How many of you keep a gambling diary for the IRS??? TAX REQ FROM IRS!!

ChuckSims · Jan 9, 2006

Amsterdam said:
Emigration is a possible, though extreme, solution. I read somewhere that if a US citizen emigrates to another country for the purpose of avoiding taxes, he has to continue to pay taxes to the IRS for the next ten years. In addition such an ex-patriate may not be allowed to return to the US, even to visit.

Not sure how the tax laws work on your side of the pond, but here in the US I don't think there is such as thing as a "tax domicile". US citizens are required to pay federal income tax no matter where they live on the planet, even if they spend 99% of their time on foreign ground.

Someday if they colonize the Moon or put men on Mars the IRS will be auditing them too.

Must be nice!

I'd like to read how English law defines "sole or main income".

U.S. citizens that accrue income on foreign land and live there for the majority of the tax year are tax exempt for around $80,000. I believe you have to live outside the USA for around 330 days of the tax year.

Its a big incentive for U.S. citizens to accept jobs that pay well with no incme tax but in places that are undesirable places to live. Like Iraq!

the_snowkid · Jan 9, 2006

bigbet1234 said:
If you small time, say making under 10K a year, just betting for a hobby, I wouldnt bother claiming it. Now, when you start making 6 figures, you best claim something.

BB

so lets say mr. x makes 25k a year, making deposits and withdraws through a neteller account, then getting them back into his bank by netellet ept (or what ever that it is). would you worry about that?

vanzack · Jan 9, 2006

Bigbet - I think its only fair why you state that it was a cakewalk.

I know from earlier posts that you prob had a good journal with backup - I dont want anyone to get the misimpretion that you got audited and got away with something.

:toast:

vanzack · Jan 9, 2006

the_snowman said:
so lets say mr. x makes 25k a year, making deposits and withdraws through a neteller account, then getting them back into his bank by netellet ept (or what ever that it is). would you worry about that?

Snowman - honestly - I will give you my opinion.

NOBODY KNOWS AND ANYONE WHO SAYS THEY DO ARE FULL OF IT.

Its exactly like driving. If the speed limit is 55mph - there is no argument - that is a fact. If someone drives 57 are they going to be pulled over? The average guy would tell you no - but Im sure it has happened. What about if you are going 75? Someone might tell you to get a radar detector and you wont get caught - or some will tell you "my uncle frank has driven 90 his whole life and never got a ticket".

All of this is subjective. Guesses. Assumptions.

The law and the tax code cannot be argued. If I were you - I would do some serious research as to what level is considered criminal. I was told it was if you are not declaring 25% of your W2 income. So if you made 100k on your W2's and are hiding 25k in gambling income you are right on the threshold. Will they prosecute? I have no idea and anyone who tells you that they know are full of shit. You might get a tax guy with a hair up his ass or it might be an initiative for the IRS to nail gamblers - and then you are fucked.

What I have attempted to do in this thread is tell you that the speed limit is 55. Lots of others have guessed as to what happens if you drive 57, 65, 85, 100 or buy a radar detector. All of that is speculation.

Do with the information what you wish.

Here are some good reference sites for reading:

http://www.rbstaxes.com/
http://www.gambling-law-us.com/Articles-Notes/
http://www.professionalgamblerstatus.com/

GL

vanzack · Jan 9, 2006

CHOPTALK - if you go to the websites I list in the post right before this one you will find several articles regarding audits and criminal activity.

I went one step further. I have had phone consultations with 2 of the 3 and one not listed. All say the same thing. That there are lots more sitting in jail and lots more that have been caught then the public knows about. Do you think that if your neighbor got audited and fined anyone would know? Of course not - so that is why rumor and conjecture run wild on the subject.

GL

Fishhead · Jan 9, 2006

POSTERS........KEEP AN ACCURRATE DIARY.

REPORT your WINS........DEDUCT your losses................from ALL your gambling activity.

Line 21.......WINS

Schedule A..........DEDUCT LOSSES

Rawpimple · Jan 9, 2006

Again, I am glad this thread has been brought up because at the very least it has gotten everyone thinking. I highly doubt that most people here knew of most of the stuff discussed here, which means most of us and other gamblers are not filing or not filing correctly. I continue to talk to CPA and lawyers about this subject. On top of other questions I have brought up a scenario of a gambler losing overall for the year and each time 4 separate people have told me not to even put down winnings -losings. This kinda surprised me because these are all people who are sharp and have experience in the field. Again I am not adivising anyone to do this, just what I am finding. I guess technically you have lost for the year, and would not owe any money so therefore you are not screwing the IRS out of any money. I do understand if you are taking other deductions and the winnings have put you in a higher tax bracket, this may affect you and I did not follow up with this question.

Let me ask another question: If you get a check from an offshore account for say 1 K and go to your bank and cash it. I am sure this is traceable somehow? Does that appear on your statement? Would anyone know you cashed a check unless they really investigated your bank account?

I would love to hear from someone who was audited and had to deal with the gambling aspect (i.e. had to show a diary, had to explain gambling winning or loses). I have never heard of someone doing this.

