it might be worth your while to talk to a CPA who is familiar with taxes for professional gamblers. It’s a business for you, not just misc income.
Open up a business and launder your income. Geez, you are just thinking of ways to dig yourself in deeper, aren’t you!
This forum is not a place to get advice on how to commit tax fraud.
February 9th, 2010 at 11:23 pm
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You do need to pay taxes on your winnings! Fortunately, you will probably have some business expenses to partially offset them. It sounds like you might owe taxes from before, in which case you may want to go to a tax preparation website that helps people deal with prior year tax issues. I’ve linked to one below.
February 11th, 2010 at 7:11 am
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if you are winning money a casino or other legitimate place, you should be getting 1099’s or whatever they give for gambling winnings – you better be making quarterly estimated tax payments to fed and state or you could get nailed for underwithholding – penalties and interest plus teh taxes – you do not want to mess around with the IRS (or state tax agencies) – they can put liens on your property and freeze your bank accounts and take money from there – laundering money is ILLEGAL – jail time you will get
February 13th, 2010 at 11:13 am
poker
why not play with real money without putting a $ …
This page gives you $ 50 … got 6 platform to choose in each of them gives you $ 50 osea $ 300 total …
all this without deposit, without having to put a $