Poker Income for the Year
Sunday, 9 April 2006 14:17![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
shipitfishI love tax time. Unlike most folks, I rather enjoy filling out my own tax form. I always have, actually; it's a nice way to review the previous year's financial accomplishments. But, it is even more enjoyable now that I'm filing for the second year as a “professional poker player”, since poker income became a non-trivial chunk of earnings in 2004.
It's exciting to have my Schedule C as legal documentation that I'm a winning poker player! I can see clearly in black and white that I'm a winning player. Today, I realized that my direct gross poker earnings from playing in 2005 were $10,028. I had $2,109 in miscellaneous expenses (mostly travel expenses for casino visits), so my net income from pure poker in 2005 was $7,920.
My gross was only $992 more than the previous year. However, since I played much more online this year, I reduced my expenses by $3,392. Thus, I increased my net income from direct poker play by $4,337. between 2004 and 2005!
I am taking a short moment for some pride in this. At one point during 2005, I had a bankroll in the hundreds. (I believe right after my NYC relocation when I raided it for “real life expenses”, my bankroll was little more than $300.) I was staked at that point so I could keep playing at middle limits. (Thanks again, Mystery Man, feel free to take some credit here for the help in comments if you like — you helped me get there!). And, even after paying back the interest on that stake agreement, I came out ahead $7,920 for 2005!
Sure, I haven't lived off that amount of money in a year since I was in graduate school (and that was in one of the cheapest cities in the country). I certainly didn't make enough to go to full-time pro in 2005. But, I also spent weeks in late 2005 playing only rarely due to pressures from my “other job”. I firmly believe that I can go pro if I want to someday, and filling out my taxes reminds me I'm on that path.
Watch for more in my journal about poker and taxes later this week. The guilt trip is on its way! :)
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u suck or lie
Date: 2006-09-01 07:27 (UTC)come on.
try harder
Re: u suck or lie
Date: 2006-09-01 20:03 (UTC)This disingenuous anonymous comment from a hotel room network inspired me to make this post today. It's mostly a response to the subject line of your comment, which I think is the key part of it. But, as for the , that's what this whole journal is about — learning to do better at poker by trying harder. If you have something constructive to say in how I've failed in that regard, or have some data I don't know about what my EV ought to be, please feel free to share it.
professional?
Date: 2006-09-01 20:54 (UTC)I currently don't have very many expenses for my poker, but using schedule C to net out poker wins/losses would definitely be favorable.
Re: professional?
Date: 2006-09-02 04:11 (UTC)My understanding is that you have to get some serious, non-trivial part of your income from the business to avoid it being called a “hobby business”. For years, I've done extra consulting as a software consultant, which was substantial but not the bulk of my income, and I filed for it much the same way. I've never been audited. Perhaps I've made a mistake, but I am following the rules to my understanding.
To be clear, I was a pro in 2005, not a full-time one. I don't make enough yet to do it as my full-time endeavor; it's only a part-time one.
As I understand it, the IRS doesn't required your business venture to be so successful that it is your sole source of income immediately. My long term goal in life is to make enough as a poker player to be a full-time professional, and I'm carrying out my pursuit of that in a professional manner with substantial resources of my time both at and away from the tables. I am a professional now, just a part-time one. AFAICT, you are still allowed to file a Schedule C as a sole proprietor even if you only received a substantial portion, but not the bulk, of your annual income from that business. It's what I've done since around 1996 for other consulting work as well.
Anyway, I am not a tax accountant, and nothing I say can be considered advice from a USA tax expert. It's based on a single taxpayer's reading and understanding of his obligations under the law. I do know that the requirements that you carry out the activity in a professional manner, that you are seeking to make more doing it over time, and that you don't use it to hide unreasonable expenses are a big part of the IRS' judgement of whether or not it is a hobby business, and therefore prohibited from Schedule C land.
I'm very interested to read that book I mentioned elsewhere (I forget its name and author, but it's a tax accounting book for poker players), and will be posting a review of it this winter.
Re: professional?
Date: 2006-09-02 09:05 (UTC)After reading this (about a year ago), I decided to build up a couple of years of well-documented (and hopefully increasing) "recreational" earnings before shifting to a "professional" status.
Re: professional?
Date: 2007-02-01 11:49 (UTC)You should read the whole article, but the relevant part is:
Myth #5. I work in a salaried, full-time position. I can also file as a professional gambler. This is almost certainly not true. In Commissioner v. Groetzinger (480 U.S. 23), the Supreme Court noted, “… [W]e conclude that if one's gambling activity is pursued full time, in good faith, and with regularity, to the production of income for a livelihood, and is not a mere hobby, it is a trade or business within the meaning of the statutes with which we are here concerned.” The key terms herein are full time, good faith, regularity, and livelihood. If you have a full-time job, it’s unlikely you can file as a professional gambler.
Anyway, take it for what it's worth, but you might want to consult a professional for advice before filing as a pro with another job.
Re: professional?
Date: 2007-02-01 16:20 (UTC)Yeah, I've heard things like this before, but it's good to see someone actually quote a definitive source (first time I've seen that). Obviously, my research involved reading primarily IRS publications, not court opinions. I admit that most of my understanding on these rules go back to years that I was a software contractor, doing system administration and development on a contract basis. The courts obviously see the activities as ultimately different, simply because it is a different, non-traditional field of endeavor.
The funny thing is that I do fit all of the requirements except full-time. I rely on the income as part of my livelihood, I'm acting in good faith (I keep records, treat it like a business), and I play regularly. While I understand that the world doesn't often operate according to logic, I have a hard time seeing how someone who takes on some computer consulting in the evenings part-time for some extra income is somehow legitimately filing a schedule while I am not simply because I don't put in full-time hours.
There are expenses in my life I couldn't pay without the additional income. I'd have to take another part time job or, to use their terminology, change my livelihood if I were to cease pursuing my part-time poker job. Russell says, the US tax code is complex and unfair to gamblers. I suppose that's true, but, frankly, someone had to fight the case to get laws changed. I read everything that the IRS sources offered me, and acted in good faith to follow the rules.
And, one must consider, what if people have two full time jobs? Many people in today's society work 80 hours a week. Traditionally, a full-time job is 40. This past month, I've probably worked as many hours at poker as I had at my real job. Will the IRS consider my professional status on a month-by-month basis, or does one have to hit full-time status by a number of hours in a year? Or, does the mere fact that you have two jobs disqualify you?
The thing that bugs me most about this is that a citizen acting in good faith, reading all the IRS publications, cannot figure it out. I suppose to this extent I have some libertarian leanings. I'm for paying taxes, and I never ever want to cheat. But, if I read all the IRS publications and still can't figure out what the right thing to do is without hiring an expert, isn't the tax code too complicated?
Anyway, ISTR the book I mentioned elsewhere in this thread was written by Russell Fox. I'll be searching for it again soon when March rolls around; I'll have some fresh posts about the tax questions then.
Re: professional?
Date: 2011-01-10 13:53 (UTC)Ha, I'm currently working in the business of (http://localdirectory.wave3.com/louisville+ky/insurance.zq.html) and I'm a gambler (not professional) but I'm constantly gaining more money from poker than from insurances. I could always "file as a professional gambler" and keep my job in the same time.
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