Gambling Winnings Tax Questions

T

TXSooner518

250+ Posts
I have a few questions re: gambling winnings for taxes.

I won a tidy sum in an onine poker tournament. My questions are: do I need to pay quarterly taxes on this amount? secondly, how do I deduct gambling losses? i am aware that the gambling tax laws make it where all winnings are taxable income and losses are just deductions. Luckily I have a house and child, so I have enough deductions to itemize. But what counts as wins/losses? If I have two poker sessions on the same day, and win $300 in one, and lose $180 in the other, is that $120 of winnings or $300 of winnings/$180 of losses? What if I play poker and blackjack all in one session, split by game? How do I determine the dividing line? WHy the hell don't they just use the net total for the year?

Anyone with answers or recs as to who might be able to give me correct answers would be greatly appreciated. I'll trade poker lessons for the advice.
smile.gif
 
I'm not qualified to give you an answer you should take seriously...BUT>

SHouldn't you just add up your net result over the course of whatever reporting time you have to use? Year..quarterly..etc? I mean, the gov doesn't care if it's blackjack or poker right? It's just that you won $120 and they want to tax it.

Seems odd that you wouldn't just settle up at the end of the year though. Do they force you to do quarterly? Couldn't you just stash away the appropriate money and wait to see hwo it shakes out over the year?
 
they don't let you just net unfortunately. that is what would make SENSE, is to look at the end of the year and say "OK, I'm up $55K for the year gambling, so that is 55K in income" and that's it.

If you are a professional gambler you can do it that way, but with me having a 40 hr/week professional career, they would not approve me as a pro gambler.
 
you cannot deduct losses like you do mortgage interest...it's a reduction on winnings, and only to the extent of winnings. so if you win 55k in a tournament but then lose 30k over the course of the year, you only have 25k of "income" to pay tax on. but if you win nothing but lose 30k you cannot deduct any of that.

so, if you really want to pay quarterly so that you don't have some small penalties, have at it. i would just net it up at the end though.

this is my understanding, but i could be wrong. and you had better have some documentation on losses if you're talking about big sums, i would imagine.

after looking it up VERY quickly (so this isn't very thorough)....

all winnings are income

losses are deductible, but only to the extent of winnings.

so, in short, you do "net it out", but there's not one line where it says "total gambling winnings"....you report both the winnings and then the losses....make sense?
 
i mean, i know that winnings go on line 21, other income. I know that losses go onto Schedule A, and are capped at the total gambling income. I just don't know how micro I have to go to detail wins vs losses. At one end of the spectrum is every bet I make in a year. At the other end is "are you up or down for the year?" I know both are incorrect and the answer is between, i just don't know where between.
 
I have heard others who have won quite a bit (such as yourself) say they pay quarterly. I'm not sure what the penalty is...Ask on 2+2?
 
JinSA, apart from the danger that would pose to my law license, I had a large wire transfer to my bank account, and so it's more like I have AKs and they have AA.
 
Why didn't you just fly to whatever island the site is located on and pick it up in cash???

Thats what Indiana Jones would do.
 
Are not the "gambling winnings" the net winnings? Basically the amount of the total winnings minus total losses.

You could also sell down stocks to offset the gambling losses but I assume you are talking about last year so that's no good.
 
That's the thing, it's not total winnings minus total losses. IF the tax code made a lick of sense, that is what it would be. But you have to add up all total winnings. Each losing session is an itemized deduction. Luckily, I have a house and baby so I am over my standardized deduction.

Plus I have to pay taxes now, since nothing was withheld. The penalty is 5.05% if you don't do so. The IRS sucks my ***.

You know, in finding these answers, so many posters here and 2p2 and elsewhere all think you can just net it, it really pisses me off that I am doing it the right way and getting screwed.
 
You are so high maintainence sometimes, geez! I don't have an answer, I just wanted to give you ****.

