vpFREE2 Forums

Using Winning/Losing Sessions - IRS problems

#1

After reading Jean Scott's "Tax Help for the Frugal Gambler" I decided to
follow the advice therein (which she's also written about in some published
magazine columns) and report gambling income by Winning and Losing Sessions
rather than total of W2Gs. This resulted in lower taxes than using total W2Gs
versus total losses.

However, I am now being audited by the IRS, and I have to hire some
professional help to fight against a possible large tax bill with penalties. The
truth is, the cost of hiring such help could end up be more than the tax
savings, even if I win.

While I believe Session totals are far more reasonable and legally
defensible, anyone who wants to file their tax return this way should be cautioned
that their returns could be tossed out, letter audits from non-knowledgeable IRS
people can follow, and soon you will be spending considerable time and
energy and money.

I don't think that advice that its okay to use Sessions fully has stated the
nerve-wracking consequences of what can happen if your tax return is audited.

I actually bent over backwards to report as truthfully as possible, even
including grey-area amounts such as bonus cash and cashback, etc. Kept a
contemporary, accurate gaming diary, etc.

But right now I'm a ball of nerves after getting another IRS letter and
working on a proper response.

The bottom line is - being right might be more painful than overpaying by
using Total W2Gs.

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

#2

<<I don't think that advice that its okay to use Sessions fully has stated the
nerve-wracking consequences of what can happen if your tax return is audited..... right now I'm a ball of nerves after getting another IRS letter and working on a proper response.>>

Actually you can get audited however you treat your gambling win/losses, especially if you have a lot of big numbers. (We expect to get audited for 2006!) And I agree that it is never a pleasant experience. But I would certainly feel like I was on safer ground in an audit if I had done my return with actual session win/loss figures rather than just W-2G's.

Linda, you are still in the area of just a letter audit, it looks like to me - although you might want to check with a tax pro on this question of what is your next step. Your first letter must have just gotten into the hands of a very junior and unknowledgeable IRS employee. Perhaps all you will need to do is write another letter, try to explain it as clearly as you can without being too wordy, and hope this one gets to a more knowledgeable employee.

<<The bottom line is - being right might be more painful than overpaying by
using Total W2Gs. >>

This might be true in a state with no state tax. But it is just not a good
option for someone who has to cope with a state who does not allow
deductions for losses. It also would be expensive for someone where a higher
AGI will run them into the Alternative Minimum Tax territory and facing a host of other negative implications.

Besides the IRS said you owed around $50,000 more in taxes. I'm sure a tax professional wouldn't charge that much to straighten this out!!!!

···

________________________________________
Jean $�ott
New book coming this summer
"FRUGAL VIDEO POKER"
http://www.FrugalGambler.biz

#3

<<I don't think that advice that its okay to use Sessions fully has

stated

the
nerve-wracking consequences of what can happen if your tax return

is

audited..... right now I'm a ball of nerves after getting another

IRS letter

and working on a proper response.>>

Actually you can get audited however you treat your gambling

win/losses,

especially if you have a lot of big numbers. (We expect to get

audited for

2006!) And I agree that it is never a pleasant experience. But I

would

certainly feel like I was on safer ground in an audit if I had done

my

return with actual session win/loss figures rather than just W-2G's.

Linda, you are still in the area of just a letter audit, it looks

like to

me - although you might want to check with a tax pro on this

question of

what is your next step. Your first letter must have just gotten

into the

hands of a very junior and unknowledgeable IRS employee. Perhaps

all you

will need to do is write another letter, try to explain it as

clearly as you

can without being too wordy, and hope this one gets to a more

knowledgeable

employee.

<<The bottom line is - being right might be more painful than

overpaying by

using Total W2Gs. >>

This might be true in a state with no state tax. But it is just

not a good

option for someone who has to cope with a state who does not allow
deductions for losses. It also would be expensive for someone

where a

higher
AGI will run them into the Alternative Minimum Tax territory and

facing a

host of other negative implications.

Besides the IRS said you owed around $50,000 more in taxes. I'm

sure a tax

professional wouldn't charge that much to straighten this out!!!!

Jean: What you just said about "Session definition", State Tax and
the AMT are exactly the issues I will be discussing next week with
the Tax accountant I just retained. I am going to ask what he thinks
of your session definition stated in your book. This is the first
year I am well ahead. I used the W2G reporting method for the prior
two years although I have all my personal daily play records. This
has a significant effect on AMT and what gets reported to my State
which does not allow deductions for gambling losses. Assuming you
are correct, I will use your method this year and likely file amended
federal and state tax forms for the previuos two years. Denny

···

--- In vpFREE@yahoogroups.com, "Jean Scott" <QueenofComps@...> wrote:

________________________________________
Jean $¢ott
New book coming this summer
"FRUGAL VIDEO POKER"
http://www.FrugalGambler.biz

#4

After reading Jean Scott's "Tax Help for the Frugal Gambler" I

decided to

follow the advice therein (which she's also written about in some

published

magazine columns) and report gambling income by Winning and Losing

Sessions

rather than total of W2Gs. This resulted in lower taxes than

using total W2Gs

versus total losses.

