fox and associates, inc.
Professional Gamblers F.A.Q. *
Professional Gamblers F.A.Q. *
1) What qualifies me as a professional gambler and is there a benefit filing my taxes as such?
Are you playing “full time” with the intent of earning a living? By definition, this is your job. You don’t always have to be turning a profit for this to be your profession. To be a professional, you need to treat yourself as such. Professionals must consider themselves a business and participate in accepted business practices for the IRS to also treat them as such. Being a professional gambler allows you to take additional business expenses: travel, supplies, dues, etc. Unfortunately, a recreational gamer can only deduct limited losses against winnings.
2) If I gamble online or overseas do I still have to pay taxes on it?
Under the Tax Code, as a US citizen, all income is taxable, regardless of where or even HOW it is earned. With the ever-changing laws regarding online gaming, professionals need to make sure their taxes are done correctly to keep them from being criminally liable to the IRS. Each professional gambler could have many sources of income, i.e., live play, online play, tournaments, public appearances, sponsorship, royalties, etc. In this field, it is harder for the government to prove winnings and losses, especially with all of the international ties. Accepting that fact, audits can be very intrusive and aggressive, as well as expensive.
3) Is it beneficial to “Incorporate” as a Professional Gambler?
There are many reasons individuals “incorporate” in this industry. It is a possibility the IRS may not agree with a person’s Professional Gambler Status but performing this function under the “Corporate Umbrella” may be the answer. Also the IRS may deny status if a person has another job or treats gambling as a recreational hobby. This is especially true for those who do not keep adequate records. Players may dabble in a variety of income generating activities, including sponsorships, writing and blogging for magazines, photo shoots, commentating, personal appearances, etc. All of these activities are related to the professional field and can be treated as income under the Corporation. Nevertheless, there are a variety of pros and cons.
4) What is the accepted “schedule of play” required by the IRS?
Even though being a professional gambler is a business, it does not have typical bookkeeping records and files like a typical business. This makes it difficult for the IRS to “audit” the day to day activities of the business. Since there is no definitive way for the IRS to truly track ALL your wins and losses, they require accurate, DAILY, records of activity. They typically like to see it written down the old fashioned way. However, in this day and age, more technological ways of record keeping are being accepted. There is various software and mobile apps on the market to assist with this.
The following information needs to be recorded for EACH SESSION:
Date & time
Location of session
Type of game played/level
Amounts wagered (buy-in)
Total amount of win/loss
For live Poker Tournaments, make sure to keep Buy-in Receipts. For slot machines, you should note the machine number. For other gaming activities, like Sports Betting, Keno or Bingo, try to keep losing tickets, receipts, payout slips, racing programs, etc.
Although this sounds easy enough, most players DO NOT comply with this requirement, which may cause unfortunate and costly repercussions.
5) Why do I need someone specialized in accounting /tax preparation?
There are many different ways a self-employed person's income is reflected on a tax return, based on their specialty and business type. In regards to Gambling, wins and losses are also presented differently on different individual's tax returns. If a person lives in a state that does not have legalized gambling, a local tax firm may have little or no experience with gaming wins with exception of the occasional winner on vacation. The IRS has specific rules that are related to gambling, especially when done as a profession. These laws change often. Online Gaming issues have complicated matters even more since "Black Friday". Taxpayers need to make sure they are not filing incorrectly, causing red flags with the IRS. Taxpayers need to make sure their tax preparer is qualified to handle the complexity of a return with the professional gambler status. Ask if they have ever ACTUALLY prepared a return for a “Professional Gambler” on both federal and state returns. Tax preparers can be uncomfortable using this status because of its rarity and complexity. Ultimately they may be ultra conservative in handling the player’s expenses and losses instead of maximizing the true benefits of filing as a professional.
6) What is the importance of being “AUDIT READY”?
In regards to Professional Gamblers, the IRS can be very aggressive and intrusive during an audit, since they MUST rely on the taxpayer’s records. They don’t have the luxury of having W2’s, W2G’s 1099’s, etc., for ALL of their income flow, possibly only for some of it. The IRS also requires and relies on the individual's “schedule of play”, so it must be sufficient so it is not thrown out or disregarded. The “schedule of play” is one of the only items that MUST be completed by the taxpayer. Technically it is one of the easiest things to do, yet it seems one of the hardest! Part of being "Audit Ready" means we will train, streamline and supervise this process to ensure that the IRS will accept it.
* This information does not constitute legal advice and you should not act upon the information provided above without obtaining specific advice from a qualified specialist. No representation or warranty is given as to the accuracy or completeness of the information provided above, and we do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on this information for any decision based on it without our knowledge.