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!!
I’m not a tax professional, but I can give you some general guidance on this topic. As a professional poker player, your poker winnings are considered taxable income, and you are required to report them on your tax return. Here are some general tips:
- Report your winnings: You should report your poker winnings as “Other Income” on your tax return (typically, on Form 1040, Line 8z). It’s important to be honest and accurate about your earnings to avoid potential issues with the IRS.
- Keep detailed records: Maintain thorough records of your poker sessions, including the date, location, buy-ins, cash-outs, and any relevant expenses. This documentation will help support your tax return and may be necessary in case of an audit.
- Deduct poker-related expenses: As a professional poker player, you may be able to deduct certain expenses related to your poker activities. Examples include travel costs, tournament entry fees, and home office expenses. These deductions typically go on Schedule C of your tax return. It’s a good idea to consult a tax professional to ensure you’re correctly claiming all eligible deductions.
- Pay estimated taxes: Since you’re self-employed, you may need to make estimated tax payments throughout the year. This helps avoid underpayment penalties and a large tax bill come tax season. The IRS provides guidelines for calculating and paying estimated taxes on their website.
- Don’t launder your income: It’s illegal to launder money, and doing so could lead to serious legal consequences. It’s much better to properly report your income and pay your taxes.
- Consult a tax professional: Given the unique nature of your income, it’s a good idea to work with a tax professional who is familiar with the specific tax requirements for professional poker players. They can help ensure you’re accurately reporting your income and taking advantage of all eligible deductions.
Remember, this is only general advice, and you should consult with a tax professional for guidance tailored to your specific situation.