I agree its simple keep a diary and make an effort to pay taxes based on your information. Thats all that can be asked of you. Plus you are probably doing more than 99% of the other people out there. There are several sites that tally all your wagers in a month and give you a print out of every bet that month. Do that for 12 months at each of your establishments and there is your journal without having to do much work. Add wins and loses and there it is.

Amsterdam · Jan 9, 2006

I suggest downloading free 2005 tax software and testing things out yourself. It's very easy to create a profile in the software and then go back and forth changing the amounts of gambling winnings and expenses and then viewing the effect on the final tax refund (or deficit).

A couple of the examples I remember running:

a.) single male 20,000 day job income with appropriate witholdings, no investments, no alimony, no other income, property, no other complicating factors -- Simple Joe. I had simple Joe win $20,000 (which bumped his AGI to $40,000). Joe also had $20,000 in gambling losses (he broke even for the year). Guess what the effect was? Joe had to pay an additional approximately $500 in taxes! Why? Well, it's because he had to pay the higher AGI tax bracket (whatever the rate is for $40,000) on $20,000. So Simple Joe in effect had to pay $500 just to break even! (These numbers are a pretty accurate approximation, I don't have the numbers in front of me)

b.) I then changed Joe's gambling winnings to much higher amounts and ran the results again and had some interesting results. I don't remember it off the top of my head but at one point I had him win $180,000 (bringing his AGI to $200,000 because of his day job), and he owed about $53,000 in taxes. So when the dust cleared his post-tax financial situation of making $20,000 a year from his day job an also winning $180,000 ended up with him clearing $147,000. That is more acceptable than the shafting he took in example (a.).

Hey don't take my word (or Simple Joe's!) for it, do some testing for yourself:

Tax software:
Link to many tax software packages from download.com (some free)

The one I used:
TaxAct Software (free to download and try)

Rawpimple · Jan 9, 2006

Amsterdam,

Interesting.

What if in example B he had 180,000 in winnings and 180,000 in loses. Breaks even and makes 20,000 a year with his day job. Could he actually end up not making a dime on the year even with working and breaking even in gambling?

BarneyFife · Jan 9, 2006

Fishhead said:
POSTERS........KEEP AN ACCURRATE DIARY.

REPORT your WINS........DEDUCT your losses................from ALL your gambling activity.

Line 21.......WINS

Schedule A..........DEDUCT LOSSES

What do you do for 2005 and past years if your only records are net profits/losses for the year? What if I didn't keep a journal of each game I wagered on, or even each day or week for that matter? And how about poker? The articles say that each table is considered a session. I have no idea what I have done under those circumstances...just net profit/losses for the year.

Amsterdam · Jan 9, 2006

Rawpimple said:
Amsterdam,

Interesting.

What if in example B he had 180,000 in winnings and 180,000 in loses. Breaks even and makes 20,000 a year with his day job. Could he actually end up not making a dime on the year even with working and breaking even in gambling?

First take a look at this:

<table bordercolordark="#3333CC" bordercolorlight="#3333CC" border="1" width="486"><tbody><tr><td width="344">[FONT=Verdana, Arial, Helvetica] Taxable Income[/FONT]
</td> <td width="126">[FONT=Verdana, Arial, Helvetica] [/FONT][FONT=Verdana, Arial, Helvetica] Rate[/FONT]
</td> </tr> <tr> <td width="344">[FONT=Verdana, Arial, Helvetica] [/FONT] [FONT=Verdana, Arial, Helvetica] $0 - $7,300[/FONT]
</td> <td width="126">[FONT=Verdana, Arial, Helvetica] [/FONT] [FONT=Verdana, Arial, Helvetica] 10.0%[/FONT]
</td> </tr> <tr> <td width="344">[FONT=Verdana, Arial, Helvetica] [/FONT] [FONT=Verdana, Arial, Helvetica] $7,301 - $29,700[/FONT]
</td> <td width="126">[FONT=Verdana, Arial, Helvetica] [/FONT] [FONT=Verdana, Arial, Helvetica] 15.0%[/FONT]
</td> </tr> <tr> <td width="344">[FONT=Verdana, Arial, Helvetica] [/FONT] [FONT=Verdana, Arial, Helvetica] $29,701 - $71,950[/FONT]
</td> <td width="126">[FONT=Verdana, Arial, Helvetica] [/FONT] [FONT=Verdana, Arial, Helvetica] 25.0%[/FONT]
</td> </tr> <tr> <td width="344">[FONT=Verdana, Arial, Helvetica] [/FONT] [FONT=Verdana, Arial, Helvetica] $71,951 - $150,150[/FONT]
</td> <td width="126">[FONT=Verdana, Arial, Helvetica] [/FONT] [FONT=Verdana, Arial, Helvetica] 28.0%[/FONT]
</td> </tr> <tr> <td width="344">[FONT=Verdana, Arial, Helvetica] [/FONT] [FONT=Verdana, Arial, Helvetica] $150,151 - $326,450[/FONT]
</td> <td width="126">[FONT=Verdana, Arial, Helvetica] [/FONT] [FONT=Verdana, Arial, Helvetica] 33.0%[/FONT]
</td> </tr> <tr> <td width="344">[FONT=Verdana, Arial, Helvetica] [/FONT] [FONT=Verdana, Arial, Helvetica] $326,451 & Over[/FONT]
</td> <td width="126">[FONT=Verdana, Arial, Helvetica] [/FONT] [FONT=Verdana, Arial, Helvetica] 35.0%[/FONT]
</td></tr></tbody></table>
This is is the marginalized tax rates for a single filer. Other tax tables for joint filers, heads of houshold, etc here.

