Busted by IRS now i owe back taxes on winnings
 

I failed to report my taxable winnings from horse racing, now i have penatlies to pay. My question is i got my account summary and it obviously shows I lost much more than what I won, will it offset the gambling income and ill just owe for the penalty?

Any help or advice would be greatly appreciated

If you have account information that includes your signers, but shows you were a net loser, you should be fine. I guess you may have to pay a penalty but the account info should validate your net position.

If, in fact, you lost for the year, why would you pay a penalty?

thanks black, for the year in question it defintely showed that i wagered more than i won, but what concerns me is that they show how much i won vs only what was taxable, I hope the IRS reailzes that only a miniscule part of the winnings was taxable/signers

cause its back tax from 2007 filing

They'll understand.

In the future you just have to itemize. Basically on one line you put the total winnings ( just total signer amount basically works ) and on the other losses up to the amount of winnings. If you were a net winner, you still write off loses against the winnings to get to the final result. If you lost for the year.....zero is the number that matters.

You should be fine.

If you can document you have a net lost for the year in 2007 then you are starting with no tax owed from 2007.

There are no penalties for not reporting taxes you don't owe. You have to be careful that you can document your losses and that the pattern of your wagers is consistent to get credit for your loses to offset the capital gains of winnings. There are several suits here that can give you more detail if you need it.

so basically all i have to do is show the documentation I already have that I lost more than what i won that was taxable, and all i will owe for are the penalties?

In general, while the account info is great, and probably enough, the best thing you can do going forward is to keep a daily diary of profits and losses.

Did you itemize you deduction in 2007? If so you may have to file and amended 1040 to show the higher income and higher itemized deductions which should net to close to zero, assuming you dodn't have a huge amount of winnings.

Just a heads up that if you plan on using your statments to substantiate / document the fact that you did not come out ahead for the year, you should probably be prepared to include ALL of your winners and not just the ones covered by the w2G. If you had a lot of winnings it may change your tax by way of phaseouts, limitations etc as your AGI will be higher.

PM me if you want some assitance or need help figuring out the tax you may owe.

if there's no income for the year then there are no back taxes

This what's so f'd up about taxes on gamblers, especially horse players. Your AGI is adjusted above the line causing you to possibly lose deductions such as child tax credit, college tuition, mortgage interest reduction ...etc, even though you may have the losses to offset the wins/signers.

If I walk up to a blackjack table with $500 and cash out for $1500, do you sign any forms? Is anything reported? Hell no, you're suppose to report the income, but there isn't anyone handing you a form W2-G when you walk away. Could you imagine how empty the BJ tables would be? John McCain a notorious high rolling craps player who is reported to play once a month claimed exactly $0 in gambling winnings on his last 2 disclosed 1040's. No adjustments to AGI and no itemized deduction for gambling losses.

So again why shouldn't someone play offshore, with large rebates and no IRS reporting. The racetracks should get there lobbyists arguing that if the casino's don't require W2-G's, why should the racetracks? You can't tell me a pit poss doesn't know what a person buys in for and what he/she leaves the table with.

Does anyone who actually beats the game pay taxes? I mean, anyone with that much ability surely can dig up some relatives abroad and bet with Betfair (or others). WTF, is this as 3rd world country?

Betfair would never produce the 300-1 requirement for a signer, unless I'm mistaken and they market exotics. I thought Betfair was just a market exchange on individual runners? Could be wrong since I don't use them.

It's not even actually beating the game, if I end up with 40 signers over a year let's say for 60K and have lost 60K, the adjustment to AGI means that even though I don't have any profits, I've lost money on taxes for standard exemption allowances, child tax credits, college tuition deductions, itemized deduction allowances. So many deductions are tied to your AGI, and that is just royally f'd up that a person gets penalized for having W2-G income but not any actual winnings.

You will definitely pay a penalty. Not declaring is a problem. It doesn't matter that you can show the losses. You must declare the signers. That is why they take your social security info...Remember, winnings can put you into a different tax bracket which is why even if you can show losses to that amount, your gross income will result in higher taxes for the rest of your income.

