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More Tax Questions

#1

Don, could you explain that last paragraph?

The real injustice is when a tax filer would not have itemized...just
taken the standard deduction...but is forced to itemize in order to
take the deduction of gaming losses to offset the gaming wins. In
this case, they are negatively impacted...and potentially quite
severly.

Don the Dentist

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#2

When someone doesn't itemize, they take the standard deduction-for
2005, a married couple will get $10,000 automatically. This comes
directly off of their adjusted gross income. They may have only
spent $2,000 in itemized deductions (DMV, charity, medical, etc.),
but they are getting $10,000.

Now let's say that same couple has $50,000 in gambling wins and
$50,000 in losses. Since you cannot simply net your losses against
your wins, you must report that $50K as misc. income (line 21) and
take an itemized deduction for gambling losses of $50,000.

If that same couple had spent $2,000 in itemized deductions, that
added with their gambling losses, would mean they have $52,000 in
itemized deductions. They spent $52K to get $52K. Previously they
spent $2K to get $10K. This is how they are penalized. If they are
in the 15% bracket, that extra $8,000 meant an extra $1,200 in tax
they are paying. None of these numbers factor in the extra bump in
AGI for your medical, misc deduction, and casualty loss minimums,
which could amount to much more. Also, if your income is over
certain limits (even artificially), you stand a chance of having all
of your itemized deductions and even your exemptions limited.

Hope this helps,
Ernie Mayhorn, EA
Enrolled to Practice Before the IRS

Don, could you explain that last paragraph?

The real injustice is when a tax filer would not have

itemized...just

taken the standard deduction...but is forced to itemize in order

to

···

--- In vpFREE@yahoogroups.com, mchaud@c... wrote:

take the deduction of gaming losses to offset the gaming wins. In
this case, they are negatively impacted...and potentially quite
severly.

Don the Dentist

#3

Ernie,
thanks for answering for answering Mike's question far, far better
than I ever could have!!

Don the Dentist

···

--- In vpFREE@yahoogroups.com, "Ernie" <erniesvp@s...> wrote:

If that same couple had spent $2,000 in itemized deductions, that
added with their gambling losses, would mean they have $52,000 in
itemized deductions. They spent $52K to get $52K. Previously they
spent $2K to get $10K. This is how they are penalized. If they
are in the 15% bracket, that extra $8,000 meant an extra $1,200 in
tax they are paying. None of these numbers factor in the extra bump
in AGI for your medical, misc deduction, and casualty loss minimums,
which could amount to much more. Also, if your income is over
certain limits (even artificially), you stand a chance of having
all of your itemized deductions and even your exemptions limited.

Hope this helps,
Ernie Mayhorn, EA
Enrolled to Practice Before the IRS

#4

Ernie, this is my understanding also, however when I asked that
question on here, I got several answers pointing out my lack of
understanding. None the less, that is still my understanding. What I
do not understand, and hope you might be able to expand, why does the
IRS consider this to be fair. Also has it ever been challenged and if
so what has been the outcome.

···

--- In vpFREE@yahoogroups.com, "Ernie" <erniesvp@s...> wrote:

If that same couple had spent $2,000 in itemized deductions, that
added with their gambling losses, would mean they have $52,000 in
itemized deductions. They spent $52K to get $52K. Previously they
spent $2K to get $10K. This is how they are penalized. If they are
in the 15% bracket, that extra $8,000 meant an extra $1,200 in tax
they are paying.

#5

"Fair" is not a word in the IRS's lexicon. IRS "rules" are based upon
congressionsl guidelines.

But, I, too, would be curious if someone has "challanged" this and what the
results may have been.

.....bl

--- In vpFREE@yahoogroups.com, "deuceswild1000" <deuceswild1000@y...>
wrote:

···

What I
do not understand, and hope you might be able to expand, why does the
IRS consider this to be fair.

#6

Since when do tax laws have to be fair. The IRS merely follows laws
passed by Congress. Gambling is still considered a sin, like smoking
and drinking, and deserved to be taxed nearly to death. Isn't that
the politician logic? Since it is a sin, only the minority sinners
complain. People challenging fairness/legality of tax laws tend to
lose.

Personally, I think they need to raise the taxable winning number to
$10,000(money laundering number) and tax 3%-5% with no deductions.
Less headaches, no auditing. Better yet, just add a 1% federal casino
tax and leave people winning less then $100,000 on a single event alone.

BTW: Roth IRA also uses the AGI number. If you win $150,000 and lose
$150,000, you lose the ability to save money in a Roth(less for single).

dipy911

···

What I
do not understand, and hope you might be able to expand, why does the
IRS consider this to be fair. Also has it ever been challenged and if
so what has been the outcome.

#7

<"Fair" is not a word in the IRS's lexicon. IRS "rules" are based upon
congressional guidelines.>>

Today is Bill Gates' 50th birthday. One of his quotes: "Life is not fair; get used to it."

I used to tell that to my kids. And I often need to remember it now when dealing with casinos!!!!!

···

________________________________________
Jean $�ott - http://www.FrugalGambler.biz
  for VP software and strategy cards.
  NEW - Blackjack Strategy Cards +
              Updated Second Edition of
             "The Frugal Gambler."

