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Poker News | Gambling and the Law

Gamblers Get IRS Tips From New Book

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For many years gamblers have been in the dark about just what the IRS expects them to claim every year at tax time. Uncle Sam wants his share of your money, and he doesn’t care if you make it playing poker or flipping burgers.

But now, thanks to a couple of savvy ladies in Las Vegas, gamblers can learn everything they didn’t really want to know about filing taxes. To help educate gamblers for their IRS battle, Jean Scott, who has written gambling books like The Frugal Gambler and The Queen of Comps, has teamed up with tax advisor Marissa Chien, to author “Tax Help For Gamblers”. Pooling their vast knowledge from both sides of the green felt, the authors have written a concise “Tax Bible” for gamblers.

The book outlines exactly what the IRS expects gamblers to claim and pay taxes on. Over the years, most gamblers either feigned ignorance, or simply had no clue what the IRS required. Uncle Sam says ignorance is not bliss, and if he decides to audit you, playing dumb won’t save your bankroll. Responsibility of knowing the tax laws falls on the tax payer’s shoulders, and there is no excuse for failing to file a return correctly.

Most gamblers who claim winnings know they can also claim losses, but only up to the amount they have won. Still, they may be shortchanging themselves when it comes to claiming their actual losses, by underestimating exactly how much they lost. This is no big surprise, since very few gamblers want to remember how much they lost during those unlucky streaks last year. Like it or not, you must keep records and save receipts to accurately claim your losses come April 15th. Author Chien says “The more information you can provide to the IRS, the better.”

If you use a player’s club card while playing, most casinos will provide you with a year end win-loss statement, if you request one. But for poker players, these offer little help unless they also play table games or slots. Unless you place in a tournament, Poker Rooms don’t log your wins or losses, so it is up to you to keep track of them.

Chien however doesn’t recommend gamblers rely on the year-end statements provided by casinos. She says. “The IRS, historically hasn’t been keen on accepting the casino generated statements, which contain legal disclaimers, as comprehensive evidence of gambling activity.”

The best way to not give Uncle Sam more than his due is keep accurate records. Since the IRS doesn’t specify exactly what a win-loss log should look like, gamblers have coughed up everything from detailed excel sheets to notes written on cocktail napkins, and the IRS accepted them. One of Chien’s many poker clients, Perry Friedman says, “Bad record keeping is often unintentional, but common, even for professionals. Poker players aren’t well organized. People who can’t find matching socks aren’t going to find all of their receipts.”

Friedman also thinks keeping records can help poker players improve their game. He says by keeping a log, “You can really analyze what you did when you lost.”

Because the IRS demands proof of losses, it is a common sight this time of year to see gamblers picking up discarded receipts in sports books and keno lounges at your favorite casino. Since it is estimated that only one of 500 gamblers keep records, scrounging for receipts is a practice of many who don’t bother to keep a log during the year. This practice, according to Chien, is illegal, and should be avoided. Just how the IRS can determine if these receipts are “found” or your own however, is not revealed.

For the gambling professional, like poker players, the IRS allows for deductions such as travel and accommodation expenses. When you sign up for the WSOP this year, what it will cost you to fly there, rent a car and stay for a few weeks at the Rio, will all be deductible. Providing you save those receipts. As Chien says, “The more information you can provide the IRS, the better”.

For some gamblers however, they don’t qualify for “professional gambler” status according to the IRS. Video Poker player Paul Senior, a retired engineer who lives in Las Vegas, is one of them.

Senior files his taxes and claims losses on his more than one million dollars in winnings every year. Since Senior can’t file as a professional gambler, he must report his massive winnings as part of his gross earnings for the year, and claim losses on a separate form. Even if he ends up with a net loss for the year, he will be paying more in taxes than someone filing as a professional gambler. The tax laws are not easy on Senior, as he is not entitled to claim “professional gambler’s deductions” like travel or hotel expenses. His big earnings also make him ineligible for other deductions many of us take advantage of, like property taxes and mortgage interest.

Senior however doesn’t see keeping win-loss records as a chore, even though he spends close to a half-hour a day updating his log. He says, “I’d do it anyway, even if the IRS didn’t require it. Engineers are anal about recording things. It’s my hobby, like golfers who record their scores.”

Author Anthony Curtis, who also penned a “Tax Help For Gamblers” book published by Huntington Press, has successfully survived two IRS tax audits. He attributes his audit survival to precise record keeping and wants to help other gamblers who may face an audit in the future. Currently he is working to develop a software program that would allow gamblers to enter not only their wins and losses, but also any comps received from a casino, all by location and date. Curtis says, “The log is insurance for good luck. It will save you money if good things happen.” He also adds the program will, “Serve as a wake up call to gamblers, who are notorious for remembering their winnings, but underestimating, or forgetting their losses.”

Many poker players admit their taxes have been a total mess, including Phil Gordon of Henderson, Nevada. Gordon is a poker tournament winner, who also earns income from speaking engagements and book sales. Since becoming a client of Chien’s a few years ago, tax time for Gordon isn’t the nightmare it used to be. He says he overpaid taxes for years before engaging Chien’s services. Now he keeps detailed records of his wins and losses, like Chien suggested.

After claiming all the deductions rightfully allowed and paying the taxes he owes however, Gordon thinks the tax laws are unfair, “There is some unfairness about not being able to carry over losses generated in one tax year to the following year, as other self-employed professionals can. I have never had a losing year, but I know a lot of people who pay hundreds of thousands of dollars in taxes one year, after they lost money the previous year.”

Gamblers generally think the IRS will raise an eyebrow over gambling deductions. As Gordon says, “Most gamblers approach each tax return as if they are going to be audited, so it is a pleasant surprise if they are not.” Commenting on how the IRS views gambling deductions, Chien adds, “Gamblers shouldn’t be afraid to take allowable deductions because they fear an audit.”

With the huge surge in popularity of poker and televised tournaments, don’t think your least favorite Uncle is ignoring the poker playing segment of the tax paying public either. These tournaments with their huge prize pools are a windfall to Uncle Sam’s coffers, and he knows it. The fact is, it doesn’t matter if you win $1.00 or $10 million, the IRS says you must claim it as income.

Poker players, who play online, may think their online winnings don’t have to be reported when filing taxes. Unfortunately, just because the government says it is illegal to gamble online, doesn’t mean they don’t want their slice of that pie too. Whether you won $1.82 for 165th place in a Stud tournament, or $10,000 and a trip to the Bahamas on PokerStars, the IRS tax law says you must report the win and pay taxes on it.

And don’t think that $20 bill you found in the washer at the Laundromat is exempt, because it’s not; the IRS says that is reportable income too.

While the IRS won’t issue a statement regarding the tax help books for gamblers, they have updated the information for gamblers on their website. One tax tip posted last summer on the site was “Your summer vacation may mean a trip to the casino or racetrack. What will you owe Uncle Sam if Lady Luck happens to be on your side?”

The answer? “It depends….” Which means you have to wade through the jumble of tax laws and figure it out. Or you could give up and hire a tax advisor, or go buy a book.

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