I have been doing extensive research and after 3 hours of consultation with the nations leading tax experts on gambling winnings - I must say - I am stunned at what the IRS expects of us.
This is for people who are not filing as "professional gamblers" - but as regular guys with gambling winnings:
Some highlights:
1. The IRS expects all gamblers to post their winning "sessions" apart from your losing "sessions". What this means is that if you are even for the year, you cant just net it out and put nothing on your 1040. If your total wins = 500,000 and your total losses = 500,000, you must list them separately.
2. Your wins are calculated as part of your AGI (adjusted gross income). So if you are a normal Joe who makes 60k on your W2, but have cumulative gambling of 500k wins and losses, your new AGI is 560K!!! Yes you can write off 500k on your Schedule A itemized deductions but you lose tons of money because of the high AGI. You lose your standard exemption (3200 x the amount of people in your household), you lose your medical deduction, you lose a high percentage of your other deductions such as mortgage interest and charitable deductions. THIS IS A CROCK. You could LOSE money on gambling for the year you could end up paying 20k in taxes - just for the right to gamble.?!?!?!?!?!?
3. Losses are not carryovers from year to year and you cannot write off more losses than wins. So you could lose 25k gambling for 4 straight years and in the 5th year if you win 100k you will have to pay tax on it - even though over the course of 5 years you have broken even you are going to pay roughly 25k in tax.
4. The IRS requires you to keep a gambling diary. This is a daily if not hourly journal of all of your wagers and winnings and losses. This is the only way to substantiate writeoffs of losses. Forget going to the track and picking up used tickets off the ground. NOT ENOUGH. You have to have bank records substantiating your ins and outs and journal entries.
5. This is not limited to big gamblers. If you win 2k on one trip to vegas and lose 1k later that year - the IRS expects to hear from you on your 1040.
6. Offshore poker and sportsbetting is a whole new world for the IRS and they want their cut. The legality of the activity - while still considered grey to the justice dept - has nothing to do with the IRS. They require you list this income.
7. Your chances of being audited if you file a regular 1040 with no gambling are about 1.1%. Your chances double to 2.2% if you declare the gambling. So the catch 22 is that you are trying to be honest in declaring the gambling - the IRS has a double chance of disputing your claims.
8. Unless you keep meticulous records and have substantial backup - most gamblers have lost audits and in tax court. Thats right, even if you did legitimately lose the IRS has such stringent standards that most cases that they audit and send a bill to the gambler - they win.
All of this came as a big shock to me. No, a huge shock. I, like most gamblers, dont keep a journal of my daily bets and how much I win at an online poker table. I DO NOW!! It is not easy to hit astronomical numbers when you bet everyday or even just casually.
Lets say you bet just 100 per game and bet all year. You bet an average of 20 bets per week (with hoops baseball and hockey being an everyday sport 20 bets is not a lot). Lets say you finish even at the end of the year. That means you are roughly 51k up and 51k down!!!! So a 100 bettor is now required to add 51k to his AGI and has to take the chance of being audited over breaking even - not to mention the fact that you will be paying additional taxes just for the right to break even!!!
THIS IS CRAZY!!! But its true. I promise. If you dont beleive me go do some research. I guarantee that with the explosion in gambling there are going to be more and more concentration on gambling income by the IRS, and I wouldnt be surprised to see some of those big name TV poker players get their lunch handed to them.
Who keeps a daily journal? Who keeps bank records or asks a teller at the casino cashier to sign an affidavit? Worst of all - Pinnacle or WSEX is not going to show up at your audit - so why would an auditor beleive your printouts from an offshore corporation?
This is all very disturbing. And it puts most gamblers in a no win situation.
ucking:
This is for people who are not filing as "professional gamblers" - but as regular guys with gambling winnings:
Some highlights:
1. The IRS expects all gamblers to post their winning "sessions" apart from your losing "sessions". What this means is that if you are even for the year, you cant just net it out and put nothing on your 1040. If your total wins = 500,000 and your total losses = 500,000, you must list them separately.
2. Your wins are calculated as part of your AGI (adjusted gross income). So if you are a normal Joe who makes 60k on your W2, but have cumulative gambling of 500k wins and losses, your new AGI is 560K!!! Yes you can write off 500k on your Schedule A itemized deductions but you lose tons of money because of the high AGI. You lose your standard exemption (3200 x the amount of people in your household), you lose your medical deduction, you lose a high percentage of your other deductions such as mortgage interest and charitable deductions. THIS IS A CROCK. You could LOSE money on gambling for the year you could end up paying 20k in taxes - just for the right to gamble.?!?!?!?!?!?
3. Losses are not carryovers from year to year and you cannot write off more losses than wins. So you could lose 25k gambling for 4 straight years and in the 5th year if you win 100k you will have to pay tax on it - even though over the course of 5 years you have broken even you are going to pay roughly 25k in tax.
4. The IRS requires you to keep a gambling diary. This is a daily if not hourly journal of all of your wagers and winnings and losses. This is the only way to substantiate writeoffs of losses. Forget going to the track and picking up used tickets off the ground. NOT ENOUGH. You have to have bank records substantiating your ins and outs and journal entries.
5. This is not limited to big gamblers. If you win 2k on one trip to vegas and lose 1k later that year - the IRS expects to hear from you on your 1040.
6. Offshore poker and sportsbetting is a whole new world for the IRS and they want their cut. The legality of the activity - while still considered grey to the justice dept - has nothing to do with the IRS. They require you list this income.
7. Your chances of being audited if you file a regular 1040 with no gambling are about 1.1%. Your chances double to 2.2% if you declare the gambling. So the catch 22 is that you are trying to be honest in declaring the gambling - the IRS has a double chance of disputing your claims.
8. Unless you keep meticulous records and have substantial backup - most gamblers have lost audits and in tax court. Thats right, even if you did legitimately lose the IRS has such stringent standards that most cases that they audit and send a bill to the gambler - they win.
All of this came as a big shock to me. No, a huge shock. I, like most gamblers, dont keep a journal of my daily bets and how much I win at an online poker table. I DO NOW!! It is not easy to hit astronomical numbers when you bet everyday or even just casually.
Lets say you bet just 100 per game and bet all year. You bet an average of 20 bets per week (with hoops baseball and hockey being an everyday sport 20 bets is not a lot). Lets say you finish even at the end of the year. That means you are roughly 51k up and 51k down!!!! So a 100 bettor is now required to add 51k to his AGI and has to take the chance of being audited over breaking even - not to mention the fact that you will be paying additional taxes just for the right to break even!!!
THIS IS CRAZY!!! But its true. I promise. If you dont beleive me go do some research. I guarantee that with the explosion in gambling there are going to be more and more concentration on gambling income by the IRS, and I wouldnt be surprised to see some of those big name TV poker players get their lunch handed to them.
Who keeps a daily journal? Who keeps bank records or asks a teller at the casino cashier to sign an affidavit? Worst of all - Pinnacle or WSEX is not going to show up at your audit - so why would an auditor beleive your printouts from an offshore corporation?
This is all very disturbing. And it puts most gamblers in a no win situation.
ucking:
