In the United States, individual income taxes are due on April 15th, which is now less than one month away. For live and online poker players, filing taxes means facing a unique set of questions: What income should they claim? How should records be kept? Should players file as pros or recreational enthusiasts? Poker News Daily enlisted the help of Certified Public Accountant Ann-Margaret Johnston to learn more.
Johnston’s website, PokerDeductions.com, has been booming with traffic as the April 15th deadline approaches. Many poker players have asked Johnston what income they should be reporting on their tax returns. She told Poker News Daily, “Always report how much you win separate from how much you lose. You especially need to be careful if you’re funneling money into a checking account. Make sure you don’t reporting less than the amount of your deposits.” Any winnings online and in brick and mortar casinos should be reported. If a casino has given you a tax form to fill out, know that they will be reporting your earnings to the Internal Revenue Service (IRS).
If you’re deciding whether to file as a professional poker player or merely as an amateur, the answer may ultimately depend on how the numbers shake out. Johnston explained, “In some states, if you have a full-time job and poker is a hobby, they don’t allow you to deduct your losses. For example, if you made $600,000 in a tournament and lost $300,000 in other games, you have to report the full $600,000. In other words, you can’t take the $300,000 deduction. We try every angle we can and run the numbers both ways.” Tax laws ultimately vary by state. Although Johnston is based in Georgia, she can prepare tax returns for any state in the U.S.
In order to figure out wins and losses from tournaments and cash games, many poker players will request information from the individual online poker sites. Alternately, they can keep a log on their own computer in a spreadsheet, for example, showing when they played, at what table, and whether any money was moved on or off the site. Johnston commented that the process of determining a player’s poker income can be quite complex: “If you have to backtrack to each site and to your checking account, you’re piecing it all together. If you were audited, you’d have to be specific about where all of the money came from.” She suggests keeping a spreadsheet that contains the details of each game played, including its date, time, type, location, and limit.
Johnston is the author of “How to Turn Your Poker Playing into a Business” and has managed her own firm for the last 13 years. She first became involved in accounting at the age of 18 and realized there was an opening for a tax preparation firm that specialized in poker. She even takes her accounting persona to the virtual felts, where Johnston can be found playing under the name “CPAEvil.”
She advises against players putting down “poker” as their source of income and instead recommends using “gambling” or “wagering.” On the rationale for doing so, she told Poker News Daily, “It’s specific. Let’s say I’m a stripper. I’m not going to put something down as my occupation that may be illegal on my tax return. Instead, I’m going to put down ‘Marketing,’ which is something that’s similar to what I do.” The question of whether playing online poker is legal or illegal in the United States can be avoided altogether by using a generic source of income like “wagering” or “gambling.”
Other advice Johnston has for poker players includes obtaining a credit card that is used solely for expenses while on the road. As many in the industry prepare to head to Las Vegas for the 2009 World Series of Poker, they should come armed with a credit card specifically reserved for poker. That way, determining deductions down the road will be a cinch. Moreover, poker players are encouraged to save all receipts, even from cab rides and other routine activities.
Johnston prepares both state and federal income tax forms. Visit PokerDeductions.com for more information. A special thanks from all of us here at Poker News Daily to Ann-Margaret Johnston for taking time out of the busy tax season to talk with us.
