Paying taxes on online gambling winnings

[Elizabeth]

I was wondering if anyone from the U.S. has won a substantial amount of money online that needed to be reported to the I.R.S. on their taxes. How is this handled? I have not won that much, but am wondering what to do if I did.

[pokeraddict]

There are no W2Gs for online gambling. The casinos and poker rooms don't report anything but it is possible your bank sees a transaction and questions it. If so they may report it to the IRS. The reality is that you are suppose to declare any gambling winning in the U.S. There are 2 ways to go about it.

I have filed as a professional gambler the last 5 years. I have shown an ability to profit from it and so I would qualify as a pro. Virtually all of mine is from poker, much of it online. Filing as a pro has its pros and cons.

Pros:

1. You can net your entire win/loss in one figure.
2. You can deduct travel expenses including airfare, mileage, hotel and taxis if they were a direct expense related to gambling.
3. You don't have to worry about losing the standard deduction if you don't itemize.
4. Can use it as income when trying to get a loan.

Cons:

1. You have to pay FICA on the entire net win although your half is a deductible business expense.
2. Instead of being a gambling win it is considered income. It may increase your tax bracket.
3. More likely to get audited filing a schedule C, especially if you take a bunch of deductions.
4. If you itemize you cannot deduct gambling losses there because it is already deducted in your net when filing as a pro.

If you just enter your wins in the gambling winnings entry there are pros and cons there as well.

Pros:

1. Will pay the same or less in federal income tax then filing as a pro.
2. Won't have to pay FICA on winnings.

Cons:

1. Can't deduct losses unless you itemize. For example if you have a W2G for $5000 and you don't itemize but lost $2000 in other gambling that year too bad, you're paying taxes on $5000.
2. Can't deduct any expenses.

I'm sure I've missed some pros and cons but I'm sure you get the idea. They should be declared to the IRS regardless of whether they were reported. After the Neteller and Epassporte issues be sure the government is either watching or will find out after the fact. I'm sure countless people will be wishing they had paid their taxes down the road.

* I'm not a CPA

[silcnlayc]

Deductions for losses are only allowed for like gambling..

Horse racing wins=horse racing losses
Casino wins=casino losses

and so on..
No mingling of wins vs losses such as bingo wins and lottery losses...(write offs)

these were just an example..

I only claim if I get W-G form from the place I gamble at..for the same amount I win I claim a loss.. and I am not a professional gambler, I just love dabbling in this area...but I do file every year anything over $600 for a dollar bet or $1200 for a $2 bet....

Hope this helps too