So in 2015, when clearing an on line casino bonus, I hit a 6kish win on a slot machine, which resulted in an tax notification. No big deal.

I declared as a professional which I have been doing for a few years (since on line legalization happened or was imminent in NJ). (I've been declaring my winnings for much longer, just not as a professional when everything was off shore and sketchy as hell)

For 2015, they said I couldn't declare as a professional and to the best of my understanding their position was that if gambling isn't your primary source of income then you can't declare as a professional gambler.

Basically this resulted in a higher tax bill because the casino win pushed me to a higher bracket (had a pretty bad year and misunderstanding a casino bonus rules and getting really lucky put me in the black, well sort of with this ruling).

It looks like they are just cherry picking here and making stuff up, but maybe something has changed in the code?

I'm sending them one last letter asking for what they are basing that position on and asking them to refund my previous self-employment tax if that is the ruling, but I don't think it is worth it for me to pursue it further. (Amongst other things I don't play nearly as much as I used to; not having to file a schedule C is nice; not paying self employment tax is nice; not having to keep such rigid track of everything is nice)

It's just weird that they are suddenly interpreting it this way (I stop using an accountant for my taxes in 2014 I think, so I don't have him to consult and I don't think it is worth my effort and money to hire someone to advise me on this, since poker and bonus whoring don't generate that much any more)

So, if you play professionally for an additional revenue stream, be advised that the IRS has some (what I think) are curious rules, or maybe just guidelines that wouldn't stand up to concerted push back.

I'm not a CPA, but based on stuff I've read here I always thought it was the case that you could only declare as a professional if gambling was your primary source of income.

Lots of info in this thread:
https://forumserver.twoplustwo.com/5...mateur-200783/

That thread has no new content posts since I last used an accountant. My accountant could easily have had different interpretations of things than the general consensus, as that was not his specialty. Also, from skimming that thread there was a lot of discussion about if people could NOT file as a pro, to reduce their tax burden. I willfully accepted the extra burden because I thought it was the right thing to do.

DrMick - that makes no sense to me (and the IRS didn't object in previous years when I was paying more by declaring as a professional). If it is a business, it's a business whether it is your primary source of income or not. If I am in the business of say selling things on ebay, and I make 50K a year doing that, but I make 100K at my normal job, I would expect the IRS to say I could not just claim that as other income to avoid paying self employment tax on it.

I don't think it's worth it to hire an accountant or lawyer for their opinion and to write a letter, especially since this will result in me paying less overall. (Especially if they refund the self employment tax from years past, but I'm not holding my breath on that).

I'm just kind of miffed that when I was paying more by declaring as a professional they were totally fine with it but when as it turned out I would pay more not declaring as a pro (which I didn't even know until I got their correspondence), they switched their stance.

Try searching for T.C. summary opinion 2010-84. A United states tax court opinion which states that there is no statute or case precedent that a gambling activity has to be pursued full time to be a trade or business.



https://www.ustaxcourt.gov/InOpHistoric/l3e.sum.WPD.pdf

There are plenty of policies that are in place to maximize the income to the IRS. For example, if you sell an asset for a capital gain, you will incur the tax on it immediately. But if you sell an asset at a loss, there are special rules which may prevent you from incurring the loss (and the associated tax benefit) immediately (ie.. wash sales, etc.). So basically, the IRS is "rigged" to make sure you pay up. That's why its such a highly respected and adored part of the government.

As for the question at hand, my accountant has always suggested that, in the special case of gambling, the IRS does not allow people to qualify as a business/trade unless one spends the majority of their "work-week" time (20+ hours/week) engaging in that activity in a demonstrable way (play logs, receipts, etc.). Of course, the IRS determines these things on a case by case basis, so the 20 hour rule is not hard and fast.

The IRS is generally always fine with your paying more than you need to.

Depending on someone's tax situation, filing as a pro could be a benefit or a detriment. The downside to filing as a pro is the self employment tax, but there are many potential upsides including (1) netting your wins and losses and (2) being able to deduct expenses like training site subscriptions, poker software, travel to/from tournaments, home office, computer hardware to play poker on, etc. So some people would save money by filing as a pro, some people would lose money.

What the IRS doesn't want you to do is just pick the status which would result in a lower tax bill. If filing as a pro would lower your tax bill, they want you to prove that you're a pro. If filing as a pro raises your tax bill, they probably won't care if you file as a pro until there comes a year where this is not the case.

In OP's case, not being able to net his wins/losses appears to have cost him a lot by raising his adjusted gross income, which is why the IRS is willing to fight pro status to get more money.

I am not a tax professional, just have done a lot of reading on the internet about this.