···
M J's (mklpryy24) somewhat curt "PLZ RESEARCH for yourselfs!!!"
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SORRY was not meant to be curt, it is just I have pointed out how to
find this info many times privately & publicly , I REALLY want to
help.
Dealing with the irs is a pain in the butt. Depending on others
for "advice" can be a mistake especially when the information can be
found on your own.
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- I
simply find this scenario has reasonable application to my own
filing,
and likely that of others ... therefore potentially quite
instructive.
Additionally, it was possible that I might have modest feedback
from
my experience in other tax matters with the IRS over the last 20
years.
What follows are my comments to extracts of your email (I've left
most
of it intact). Admittedly, anything I have to say on this matter
is
anecdotal, based upon my own interpretation of my experiences, and
as
such my be worth less than what it costs me to send the email.
To point, I am not a tax professional (though have strong training
in
accounting in finance). Simply accept this as submitted in that
spirit and a mere desire to share what insight that might be
valuable:
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--
misscraps wrote:
> The first thing we got was a CP2501 letter listing apparent
> discrepancies in our return The 2 major problems were a larger
W2G
> total than we listed. The other thing was that 1099s for
> gambling-related income (such as drawings) were not on a
separate
> line (we'd lumped them in with gambling income).
Not entirely unexpected, since this is the type of thing that a
computer will kick out from a cursory review of your return. It's
a
routine event and nothing major in and of itself.
It does demonstrate that it's important to annotate your return in
some fashion when you do combine gaming 1099-misc in some fashion
with
your other reported winnings. If they have a modest total, you
might
simply split the two values out on the line beside the line
for "Other
Income".
If the 1099's do amount to a sizable total, then an attached sheet
is
called for, even though it will slow processing of your return. On
the other hand, you're going to want someone to take a personal
scan
of this anyway. Similar logic can be applied to dealing with the
difference between reported winnings and total W2-G's, in a case
(such
as yours) where reported sessions wins are smaller than W2-G's.
*********************************************************************
that is what trigger the cp 2000 notice, having less gaming income
on the return that what was repoted to the irs
> We sent a reply which was actually completely ignored. They
then
> sent us a CP2000 (another letter - presumably a "letter audit")
> listing the same discrepancies (no letter saying why they
disagreed
> with our first response).
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cp2000 are the underreporter dept letter thatthe computer generates
when the total income reported on the return does not match what was
reported to the irs
This again asked for a response. It also
> calculated an amount we would owe the IRS - but this amount was
huge
> and very wrong, since it used a wrong amount for losses. It
used
> W2Gs for gambling income, but our "session loss" as loss -
> actual loss if you were calculating W2Gs was more than W2Gs. We
were
> net losers either way you would calculate it for 2004. So the
IRS
> calculations had us as net winners of over $130,000 or so -
plus
> penalties and interest. That was really sad when we'd actually
lost
> over $20,000.
> *************************************************************
they took the total of the w2gs for the tax calculations +penalties
& interest, doubt that they gave any credit for any losses NOT
already reported on your SCH A
> We sent a reply to the CP2000 - which was lost - even though
sent via
> Certified mail to IRS in Fresno and apparently received.
A more serious letter but, again, they issue these by the 1000's
each
month. It can be somewhat daunting because if a couple of years
have
gone by, interest and penalties will blow up even a modest
liability
into something that makes any of your actual gaming trip losses
look
like small fries. Of course, in a case such as yours where their
interpretation of your income is so divergent from yours, it can
lend
the feeling that they're ready to seize all your assets at any
moment.
It needs a prompt response and a follow up call within 2 weeks to
ensure receipt and prcoessing.
*********************************************************
Sad but true, 90 days to respond is not unusal. Also if the response
is "i dont owe this" & has nothing else a response is not always
required
*********************************************************************
> We are now going through a Taxpayer Advocate to try to get the
> response looked at - this may be a mistake - she is looking
through
> tax codes and saying you can't use "sessions" and all 1099s are
> always on a separate line (even if gambling-related). She is
taking
> our response to the CP2000 to some sort of auditor or supervisor
on
> Tues.
