Denny, that was a very good overview of choices. I just want to
flag one issue.
First off You could declare all your gambling W2G winnings as
normal income, and then declare losses on the line indicated on
the
form when you fill out your income tax.
There is an extra cost for doing it this way if you would not
otherwise itemize your deductions. In such cases, part of your
gambling losses are going toward bringing you up to the level where
itemizing is advantageous.
If that's not clear, I could elaborate with an example.
--Dunbar
PS--same disclaimer; I am not a CPA.
--- In vpFREE@yahoogroups.com, "denflo60" <dennis.florence@...>
wrote:
Movetoomuch:
>
Let me file the usual disclaimer that I am not an accountant and
this
is only what I have so far learned. Consult your own accountant
and
do not just rely on my understanding.
First off You could declare all your gambling W2G winnings as
normal income, and then declare losses on the line indicated on
the
form when you fill out your income tax. If you don't have many W2
G's this is OK. If you have many then the value of your itemized
deductions decreases as all your W2G's show up in your adjusted
gross
income. Also you'll get hit by the Alternative Minimum Tax even
if
you lost as much as you won.
Secondly, in certain states where losses are not deductable, your
earnings could be taxable to the full amount at least of W2g's as
there may be no line to deduct losses on the state form.
You can fill out schedule C, so that your losses can be deducted
from
your winnings so only the net win affects the the adjusted goss
income. To do this you must be a professional (I will add the
words
gambler). While courts have rules that Poker players can consider
gambling as a profession, the same is not true for video poker
players up to the present.
You could use the session method where you net your winnings anfd
losses are netted for each session. The problem here is that
sessions are not defined, although there are several good articles
on
how sessions may be used. Assuming this results in an income less
than your total W2G's, which it likely, you could well be audited
because there is nothing in the IRS computers that look at
footnotes
or explanations even if you list all your W2g's and say they are
all
included in the net sessions. With contemporaneous records and an
accountant's help I think you can win this argument but you might
end
up in tax court to do it and it may not be worth it to you.
Finally you can become a subchapter S Corporation with an EIN tax
number. This says you're a professional and especially if
you'making
money and prove you're a legitimate full time [player who through
some means wins (A hypothetical advantage player who plays to
infinity on only positive games is an extreme example) three out
of
five years you can also subtact your travel meals, books etc
expenses
in netting your winnings. You have to pay both your own and a
company's portion of FICA deductions (about 15% with about a 2.5%
credit on another line). Unfortunately with current policies at
least my Casino of choice will not let me play as a Corporation of
1
with an EIN tax number.
At all times keep great records and try to be in a position to
prove
you can beat a machine with a built in mathematical advantage. If
all else fails stop gambling as I may have to do. That way there
is
no time spent learning tax law, reading volumes and opening up
bank
accounts and paying accountants and lawyers or move to a non
taxable
jurisdiction. I will say though, I have learned one hell of a lot
in
···
the process. Again remember the disclaimer. I am not an
accountant. Hire one. Denny