To answer your question I'll have to boot into Windows and try it out on the software. Normally I wouldn't do this but I am curious. I'll be back in a few minutes with an answer...

Fishhead · Jan 9, 2006

BarneyFife said:
What do you do for 2005 and past years if your only records are net profits/losses for the year? What if I didn't keep a journal of each game I wagered on, or even each day or week for that matter? And how about poker? The articles say that each table is considered a session. I have no idea what I have done under those circumstances...just net profit/losses for the year.

This is why you need to keep a DETAILED diary of ALL your gambling activity.

Then add up the WINS and deduct the LOSSES .........only up to the extent of your winnings.

Fishhead · Jan 9, 2006

Fishhead said:
This is why you need to keep a DETAILED diary of ALL your gambling activity.

Then add up the WINS and deduct the LOSSES .........only up to the extent of your winnings.

As I have always stated........take what you learn here in this forum and then by all means HIRE A QUALIFIED TAX ADVISOR and THOROUGHLY discuss your tax situation and your plan of action.

Amsterdam · Jan 9, 2006

BarneyFife said:
What do you do for 2005 and past years if your only records are net profits/losses for the year? What if I didn't keep a journal of each game I wagered on, or even each day or week for that matter? And how about poker? The articles say that each table is considered a session. I have no idea what I have done under those circumstances...just net profit/losses for the year.

Barney, from what I understand, when you're sitting across the table from the IRS auditor the burden of proof is on you demonstrate your losses. That is, you have to be able to convincingly offer enough evidence (by way of accurate betting journals/records/etc.) that you did actually lose the amount of claim you did. Otherwise, if the IRS finds money movements in your banking records, you may be expected to pay full taxes on them even though you actually lost a lot of the money you at one point deposited in your account.

vanzack · Jan 9, 2006

Barneyfife - it is easy to go to your sportsbook or poker site and ask them for the records.

earlier in this thread I detailed several big books and poker sites that I did this with. You could recreate your journal in a week.

Amsterdam · Jan 9, 2006

Rawpimple said:
Amsterdam,

Interesting.

What if in example B he had 180,000 in winnings and 180,000 in loses. Breaks even and makes 20,000 a year with his day job. Could he actually end up not making a dime on the year even with working and breaking even in gambling?

Ok just crunched the numbers and Simple Joe ($20,000 day job income with very close to $1409 in federal withholding and no other complicating tax factors such as property, alimony, dependents, etc.) who won $180,000 during 2005 and also lost $180,000 to break even at the end of the year ended up owing the IRS $922. If he wouldn't have gambled at all the about $1409 witheld from his paychecks would have had him even, but his massive wins and losses ended up costing him almost $922 in additional taxes because his AGI totalled $200,000.

So, to answer your question, no he won't end up not making a dime after taxes, but he will be down a dime.

If I were Simple Joe in this situation I'd be annoyed that I worked a meager $20,000 job all year yet had $360,000 in total action betting on sports. Joe would have been averaging almost $7000 in action per week betting on sports whilst only earning a weekly gross of less than $400 at his day job -- a ridiculous situation!

trytrytry · Jan 9, 2006

strange situations

trytrytry · Jan 9, 2006

what is the situation in tax law if your AGI is over $200,000? what kicks in no deductions?

luap · Jan 9, 2006

A diary or journal would be no good without a copy of the wager ticket or statement of account from the sportsbook.

Anybody can create a diary or journal and make it look like they want it to. Make copies of all your wager tickets, especially those with losses.

I copy my tickets to my hard drive and then print it out at the end of the day. This supports my diary or journal.

Be sure to file those Forms TD 90.22-1. There is at least a $10,000 penalty on these for nonfiling. This is true whether you are a winner or a loser.

Rawpimple · Jan 9, 2006

Thanks just wondering how that would turn out. I know it was a ridiculous situation.

For the IRS to turn its attention to offshore gambling and looking for people cheating on their taxes from gambling is a waste. These wonderful offshore books, and palacial casinos and hotels are not being built by gamblers. Well they are, but they are not being made by the gamblers winning. The fact is most people gambling are losing and in fact the good majority are losing and only a select few consistently make a profit. So if the IRS is planning an effort (read this somewhere in this thread) to go after gamblers they are not going after a lucarative aspect. They will probably waste more money trying to prosecute small time players and searching than will actually make.