Problem with offshore is that they have limits on payments and you have to deal with cashing a check from a known offshore book. Banks have to report this stuff nowadays. I used to love the rebates at Pinnacle and Ibetx until they tossed out US accounts. My best play was laying money on Odds on favorites to lose...

LOL.. isn't that a given? Just kidding, Seattle, I couldn't resist... :D

I am reading this correctly...
No derision, no snide comments.
Helpful information.

I must be on the wrong board.

As others have said, I think all you need to do is get a year-end summary from TVG or whoever you bet with. Your year-end summary will show that you lost for the year and you shouldn't owe anything. I don't think you will owe any penalties either.

My first wife used to have a bit of embarrassment when we visited the accountant for our tax prep and I tossed my signers down to list on the taxes.

Apparently making $$ was good, but making $$ from gambling was something not be made known in "good social circles" or something.

I was always kinda proud of those signers.

:)

(my current wife loves 'em.....she laughs and shares stories with friends about my occasional gambling prowess....)

One of my ex-girlfriends, who's very cool, spent her summers in the Hamptons ( obviously without me ) and her friends used to give her a hard time about me being a horseplayer and hanging out at the track. She was very happy when they once snidely asked her how I was doing at the track and she got to tell them I hit a Pick-6 for $141K a few days earlier.

They stopped asking her about me.

I've had many four digit wins in a single day at blackjack in Nevada, but never a five digit.

I may be mistaken, but somehow I thought that if cashing in a large enough amount of chips at the window at one time there was some tax transaction of note that would take place.

Not a "holier than thou" thing, but I always declare my annual gambling winnings......and the offsetting losses. Candidly, most of the time I declare "a wash" for year end by my estimates and keep enough supporting detail around to have a reasonable defense if audited.

If playing at a casino on a regular basis with monitored play for comps, I'd highly recommend making an effort to acknowledge in some way on tax filings.

Great story!


Especially good with the "spent her summers in the Hamptons" detail!

True story, I was in a bar with some horse players a few days ago and was razzing some guy in his mid-20's when he inquired about a bottle of "chartreuse" that had somehow made it behind the bar in this non-uppity establishment. It was one of those great gambling story and trivia sharing late afternoons, and the totally cool kid let me know that "chartreuse" was a favored drink component of F. Scott Fitzgerald (The Great Gatsby guy). Points to the kid. I was impressed with the off the cuff trivia.

He knew nothing of Nashua and the Woodwards, however. :)

I got the year end summary from TVG and in addition to the amoutn wagered it shows how much I won and how much i deposited and withdrew. I thought it might pose a problem because it shows that I won even if the amount wagered is defintely more than amount won. They might say its some taxable income even if it isnt a signer, that im not sure of. But since TVG keeps track of wagers, i think i can just show the list of wagers that didnt win that will offset what was actually "taxable". Thanks for all the advice and help guys, it had really helped. I appreciate it

This is correct. You should be fine. I'm going through the same exercise with the IRS for 2006 and 2007 right now, it's a pain in the balls but we'll get through it.

Speaking of the IRS
 

Got this e-mail yesterday. I cannot believe anyone would believe this crap. These Nigerians are sharp.

This is Francis V. from the Refund Operations Department at Internal Revenue Service
(United States Department of the Treasury).

After the last annual calculation of your fiscal activity we have determined that you
are eligible to receive a tax refund of $184.23.

Please submit the tax refund request and allow us 3-9 days in order to process it.

A refund can be delayed for a variety of reason. For exemple (invalid records or
applying after the deadline).
The good news is that Internal Revenue Service will make this refund directly to your
visa and/or mastercard linked
to your checking/savings account instead a check or a direct deposit.

To access the form for your tax refund, please continue to our secure server
attachment form.

Important: Do not use credit and/or american express or discover cards. Only cards that
are linked to your checking/savings account are accepted.