However, I am now being audited by the IRS, and I have to hire

some

professional help to fight against a possible large tax bill with

penalties. The

truth is, the cost of hiring such help could end up be more than

the tax

savings, even if I win.

While I believe Session totals are far more reasonable and

legally

defensible, anyone who wants to file their tax return this way

should be cautioned

that their returns could be tossed out, letter audits from non-

knowledgeable IRS

people can follow, and soon you will be spending considerable

time and

energy and money.

If your gross winnings don't exceed the W2-G's it will almost
certainly result in the minimum a letter audit. The only conclusion
the IRS can reach is that you didn't include a taxable win. Even
with an explanation they don't understand. I agree you get "hosed"
if you live in a state that won't let you write off losses.

···

--- In vpFREE@yahoogroups.com, misscraps@... wrote:

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

#5

<<If your gross winnings don't exceed the W2-G's it will almost
certainly result in the minimum a letter audit. >>

Not true IF you have attached a list of W-2G's with a note stating they are contained in the win-loss session numbers. We (and many many others) have done that for years with no audits of any kind. The only year we got a letter audit is the one in which we forgot to add that note and all we did was send them that list with an explanation and it was accepted.

However, you must remember that any return with gambling income, with or without W-2G's, especially if it is a big number, MAY trigger an audit since the IRS is looking at gambling a little more intensely than in the past. Anytime you have a cash element in your return this would be true. (Also occasionally a human error at the IRS may overlook attached information - which may have happened to MissCraps.) However, the odds of a recreational gambler being audited about gambling income is still very low.

···

________________________________________
Jean $�ott
"FRUGAL VIDEO POKER" - Pre-pub
orders for this new book now taken at
http://www.FrugalGambler.biz

#6

<<If your gross winnings don't exceed the W2-G's it will almost
certainly result in the minimum a letter audit. >>

Not true IF you have attached a list of W-2G's with a note stating

they are

contained in the win-loss session numbers. We (and many many

others) have

done that for years with no audits of any kind. The only year we

got a

letter audit is the one in which we forgot to add that note and all

we did

was send them that list with an explanation and it was accepted.

Jean: Oh, this is most encouraging. I did not read this into the
last post.

Denny

However, you must remember that any return with gambling income,

with or

without W-2G's, especially if it is a big number, MAY trigger an

audit since

the IRS is looking at gambling a little more intensely than in the

past.

Anytime you have a cash element in your return this would be

true. (Also

occasionally a human error at the IRS may overlook attached

information -

which may have happened to MissCraps.) However, the odds of a

recreational

···

--- In vpFREE@yahoogroups.com, "Jean Scott" <QueenofComps@...> wrote:

gambler being audited about gambling income is still very low.
________________________________________
Jean $¢ott
"FRUGAL VIDEO POKER" - Pre-pub
orders for this new book now taken at
http://www.FrugalGambler.biz

#7

<<Jean: What you just said about "Session definition", State Tax and
the AMT are exactly the issues I will be discussing next week with
the Tax accountant I just retained. I am going to ask what he thinks
of your session definition stated in your book.>>

I hope this accountant is well informed about gambling issues. So many
accountants may be very good with subjects they are familiar with, but can
give very bad information about gambling issues because they aren't gamblers
themselves or haven't had much (or any) experience with returns for
gamblers.

···

________________________________________
Jean $�ott
"FRUGAL VIDEO POKER" - Pre-pub
orders for this new book now taken at
http://www.FrugalGambler.biz

#8

<<Jean: What you just said about "Session definition", State Tax

and

the AMT are exactly the issues I will be discussing next week with
the Tax accountant I just retained. I am going to ask what he

thinks

of your session definition stated in your book.>>

I hope this accountant is well informed about gambling issues. So

many

accountants may be very good with subjects they are familiar with,

but can

give very bad information about gambling issues because they aren't

gamblers

themselves or haven't had much (or any) experience with returns for
gamblers.
________________________________________
Jean $¢ott

Jean's point is VERY important. Make sure the accountant you choose
has substantial experience filing returns with gambling income.
Otherwise, the accountant's opinion will not be worth much.

--Dunbar

···

--- In vpFREE@yahoogroups.com, "Jean Scott" <QueenofComps@...> wrote: