States including Hawaii, Connecticut, Massachusetts and Ohio now prohibit deductions of gambling losses on state income taxes. These laws could make it difficult for even a winning player to have much money left over.
Fortunately, there's an alternative -- filing as a professional gambler.
Even in these states that bar gambling deductions, it appears that filing as a professional allows you to deduct losses on a Schedule C to the extent of winnings. Check with an accountant to be sure.
Filing as a professional comes with some disadvantages as well because you have to pay self-employment taxes, but that hardship is far less than the burden of paying taxes on gross profits.
Also check out Poker Cats' recent post on online gambling and taxes.
In other news, it looks like the Treasury Department has delayed enforcement of UIGEA regulations for six months, according to PokerNews.
Showing posts with label taxes. Show all posts
Showing posts with label taxes. Show all posts
Wednesday, November 25, 2009
Monday, April 14, 2008
Taxes: Screwed Again
I'm baffled by my tax bill.
Sure, I was better prepared for it this year than last. I paid quarterly estimated taxes for the first time and have the bankroll to absorb the hit. But I still got sticker shock when my accountant showed me the damage.
I estimate that I'm paying about a third of my $60,000 in 2007 gambling winnings to the IRS.
Sucks.
---
Blinders' post about bet sizing encouraged me to be more careful, especially on the flop.
It's way too easy to throw out a 2/3 or 3/4 pot-sized continuation bet rather than thinking about making a more precise amount. I subscribe to the idea that continuation bet sizes should be based on flop texture, not your hand. A coordinated board requires a bigger bet; an uncoordinated board only needs a smaller bet. I generally size my bets between 2/3 and full pot.
Making more precise bets makes perfect sense to me. You want to be accurate and studious in every action. If you aren't paying attention to how much you're betting exactly, you're more likely to get into a bad situation. Correct bet amounts encourage your opponents to make mistakes, which results in money for you.
In the big picture, paying attention to bet sizes improves my game because it forces me to think about the hand rather than simply blasting the pot.
Sure, I was better prepared for it this year than last. I paid quarterly estimated taxes for the first time and have the bankroll to absorb the hit. But I still got sticker shock when my accountant showed me the damage.
I estimate that I'm paying about a third of my $60,000 in 2007 gambling winnings to the IRS.
Sucks.
---
Blinders' post about bet sizing encouraged me to be more careful, especially on the flop.
It's way too easy to throw out a 2/3 or 3/4 pot-sized continuation bet rather than thinking about making a more precise amount. I subscribe to the idea that continuation bet sizes should be based on flop texture, not your hand. A coordinated board requires a bigger bet; an uncoordinated board only needs a smaller bet. I generally size my bets between 2/3 and full pot.
Making more precise bets makes perfect sense to me. You want to be accurate and studious in every action. If you aren't paying attention to how much you're betting exactly, you're more likely to get into a bad situation. Correct bet amounts encourage your opponents to make mistakes, which results in money for you.
In the big picture, paying attention to bet sizes improves my game because it forces me to think about the hand rather than simply blasting the pot.
Wednesday, June 27, 2007
A Good Beat Because I'm Stupid
I got a mysterious check in the mail from the Hawaii Tax Department on Friday giving me a refund of more than $4,000 on my taxes. I didn't get my hopes up -- surely this was a mistake. The same kind of mistake happened to a family member a few years ago.
The funny thing is that I was the one who made the error, not the tax department! I had miscalculated my state income taxes by more than $4,000. I thought I owed $7,300, but instead I owed a lot less.
I re-checked my math against a letter the state tax department sent me, and indeed I had made two significant mistakes. I like to think I'm good at math, but I guess I'd make a pretty damn shitty accountant.
So I'm a dumbass, but I'm very happy about it! Obviously, this won't happen next year now that I have a tax accountant. And I still ended up paying about $18,000 in federal and state income taxes this year, which is nothing to laugh at.
But getting that money back is a good beat. I'm thankful the tax department caught my mistakes because I know I never would have. Now I have the pleasure of spending this money on my estimated quarterly taxes, which are already way overdue.
---
I'd like to thank all the people who leave comments on this blog. Your insight makes me a better poker player, and I appreciate it that you care enough to say something. It makes me feel like this blog is worthwhile.
Here's a list of this month's commenters. Thanks, and keep 'em coming!
Schaubs
Raveen
Phish Hooks
Hoyazo
JL514
Poker Cats
Sham
CC
StB
Wwonka
MeanHappyGuy
Miami Don
Wes
TripJax
Fuel55
SpeakEasy
The funny thing is that I was the one who made the error, not the tax department! I had miscalculated my state income taxes by more than $4,000. I thought I owed $7,300, but instead I owed a lot less.
I re-checked my math against a letter the state tax department sent me, and indeed I had made two significant mistakes. I like to think I'm good at math, but I guess I'd make a pretty damn shitty accountant.
So I'm a dumbass, but I'm very happy about it! Obviously, this won't happen next year now that I have a tax accountant. And I still ended up paying about $18,000 in federal and state income taxes this year, which is nothing to laugh at.
But getting that money back is a good beat. I'm thankful the tax department caught my mistakes because I know I never would have. Now I have the pleasure of spending this money on my estimated quarterly taxes, which are already way overdue.
---
I'd like to thank all the people who leave comments on this blog. Your insight makes me a better poker player, and I appreciate it that you care enough to say something. It makes me feel like this blog is worthwhile.
Here's a list of this month's commenters. Thanks, and keep 'em coming!
Schaubs
Raveen
Phish Hooks
Hoyazo
JL514
Poker Cats
Sham
CC
StB
Wwonka
MeanHappyGuy
Miami Don
Wes
TripJax
Fuel55
SpeakEasy
Saturday, May 12, 2007
Tax Answers
After paying taxes this year, I quickly decided it was time for me to stop doing them by hand and find a tax accountant. Taxes are a pain, they're too expensive to risk making mistakes, and I had a lot of questions.
So I met with an accountant yesterday and had a great opportunity to ask her all about poker and taxes.
The first thing I wanted to know about was filing as a professional. As a professional, you can deduct many poker-related expenses, including travel, meals, expenses and lodging. The downside is that you have to pay self-employment taxes on your winnings of an additional 15.3 percent. The accountant ran the math, and it didn't result in any savings for me. Unless I spend tens of thousands in poker-related expenses, it makes more sense for me to file taxes as normal. Maybe someday, when I become a badass tourney player and tour the world. Right.
I also found out about how to pay estimated taxes, which I will have to do this year or else risk paying penalties. I have to pay quarterly estimated taxes because government withholdings from my paychecks don't include gambling income. Anyway, the way to do it this year is to base my estimated tax payments on my taxes last year. For example, if I owed $15,000 in taxes on April 15, I need to basically divide that number by four to figure out my quarterly responsibility, and then fill out form 1040-ES for the feds and another form for the state.
Because I owed a large amount in taxes last month, I had to make several withdrawals from poker sites in order to cover the bill. Those withdrawals temporarily inflated my bank account above $10,000 for the first time. I wondered whether that amount triggered federal reporting requirements. Fortunately, the accountant told me those requirements only apply to cash transactions. When it comes to checking accounts, she said there's no reporting requirement. That's nice to know.
Finally, I asked her the big question: Isn't there some way for me to pay less taxes? Unfortunately, she said there wasn't much I could do. All income is taxable, and we have to pay the taxman or risk getting caught.
So I met with an accountant yesterday and had a great opportunity to ask her all about poker and taxes.
The first thing I wanted to know about was filing as a professional. As a professional, you can deduct many poker-related expenses, including travel, meals, expenses and lodging. The downside is that you have to pay self-employment taxes on your winnings of an additional 15.3 percent. The accountant ran the math, and it didn't result in any savings for me. Unless I spend tens of thousands in poker-related expenses, it makes more sense for me to file taxes as normal. Maybe someday, when I become a badass tourney player and tour the world. Right.
I also found out about how to pay estimated taxes, which I will have to do this year or else risk paying penalties. I have to pay quarterly estimated taxes because government withholdings from my paychecks don't include gambling income. Anyway, the way to do it this year is to base my estimated tax payments on my taxes last year. For example, if I owed $15,000 in taxes on April 15, I need to basically divide that number by four to figure out my quarterly responsibility, and then fill out form 1040-ES for the feds and another form for the state.
Because I owed a large amount in taxes last month, I had to make several withdrawals from poker sites in order to cover the bill. Those withdrawals temporarily inflated my bank account above $10,000 for the first time. I wondered whether that amount triggered federal reporting requirements. Fortunately, the accountant told me those requirements only apply to cash transactions. When it comes to checking accounts, she said there's no reporting requirement. That's nice to know.
Finally, I asked her the big question: Isn't there some way for me to pay less taxes? Unfortunately, she said there wasn't much I could do. All income is taxable, and we have to pay the taxman or risk getting caught.
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