***************************************************************
that is what the tax code requires, sorry.
I had a situation about 6 years ago that ultimately was referred to
the TA office. In that case, it was a tremendous breath of fresh
air,
for prior to that point my tax situation had recieved incredibly
irrational treatment at times. The agent I spoke with on a few
occasions was conscientious, immediately got that it was unlikely
that
I was attempting to defraud anyone, and was determined to act on my
behalf to bring the matter to a reasonable conclusion. I wound up
paying a modest amount that I don't feel was a true liability, but
in
the scheme of things, I have no complaint.
********************************************************************
You more than likely paid what you truly owed, fair is what congress
says it is.
That said, a recent interaction with the IRS has me concerned that
the
quality of their staffing has taken a sharp turn for the worse
(circa
the late 1990's, the IRS had come under intense scrutiny for
abusive
tactics and consequently they were on their best behaivor
thereafter).
*********************************************
( see below)
I spoke with one rep who seemed to take everything about my
situation
reasonably in hand and instructed me what I should do to proceed to
resolve things. After taking those steps and speaking with someone
else to move things forward, I was met with complete ignorance on
the
part of 3 successive reps. Trust me when I say that I was getting
ready to sharpen a table leg and find someone appropriate to
impale.
************************************************************
some reps agree way too much with disgruntled tax payers as the
evaluations they recieve depend on keeping tax payers happy, the
farther you go up the chain the more strict to the code they will be.
The IRS is not obligated to follow incorrect info giving by
employees per law.
------
The variable that I see key to your situation is the fact that the
tax
code is so vague when it comes to reporting gambling winnings and
losses.
************************************************************
You must report TOTAL winnings on the return, losses on the sch a.
Whats vague???
The TA that you're working with likely appreciates that by now.
As you note, the simple fact is that even with the reporting of W2-
G's
as your gross winnings, and the net of all your other gaming
reported
as losses, you still net out to a gaming loss (we're simply talking
about realloating the accounting).
Because the reported loss on your Sched A is limited to the amount
of
your reported wins, it's only common sense that if you gross up
your
winnings to reflect your W2-G's, the Sched A limition will be
raised
accordingly -- and therefore it's reasonable that you might report
larger gambling loss, subject to the new amount limitation.
********************************************************************
Harry, what you recomend has been called fraud, raising your loss
amount to match your w2g's WITHOUT the records kept by the tax payer
to verify the losses leads to fraud penalties of 40% of increased
tax plus an acuracy penalty that can reach an additional 25% +
interest.
Now, that's simple logic that I would hope anyone with a
constructive
attitude toward this can get. The crux of the problem is simply
with
the interpretation in how to report, not the accounting or how the
numbers tally up.
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There is no "interpretation" in regards on how to report gamings
winings per law & the courts.
If, explained to the TA in simple and direction fashion, with
thorough
supporting documentation that details the win/loss allocation used
in
the case of each reporting (and an overall accounting of your
losses
when not subject to the reporting limitation), I would hope that
the
light would turn on and they would be able to assist you in moving
forward on this. Or, armed with this info, would be able to seek
out
an experienced rep who can deal with the details you provide.
*********************************************************************
Yes, but they will still require the total gaming income to be
reported on the 1040 & the losses on a sch A.
------
You have the additional variable to contend with in getting them to
accept a tax treatment where your 1099's are considered to be
gambling
income. Strictly speaking, if there was no entry fee to the event,
the income isn't reportable as gambling related. Even if there is
an
entry fee, the income can't be simply lumped into your other
gambling
income under a strict interpretation.
********************************************************************
not strict, accurate.
However, there is anecdotal discussion that such a treatment has
been
accepted in some cases. I have no personal knowledge of case
history.
