Getting robbed (by tax code) was "keeping your $$$$ safe "

[tedchee]

Haven't got the time to do the research so I'll just throw a couple of balls
out there & hope some people catch it & run with it. PLEASE, SOMEONE FIND A
HOLE IN THIS.

LOSS OF MEDICAL/DENTAL DEDUCTION

In his email, sphboc2003 says that casualty losses are "deductible only to
the extent that it exceeded 10% of Adjusted Gross Income". What's worse is
that medical & dental are deductible after exceeding 7.5% of AGI. Many more
people will fall into this category. Since the AGI is inflated by gambling win &
before gambling losses are deducted, many frequent gamblers are never going
to see any deductions for medical-dental expense. For those who have large
medical-dental expense, the implication is to stop gambling so that you can
claim the sure bet.

Until tax law changes, don't see any way of getting back deductions which
are now out of sight.

AMT

Perhaps the more tax-savvy will comment here. The tax cuts which were
supposed to be more inclusive are negated by the AMT which has also become more
inclusive. AMT is not indexed to inflation & the tax cuts didn't take that into
account which is an oversight or so says the spin controllers. I doubt if it
was an oversight as the AMT is now generating a lot of revenue which is
impossible for gov to give up. So indexing the AMT is currently out of the
question. The question is: Is our higher AGI (due to gambling) kicking us into more
danger zones on the AMT? If so, anything we can do about it.

All of the above, of course, applies to those who intend to report gambling
wins on their returns.

message dated 6/22/2004 8:17:55 AM Pacific Standard Time,
vpFREE@yahoogroups.com writes:

<<< Date: Mon, 21 Jun 2004 17:35:12 -0000

···

From: "sphboc2003" <sphboc@aol.com>
Subject: Re: keeping your $$$$ safe

Winner of a "W2G" amount ($1200+), who elected to accept payment in
currency and were subsequently robbed (of the same amount) in the
casino's parking area, might well encounter additional problems at
tax-return time.

The W2G amount would still need to be reported as income. But, the
dollar amount lost due to the robbery would NOT (usually*) be
properly reportable as a "gambling loss". Most likely, it would need
to be reported as a "casualty loss"; deductible only to the extent
that it exceeded 10% of Adjusted Gross Income. >>>

[Non-text portions of this message have been removed]

[blaw57]

[various depressing truths]

PLEASE, SOMEONE FIND A HOLE IN THIS.

[lots more depressing truths]

Thanks for pointing out the effects gambling income has on
medical/dental deductions, I had not realized that particular pitfall
before. Aren't there a number of items whose loss is subject to that
same test?

Sorry, there's no hole in your logic - you're like the guy in the
first Matrix movie, sitting up in his tub, looking around at the rest
of the battery - kind of hard to believe at first, isn't it? But the
tax code is heavily stacked against gambling, not really
intentionally, I don't believe, but just because gamblers don't make
a good lobbying group image so no congressman will go out of his way
to fix the obvious inequities. And the basic problem isn't gambling's
image, but the gawd-awfully complicated tax code we have that changes
every year and that tries to serve all types of purposes besides
raising revenue for the government. We need a flat tax.

Here's another one that bites me - I'm sure there are a half dozen
more other people can name. I don't own a house or have kids or buy
tax shelters or borrow money, so I have virtually no itemizable
deductions. I just started VP this year so I haven't filed yet for a
gambling year, but if I recall correctly, gross gambling income gets
added on the front of the form, but gambling losses are deductible on
schedule A. So the net effect is the first couple thousand of losses
are not decuctible for me because first I have to get past what would
have been my standard deduction if I had not itemized.

···

--- In vpFREE@yahoogroups.com, TedChee@a... wrote:

[dipy9111]

Actually a consumption tax would be better. If you don't spend
anything, you don't pay any tax. Basic food and basic needs should
be excluded. You buy a 10 karet(caret?) diamond you pay 10% federal
sales tax. Naturally, gambling would be protected under this system
because no provable consumption goes on.

But the tax code is heavily stacked against gambling, not really

intentionally, I don't believe, but just because gamblers don't make
a good lobbying group image so no congressman will go out of his way
to fix the obvious inequities. And the basic problem isn't gambling's
image, but the gawd-awfully complicated tax code we have that changes
every year and that tries to serve all types of purposes besides
raising revenue for the government. We need a flat tax.

[David]

Haven't got the time to do the research so I'll just throw a

couple of balls

out there & hope some people catch it & run with it. PLEASE,

SOMEONE FIND A

HOLE IN THIS.

LOSS OF MEDICAL/DENTAL DEDUCTION

In his email, sphboc2003 says that casualty losses

are "deductible only to

the extent that it exceeded 10% of Adjusted Gross Income".

What's worse is

that medical & dental are deductible after exceeding 7.5% of AGI.

Many more

people will fall into this category. Since the AGI is inflated by

gambling win &

before gambling losses are deducted, many frequent gamblers are

never going

to see any deductions for medical-dental expense. For those who

have large

medical-dental expense, the implication is to stop gambling so

that you can

claim the sure bet.

Until tax law changes, don't see any way of getting back

deductions which

are now out of sight.

AMT

Perhaps the more tax-savvy will comment here. The tax cuts which

were

supposed to be more inclusive are negated by the AMT which has

also become more

inclusive. AMT is not indexed to inflation & the tax cuts didn't

take that into

account which is an oversight or so says the spin controllers. I

doubt if it

was an oversight as the AMT is now generating a lot of revenue

which is

impossible for gov to give up. So indexing the AMT is currently

out of the

question. The question is: Is our higher AGI (due to gambling)

kicking us into more

danger zones on the AMT? If so, anything we can do about it.

All of the above, of course, applies to those who intend to

report gambling

wins on their returns.

There are several isssues which affect gambling income as you point
out. If you don't itemize deductions, you can be taxed on phantom
income. The increase in AGI can reduce certain deductions (which
have floors based on AGI) such as medical or misc. Furthermore the
increase in AGI from gambling income can adversly affect your
elegiblity for IRA deductions, deductibility of student loan
interest etc.

Gambling deductions are not an item of tax preference under the AMT,
however the increase in AGI from gambling income can bring you into
AMT expousure. Similarly, the phaseout of exemptions and itemized
deductions based on AGI can adversly affect your tax bill, even
though gambling losses are not directly subject to the phaseout.

The taxation plan is certainly unfair to gamblers, in that your tax
liability can be increased even thou you "net" no income. It should
be rembered that gamblers are not well organized to protest the
inequities to Congress, and the casino and gambling industry has
stronger priorites with Congress than the unfair taxation of its
customers. If you want an example where the tax law in much more
grossly unfair, condsider the case where an employee has recovered
for job discrimination, unjust dismisal, etc. Assume the settlement
is for 500T with 100T of costs, experts, etc., and 200T of legal
fees, so that the individual nets 200T. The 300T of "expenses" is
considered an itemized deduction, but is an item of tax preference,
hence not deductable in computing AMT. Therefore the AMT income
would be 500T and the entire net of 200T to the individual could be
paid in taxes! Certain Federal Circuit Courts have even held that
this result applies even if the defendent pays the individual's
attorney directly, so the indiviual never saw or was paid the 300T
in this example. Perhaps because the Republican don't like trial
attorneys or suing employees, this inequity was not corrected post
haste.

Back to gamling; it has been pointed out that a solution to the AGI
issue is to file as a profesional gambler. To do so you would need
to keep detailed records and to prove your gambling activities were
realy run as a business. You would also be liable for self
employment taxes on the net gambling income. In certain cases this
might not be a bad thing, depending on your social security account.
I will explain in a seperate "ot" post, if anyone is interested.

David

···

--- In vpFREE@yahoogroups.com, TedChee@a... wrote:

[David]

--- In vpFREE@yahoogroups.com, "d_richheimer" <d_richheimer@y...>
wrote:

Back to gamling; it has been pointed out that a solution to the

AGI

issue is to file as a profesional gambler. To do so you would need
to keep detailed records and to prove your gambling activities

were

realy run as a business. You would also be liable for self
employment taxes on the net gambling income. In certain cases this
might not be a bad thing, depending on your social security

account.

I will explain in a seperate "ot" post, if anyone is interested.

If you do not have much Social Security coverage, perhaps becaue of
being a gampler living "under the radar" you may be suprised at how
much benefits are provided for a little payment up to a certain
point. Like the tax system Social Security benefits are on
progressive brackets, however the brackets are wildly more
progressive. Therefore in certain cases filing as a professional
gambler and paying self employment taxes could be a good investment.

Basically social security retirement benefits are figured as follows:

SS covered wages for old years are grossed up by numerical factors
comparing median wages for each year to current median wages (akin
to grossing up compared to changes in CPI). [Obviously the further
back the year the larger the gross up factor.]

The wages as grossed up are averaged for the 35 highest years (if
less than 35 years, the average is still divided by 35).

This average is then divided by 12 to determine a monthly average.
{Average Indexed Monthly Earnings = "AIME").

For someone reaching 62 on 2004:
On the first $612 of AIME the retirement benefit is 90%;
On AIME above $612 up to $3,077 the retirement benefit is 32%;
On AIME above $3,077 the retirement benefit is 15%

SS retirement benefits are indexed for inflation and spousal benefit
is the higher of spouse's own benefit or 50% of the primary
beneficiary's.