Regards,

Francis V.
Internal Revenue Service - Tax Refund Specialist

West Coast,
The amount is 10k. Anything over 10k in chips triggers a great deal of paperwork you dont want to do. My advice is to cash it in slowly over the course of the day.

The Nigerians should run it through a spell checker, LOL.

Exactly, I declare the winnings and itemize the losses, but the winnings effect your adjusted gross income before you can itemize the losses. So basically gamblers are screwed (with W2-G's) unless you can claim professional gambler status. A lot of deductions are reduced or phased out based on AGI, and the signers effect your AGI before you can deduct/itemize your losses.

So I finally went down to the IRS to get to the bottom of this, guy at his computer recrunched the numbers told him I certainly lost more than i wont but that you can only deduct the losses up to the amount won. So final verdict after 10 minutes of inputing things into his IRS computer, is that since I dont own any property, pay any other taxes, no state income tax, and basically nothing else. It wasnt enough to offset the taxes from the reported gambling income's taxes. He was like all ready for my check, and im like I didnt come here with the intention of paying, he had a good laugh and was like I understand and I am sorry. I should pretty much trust the IRS?

I had a situation where I won a contest and because it was free to enter I had no outs.I spoke with an irs guy and he let me know I could have offset the winnings had they been achieved from gambling if I could prove I had losses up to the winnings.

I had a similar situation to yours only in that I didn't own property but did pay state taxes.

It wouldn't hurt to try a different representative.

Honestly, I have no idea what you just said. So, are they making you pay more or not? Are they taking your word for it that your losses equalled your winnings or do you have to show proof? Are they going to audit you now, or basically are they asking you to fork over a few hundred bucks?

I had a notice that some gambling income was not reported, and that i owe taxes for those winnings. They are asking me to fork over a few thousand

You got to get tighter on this. Doubtful that any ADW would be unable to correctly calculate these numbers. Either you won or you didn't; and TVG should be able to show this.

I knew the backround of the story, it was your explaination of what happened when you went down there that I didn't understand.

First, any ADW should be able to provide you with a statement. Second, don't you keep losing tickets from the track, and on days when you hit for a signer, collect more from what is laying around?

This is the reason I use a "Player's Card" that is tied to a number specificaly assigned to you. The IRS could say that you picked up tickets that were not yours and can't prove they aren't. But if you have tickets with a number then it is proof that YOU made the bets. Also, pick up any lottery scratch-offs you see laying around and save them for the same purpose and keep non-winning lottery tickets if you have them or can find them.

I showed all of this to the IRS man, but he said it wouldnt be worth my while to file an amendment because basically dont pay for anything nor do I own anything. WA state doesnt have an income tax as well. Even if I did show him documentation I certainly lost more than I won, that I could only claim up to the winnings, also stating that since gambling isnt my profession that was nothing more he could do for me.

What's happening is probably this. The agent is saying you are better off taking the standard deduction, which you no doubt did in 2007, than reworking it so that you can itemize and deduct your losses. He's probably right.

Let's say you made $50,000 in non-gambling income in 2007, and you signed for $4000 in gambling wins. Your adjusted gross income on lines 37 and 38 of your 1040 would be $54,000.

If you took the standard deduction on your 2007 return, which if you're single was $5300, your taxable income would be $54,000 - $5,300 = $48,700.

If you try to itemize so that you can offset your losses, then your taxable income is $54,000 - $4,000 = $50,000. You end up with more taxable income by itemizing.

So you're better off just biting the bullet and taking the standard deduction. You end up with lower taxable income that way.

This is why the agent pointed out that you have no other deductions (no state income tax, no mortgage interest, etc). Other deductions would have tipped the balance in favor of itemizing.

If you had signed for something like $20K or more of winnings, then you would definitely be better off by itemizing--but you'd still be effectively paying tax on your first $5K or so of those winnings.

--Dunbar

Her friends sound like typical Hamptons crunts.

I hate those types with a passion after working on Wall St for nearly 10 years.