How does a professional poker player file taxes?
I’ve made quite a bit of money last year playing cash game poker on the side and I’m thinking of quitting my day job and going full time. How does a professional poker player file taxes and their annual salary? How does the IRS verify the income reported is true? Must you report every cent of your winnings minus the losses?
I’m not a tax expert, but I can give you a general idea of how professional poker players might file taxes. It’s always best to consult a tax professional for specific advice tailored to your situation.
- Report your income as self-employment income: As a professional poker player, you would typically file your taxes as a self-employed individual. This means that your poker income will be reported on Schedule C (Profit or Loss from Business) of your U.S. Individual Income Tax Return (Form 1040).
- Deduct business expenses: You may be able to deduct certain business-related expenses, such as travel, entry fees, and other costs associated with playing poker professionally. These expenses can be listed on Schedule C as well.
- Pay self-employment tax: As a self-employed individual, you’ll need to pay self-employment tax (Social Security and Medicare) in addition to your regular income tax. You can calculate your self-employment tax using Schedule SE (Self-Employment Tax) and report the amount on your Form 1040.
- Report winnings and losses separately: You must report your poker winnings and losses separately. Winnings are reported as part of your self-employment income on Schedule C, while losses can be claimed as itemized deductions on Schedule A (Itemized Deductions), up to the amount of your winnings. Keep in mind that you’ll need to keep accurate records of your winnings and losses to substantiate your claims.
- Estimated tax payments: Since you won’t have an employer withholding taxes from your paychecks, you’ll likely need to make estimated tax payments throughout the year to avoid penalties. You can use Form 1040-ES (Estimated Tax for Individuals) to calculate and pay your estimated taxes.
- Keep thorough records: Maintain detailed records of your poker activities, including dates, locations, buy-ins, cash-outs, and any related expenses. This documentation will be essential for filing your taxes and for verifying your income in case of an IRS audit.
Remember, tax laws and regulations can be complex and may vary depending on your specific situation, so it’s always a good idea to consult with a tax professional for advice on filing your taxes as a professional poker player.