Tax Strategies for professional poker players in the US

do you file as a gambler ?

unless you file as one , you can't deduct losses as a business expense..

if anything it hurts you if you don't itemize to being with .

A good accountant with experience will definitely be able to assist with tax planning. But it doesn’t necessarily need to be a CPA. Another option is an Enrolled Agent. Or even just a tax preparer. The key is they have experience applicable to your “business”.

Disclaimer, I'm not an accountant.

To my knowledge buy-ins are an expense like any other. Federal personal income in the US is taxed on net income, which is income minus expenses. I think you have a choice on whether to account for intra day or intrasession earnings as an expense plus an income or just net it out and account the income, in which case it's true that you wouldn't "write it off", but that decision has no impact on your net income, only on your gross, which would be relevant in industries where you get taxed on gross, like with sales tax, but not with poker.

So to make it simple, if you play 2 tournaments this year, both for 100$. One you lose, that one is easy, you write it off as a 100$ loss. Now when you win the second tournament, let's say you finish ITM and you win 200$, you either book it as a 100$ win, or as a -100$ buy in plus a 200$ win.

With the accounting method 1 you have a gross income of 100 and expenses of 100. With the second method you have an income of 200 and expenses of 200. I think method 2 makes the most sense and reflects what actually is going on, but method 2 might have some bearing from other industries where you are trying to minimize what you show to the IRS and thus minimize some other taxes like sales tax, I wouldn't personally do that. It's worth noting that this difference can be quite significant, increasing your gross income by possibly 5x. I would only consider it for cash games, and even then only do it in sessions that are too short.

It's worth noting that this strategy does not magically make the EV of tax liabilites go away of course, you are just pushing them all to a specific outcome.

I think also that unless you are already at the highest bracket, you are increasing your tax EV, as you should be aiming to consistently use as many of the lowest brackets as possible for your personal income. If you push all of your income into a single year where you hit it big, you are going to be paying most of your earnings at the highest tax bracket, and leaving the lower brackets of the other years unused.

Definitely get at least a consult to answer your questions and get some guidance. In my experience it's just a guy I see once or twice a year, so it annualizes as a pretty cheap expenditure. Try to avoid being near the due dates, cause they have to charge you much more then.

Also, this day an age, you can use chatgpt to get a lot of questions answered. If you have a bit more time and you want to do it right, go through the irs website, read the forms and form instructions, at least diagonally, just to get an idea of what's going on. But it can definitely be daunting if you are not sure.

Finally, this guy advertises at the WSOP and apparently does tax for a lot of poker pros:

kondlercpa.com

There's a world of difference between general and specific advice. As well as between legal and accounting advice.

Is this an advice?

Expectations: "I'm going to have to pay millions in taxes."

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Reality 90% players: "Are gambling losses considered charity?"

Reality 9% players: "Going to have to file taxes."

Reality 1% players: "Has never filed taxes, has no plan to file taxes. Never been contacted by IRS, completely off IRS radar because there is no file to scan for errors. The entire persons name and data in the IRS database includes his name, and his social security number. The files are blank. The Auditor assumes db error and goes to next filer, who responsibly files his taxes. Guys name is Billy, and Billy forgot to carry a 1. The auditor immediately calls FBI, CIA, DOD, Seal Team 6, and Seal Team 7 to explain the situation. We got a rebel. We got a threat level midnight. Orders are to extract Billy dead, or alive. 9 months later Billy is in court; Dave - whose part of the 1% not filing taxes is the judge on the case. He sentences Billy to life in prison.

Be like Dave, not like Billy. Dave is a Judge. Dave is smart. Billy is dumb. Billy forgot to carry 1.

It isn’t legal nor accounting advice

Def true. True enough that though I would love to make specific comments in this thread, I won’t. I probably could (my specific situation is fairly unique) make some comments but could quickly cross some line. I will say be careful as some advice could def cause issues

Two bits of general advice but not applicable to all situations
- the adage ‘it is all one long session’ is not true in the eyes of the IRS for most
- while the IRS is nowhere near as bad as some will say, the IRS doesn’t write all the rules so sometimes what makes sense to both you and the IRS isn’t how it really is

There is an entire thread about taxes and poker on this site. Someone else may be able to find the link.

Pay your taxes!

I've filed as a professional gambler for a long time. One key thing anybody with gambling income needs to decide is whether they are a professional or amateur gambler in their tax return.

If one is an amateur gambler, all winning sessions are declared as gambling income. All losing sessions are an itemized deduction up to the amount of wins. This means you have to get past the standard deduction before your losses actually reduce your wins. One advantage of amateur status is that you do not have to pay self-employment taxes.

If one is a professional gambler, your net gambling wins minus losses will be declared as income on a Schedule C meant for small businesses. There are a lot of advantages to this. You get full netting of wins and losses. You can deduct business expenses. You get the QBI deduction of 20% of your net business income. Your income is earned income so you can open an IRA or solo 401(K). You do have to pay self-employment taxes.

I understand almost nobody does things correctly or even understands how to do things correctly, but I do and it gives me peace of mind. I have an excellent accountant and he basically said to me early on, look you are a professional gambler, file as a professional. Both professional and amateur gamblers are required to keep detailed records of their gambling.

I don't know man, I think it would be pretty suspicious having thousands of dollars pouring into my bank account from PayPal every month. I read an article that says PayPal reports transactions totaling $5,000 or more in a given year to the IRS. So the IRS is going to know. If you play live poker you may be able to get away with this since everything is in cash, but online there is always a trail.

Please make those specific comments. We won't bite. Cross the line!

Yeah, I've probably read that page. It is more about how to file, whereas this thread is more about strategy. Maybe some unique planning. For example, I plan on writing off my PC that I'm building as a business expense. There are probably a few things I could write off that I might not even be thinking of.

@LoveThee
I never thought about asking ChatGPT, that is a good idea. The way I've been planning to do it is every time I withdraw money from PokerStars or BetMGM that is considered a "paycheck". Is this correct? Probably not, but it seems logical and there really isn't any way that the IRS would find out if this is the wrong way to do it. I would do this more out of convenience rather than to save money although it could be used that way as well.

Wrong, your total winning sessions are declared as income and then your total losing sessions are a deduction when filing as a pro.

If you mean an itemized deduction, then you are definitely wrong.

The professional nets out losses before the calculation of AGI. The amateur deducts losses after AGI.

It ends up being netted, but you don't net it and enter that as income. The total losing sessions goes under misc. other where you can list it as such.

I use tax software, that is how it is on there.

It worried about you or anyone here biting.

The purpose of section 1 of a Schedule C is just to list the different factors that contribute to your net income.

We agree about how this is done in practice but you are framing it as me being wrong.

Gross receipts and sales line 1 and returns and allowances line 2 don't flow through to anything else on the Schedule C or anywhere else on the tax return. All that matters from this section is gross income. Changing line 1 and 2 on this section while keeping line 7 the same has absolutely no impact on your taxes.

In other words, for a professional gambler, only net win matters for your taxes. For an amateur gambler, the composition of wins and losses matters too.

Pay your taxes. I was being silly.

Threads on taxes and (old) advice from tax professionals can be found in this subforum:
https://forumserver.twoplustwo.com/57/ge...