The suggestion of asking on 2 + 2 or a forum like that is a great one. Also, maybe search on Card Player magazines website archives. I am sure that they or some other publication has tackled and explained this item. If not, I suggest you write an article with your findings and get paid for it.
 
The idea of paying quarterly requires the same kind of guess-work that many self-employed people do.

Some people do a quarterly accounting, including all receipts and expenses, and pay their estimated taxes based on that.

Others have a "feel" for about what they will make for the year and pay quarterlies based on that. That is probably not great tax advice and I doubt a CPA would suggest it, but that's what many people do (including myself) and most of us end up being close enough to correct at the end of the year where we either owe a little or get a bit of a refund. And if I owe a little and owe another $100 in fees because I didn't pay enough quarterly, so be it.

In a gambling sense, I think it would be easiest to "net" it quarterly and pay taxes based on your quarterly net winnings. Of course, if you have one big winning quarter and then two losing quarters, you're gonna end up having paid a lot more than you needed to. But you don't lose, right?
biggrin.gif
 
OK, I've found out some more info. The good news is I don't need to pay quarterly. If you pay the full amount of your 2007 owed tax minus anticipated witholdings in 2008, you are set. Well, we anticipate more witholdings in 2008, since my wife and I both have full time jobs, and our 2007 owed tax was low due to house/kid.

Now, in 2009 we may need to pay quarterly if I am winning again, b/c our 2008 tax owed will be much higher.

Johnny, you HAVE to include every individual winning session in income and itemize every losing session as a deduction. The real ***** is if you have, say, 100 winning sessions with $1000 each and 100 losing sessions with $900 in losses, that is going to add $100K to your AGI. Retarded system. The def of 'session' is sketchy. Probably the leading poker accountant that I have found through 2p2 indicates that if you go to the casino and play some NL Holdem, then a tourney, then some limit holdem, then some more NL holdem, that is 4 distinct sessions. I am going to do it by casino visit, and by logon/logoff online. But netting by periods as short as a week has been rejected by IRS, so quarterly/yearly are asking to get slapped.
 
I understand that Sooner, I wasn't saying you didn't.

I was saying strictly for estimated tax purposes, you could "net" your play for a quarter in order to come up with a good number to pay for estimated taxes. I realize how they get treated at year's end.

That method is the "close enough" method. It sounds like you want the "by the book" method, so good luck to you finding that.
 
sorry, Johnny, misunderstood you there.

in my head, I had moved on from the quarterly tax issue, since I found out that as long as you pay 2007 tax owed minus 2008 witholdings (which in my case is 0), you are good on the quarterlies.

I'm now concentrating on assembling appropriate records for my 2008 return for next year.
 
don't pay quarterly (you already figured that one out)

unless someone filed a W-2 on your behalf you should claim winnings and losses separately however if you have records to support it I'd look at each session net and add up to gross numbers to include in income and loss. If someone filed a W-2 then you may want to make sure to document how that was part of your winnings as that will be the only number the IRS knows for sure.

TIP: Most people are net losers thus the IRS is used to seeing a deduction equal to the income and it won't be an issue.
 
the IRS won't know about the large wire, if it is greater than $10,000 then the bank is required to disclose to I believe the DOJ not the IRS.
 
yeah, but with a 9 month old daughter and a law license, I'm really not looking forward to answering an IRS auditor's query about it, b/c the auditor can find out. I'd love to save money, but not at the cost of disbarment/jail.

It was won on PokerStars, located either Isle of Man or Costa Rica.
 
Estimate your total winnings and your total losings and use them both. It won't raise a red flag if the 2 are the same number. Worst case you get audited and your honest that you know for sure you won X and are pretty sure for the year you are a loser (or lost Y) and at worst they'll assess a small penalty. You aren't going to get prosecuted, and I don't think you'll get disbarred for getting audited.
 
I'm a CPA, but taxes aren't my specialty however I know quite a bit about them. Nothing I've said is a professional opinion just my personal knowledge from school, living with tax professionals (CPA and non-CPA), and personal experiences
 
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