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....)