********************************************************************
If the IRS feels that the treatment results in an INCREASE in tax,
then its accepted 
What I can say is that it is indisputable that you must have been
an
active player in order to participate in these events, and that
your
participation does bear the expectation by the house that you will
continue to game in that casino. That makes the event so
tangential
to the related gaming income that there is room for a reasonable
interpretation of the code, given its vaguenss, that it may be
reported in this matter. (And, in my corporate experience, tax
filing
is ALL about "interpretation" of the code, since there's nothing
hard
and fast about it.)
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Harry , per the tax law & court decisions the tax treatment of
gaming is "hard & fast"
Also a lot companys have been fined & paid millions for believing
there is "nothing hard & fast about it" Black & decker & conelco for
2.
They have found out that depending on an "opinon letter" from their
lawyers or accountants that the interpretation is or maybe correct
does not protect them from responsibility of the tax treatment
------
There is, of course, the implicit concern about how a gross up of
your
gambling winnings to the amount of your W2-G's will impact
limitations
on non-gambling related deductions. The consequence of the gross
up
will be to increase your AGI, which can trigger (further)
phaseout/elimination of some deductions and tax credits.
This can result in a substantive increase in your net tax
liability.
Thus, even if they were to accept your revised reporting based on
gross W2-G income, the outcome could be far from acceptable.
**************************************************************
Such as being subject to the dreaded AMT which will effect 15
MILLION taxpayers next year ,30 MILLION in 2 years because it has
never been indexed for inflation
This is the point where should the dollars at risk be sufficiently
substantial, I would get a tax lawyer involved immediately to
aggressively defend your original "session" based reporting.
Likewise, this is true with respect to your tax exposure in the
treatment of your 1099's. In either case, there may be sufficent
financial exposure that your best bet is to get someone involved
early
one rather than wait on how things initially bear out.
******************************************************************
Excellent suggestion Harry, as soon as possibile.
> We've considered hiring a tax professional, but have been told
> contradictory things by different people - such as wait until
you
> reach the appeal stage;
> wait til you receive a "notice of deficiency,"
********************************************************
then you are required to either pay the full amount (you can then
take it to district court) , make an installment agreement or take
it to tax court(does not require full payment) before the 90 day
limit blows. There is NO delay availibile for the 90 day rule.
Courts will & have thown out petitions dated on the 91st day
or it "looks better"
> to have a taxpayer go in without a professional, etc.
****************************************************************
total BS. get help
Also a
> professional charges $150-250 an hour or more - so pretty soon
the
> cost of hiring one might be more than the additional taxes we'd
have
> to pay (assuming we can at least get them to put in the correct
> amount of losses).
*********************************************************************
you will not be able to write off the 20k in losses in excess of
your winnings you say you have. Congress does not allow it.
My immediately preceding comments bear directly on this.
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--
Ok, if I'm merely blowing hot air here and there's little of
practical
use, I'll buy that. It's my desire that something of my experience
and knowledge may prove to shed a modest amount of light for you in
grappling with this.
*******************************************************
Me too
Again, I wish you the very best of luck with this.
*********************************************************************
Me too!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
(A modest amount of alcohol may ease the burden from time to time 
- Harry
btw, in my discussions with others, you have little ground on
which to
file as a "professional gambler". The IRS is very stringent in its
acceptance of such a filing and has placed some very strict tests
for
qualification which don't appear to be met in your case.
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Tax court has ruled that somebody with a full time job or bizness
can not devote the time or resources to claim pro status. However,
passive income such as retirement is allright. You still must meet
the strict record keeping requirements as any other bizness.
"records must have enough information that they alone can be used to
verfy income ,expenses , deductions & the proper tax amount"
Please do not take anything i have said as "curt" or in any way
negative. I want to help.
I am AMAZED at how much my info has been criticzied both publicly &
in private responses since it it so damm easy to verify wether i am
right or wrong.
so for 5th or 6th time
www.irs.gov ,find the pub regarding gambling
www.taxcourt.gov ,MANY MANY decisions regarding gaming & everything
we have dicussed
To correct the tax laws , contact Congress, they & they ALONE make
the laws.
peace & love
M J
18+years in tax bizness
spell checker still broke