#8

As I tell my clients and students, I don't answer "why" questions
when it comes to the IRS -- don't forget that the IRS isn't a part
of the Dept of Justice, but the Dept of Treasury.

But seriously, simply put, the IRS doesn't understand the world of
gambling in a real world environment. These are people that must
follow the tax code and aren't allowed to deviate without a darn
good defendable explanation as to why. I have had numerous
discussions/debates with IRS auditors about gambling and I get
different answers everytime-they just don't understand. This is why
there is such a disparity at the field level when it comes to audits
and advice from the IRS.

Also, and this is just my opinion, I don't know that "gamblers"
enjoy a real stong political stance with lawmakers. This coupled
with the fact that there only about 3 members of the whole of
Congress that understand taxes/finance/money/tax code, makes it
difficult to get anyone to understand the problem. Anyone who has
been following the whole AMT debacle knows exactly what I mean.

So fair, no it's not fair. The best advice I can give someone is
that if you have one of those "big gambling" tax returns, to
calculate how much this inequity has cost you-put a number to it,
and make an appointment with your local Rep or Senator and give them
a copy and explanation. Keep doing it. I don't if it will work,
but this is all about awareness and education because it can be a
difficult and technical subject.

Ernie Mayhorn, EA
Enrolled to Practice Before the IRS

Ernie, this is my understanding also, however when I asked that
question on here, I got several answers pointing out my lack of
understanding. None the less, that is still my understanding.

What I

do not understand, and hope you might be able to expand, why does

the

IRS consider this to be fair. Also has it ever been challenged

and if

···

so what has been the outcome.

#9

Ernie,

Again you answered very completely.

I am aware that the IRS enforces laws enacted by our Congress, as
many were quick to point out.

Possibly the word "fair" was a poor choice. When I asked has this
ever been challenged, the point I was trying to make was various
organizationa have been known to challenge laws.

So to your knowledge, has this situation ever been challenged?

Thanks again for an your answer.

DWK

···

--- In vpFREE@yahoogroups.com, "Ernie" <erniesvp@s...> wrote:

As I tell my clients and students, I don't answer "why" questions
when it comes to the IRS -- don't forget that the IRS isn't a part
of the Dept of Justice, but the Dept of Treasury.

#10

There is nothing whatsoever to challenge. Gambling wins of any amount
are taxable. Gambling losses can at best go on Schedule A (if not
accepted as a professional gamber & able to file a schedule C)
regardless of the negative impact on the taxpayer. People who don't
follow this procedure could be said to have "tested" the waters &
many have gotten quite wet. The rules are clear & tight.
--- In vpFREE@yahoogroups.com, "deuceswild1000" <deuceswild1000@y...>
wrote:

>
> As I tell my clients and students, I don't answer "why" questions
> when it comes to the IRS -- don't forget that the IRS isn't a

part

···

--- In vpFREE@yahoogroups.com, "Ernie" <erniesvp@s...> wrote:
> of the Dept of Justice, but the Dept of Treasury.

Ernie,

Again you answered very completely.

I am aware that the IRS enforces laws enacted by our Congress, as
many were quick to point out.

Possibly the word "fair" was a poor choice. When I asked has this
ever been challenged, the point I was trying to make was various
organizationa have been known to challenge laws.

So to your knowledge, has this situation ever been challenged?

Thanks again for an your answer.

DWK

#11

There really isn't much to challenge with this-the code is the code.
Challenges would take place in Congress and nothing that I know of
regarding this is up for discussion.

Trying this with an auditor will get you nowhere, trust me. Actually,
it will probably get you further behind.

#12

Unfortunately, in our society, the "gambler" is looked upon as a "pariah" and a "sinner". In
my opinion, a "campaign" to correct the gambling tax laws, as reasonable and logical as it
may appear to us, would probably create more problems that it might correct.

Sigh! I wish that it were not so.

.....bl

···

--- In vpFREE@yahoogroups.com, "deuceswild1000" <deuceswild1000@y...> wrote:

When I asked has this
ever been challenged, the point I was trying to make was various
organizationa have been known to challenge laws.

So to your knowledge, has this situation ever been challenged?

DWK

#13

--- In vpFREE@yahoogroups.com, "Michael Boutot" <vegas_iwish@y...>
wrote:

There is nothing whatsoever to challenge. Gambling wins of any

amount

are taxable. Gambling losses can at best go on Schedule A (if not
accepted as a professional gamber & able to file a schedule C)
regardless of the negative impact on the taxpayer. People who don't
follow this procedure could be said to have "tested" the waters &
many have gotten quite wet. The rules are clear & tight.

Are you saying a law cannot be challenged?

#14

Sometimes discretion is the better part of valor. Try to fly under the
radar.

John

--- In vpFREE@yahoogroups.com, "deuceswild1000" <deuceswild1000@y...>
wrote:

···

--- In vpFREE@yahoogroups.com, "Michael Boutot" <vegas_iwish@y...>
wrote:
>
> There is nothing whatsoever to challenge. Gambling wins of any
amount
> are taxable. Gambling losses can at best go on Schedule A (if not
> accepted as a professional gamber & able to file a schedule C)
> regardless of the negative impact on the taxpayer. People who don't
> follow this procedure could be said to have "tested" the waters &
> many have gotten quite wet. The rules are clear & tight.

Are you saying a law cannot be challenged?