It is apparent that Social Security is a great deal at the 90%
benefit bracket, so-so at 32% (Ok with the spousal benefit at the
current low interest environment) and terrible at 15%. Plus there
are taxes on retirement on SS benefits for certain taxpayers. The
following lessons can be learned:

   a. The Republican plan to have a portion of SS taxes be invested
in IRA type individual stock plans is impossible since so much of
the marginal SS taxes on higher income earners is redistributed to
lower level earners. However the Republicans would like the average
wage earner to know that much of "his" social Security is not his,
but is funding a vast social welfare program. The Democrats would
presumably not like some workers to become disenchanted with SS.

  b. If you are a gambler with AIME below $612 Social security
coverage could be benficial, so condider filing as a professional
gambler and showing income to boost your AIME to that level. Also
keep in mind that even if you had previously sufficient SS earnings,
to cover the 90% and 32% brackets, to have SS disability coverage,
you need a certain number of "credits" generally in the past 10
years, with a credit currently representing $900 and a maximum of
4 credits or $3,600 being credited in one year. Therefore it may pay
to average at least $1,800 in SS covered wages to retain disability
coverage.

The above is an over-simplification, but IMO the concepts are
important to keep in mind.

David

[timmer]

Heres a novel idea. Dont win anything, then nothing is reportable.

timmer

>>>But the tax code is heavily stacked against gambling, not really
intentionally, I don't believe, but just because gamblers don't

make

a good lobbying group image so no congressman will go out of his

way

···

to fix the obvious inequities.

[timmer]

This is all well and good untill the thing goes tits up which will
happen when the boomers all hit retirment age.

so if you are a genXer I suggest you save your pennies and play the
houses that offer cash back.

better start developing multiple income streams and invest wisely
with diversity.

Bottom line dont count on SS to carry your dead ass to the grave
because it liklely wont happen.

If you think privitization will save it just think about the
managment fees that will likely be assesed under a cheney-
halliburton type arrangment that will most likely be forced upon us.

Just think of your SS payment as money you give to Mom Dad and those
elderly friends or neighbors whos toy dog shits on your lawn. You
will feel so much better about it when the thing eventually goes
Bust.

timmer

If you do not have much Social Security coverage, perhaps becaue
of

being a gampler living "under the radar" you may be suprised at

how

much benefits are provided for a little payment up to a certain
point. Like the tax system Social Security benefits are on
progressive brackets, however the brackets are wildly more
progressive. Therefore in certain cases filing as a professional
gambler and paying self employment taxes could be a good

investment.

Basically social security retirement benefits are figured as

follows:

SS covered wages for old years are grossed up by numerical factors
comparing median wages for each year to current median wages (akin
to grossing up compared to changes in CPI). [Obviously the further
back the year the larger the gross up factor.]

The wages as grossed up are averaged for the 35 highest years (if
less than 35 years, the average is still divided by 35).

This average is then divided by 12 to determine a monthly average.
{Average Indexed Monthly Earnings = "AIME").

For someone reaching 62 on 2004:
On the first $612 of AIME the retirement benefit is 90%;
On AIME above $612 up to $3,077 the retirement benefit is 32%;
On AIME above $3,077 the retirement benefit is 15%

SS retirement benefits are indexed for inflation and spousal

benefit

is the higher of spouse's own benefit or 50% of the primary
beneficiary's.

It is apparent that Social Security is a great deal at the 90%
benefit bracket, so-so at 32% (Ok with the spousal benefit at the
current low interest environment) and terrible at 15%. Plus there
are taxes on retirement on SS benefits for certain taxpayers. The
following lessons can be learned:

   a. The Republican plan to have a portion of SS taxes be

invested

in IRA type individual stock plans is impossible since so much of
the marginal SS taxes on higher income earners is redistributed to
lower level earners. However the Republicans would like the

average

wage earner to know that much of "his" social Security is not his,
but is funding a vast social welfare program. The Democrats would
presumably not like some workers to become disenchanted with SS.

  b. If you are a gambler with AIME below $612 Social security
coverage could be benficial, so condider filing as a professional
gambler and showing income to boost your AIME to that level. Also
keep in mind that even if you had previously sufficient SS

earnings,

to cover the 90% and 32% brackets, to have SS disability coverage,
you need a certain number of "credits" generally in the past 10
years, with a credit currently representing $900 and a maximum

of

4 credits or $3,600 being credited in one year. Therefore it may

pay

to average at least $1,800 in SS covered wages to retain

disability

···

coverage.

The above is an over-simplification, but IMO the concepts are
important to keep in mind.

David

[Peter]

HUH?

First, this is a VP site, not a SS site (or, so I thought).

Second, since you have brought it up, I would like to see your
reference to this "factoid".

Thanks.

.....bl

If you think privitization will save it just think about the
managment fees that will likely be assesed under a cheney-
halliburton type arrangment that will most likely be forced upon

us.