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The Poker Legislation Forum, Brought to You by the PPA Discussions of various poker-related laws and steps players can take to push for better laws.

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Old 09-29-2011, 12:37 AM   #46
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Re: Risky sites, the casualty loss, and possible implications for *future* play post-Black Frid

I am an accountant, if you have claimed all of your poker income, yes you can claim the lost money as a casualty loss when you are certain the money is lost. Also you would not claim any winnings until you have collected the money in your possession. You could argue and have a good chance of winning the argument in tax court that until the money hits your US bank account that your winnings would not have to be claimed until then. If you were playing on new years eve, you would have to check your balance at exactly 11:59.59 to determine your wins and losses via the accrual accounting method, which is only for companies. All individuals are under the cash accounting method. Your W2 is always the same as your last paystub that you recieved during the year.... you only pay taxes on stocks and investments when you actually sell them etc.... Same could be argued for online poker winnings, whatever you actually deposited into poker would be your basis for your investment, and whatever you actually recieve from them in your bank account would be the return on your investment. You wouldnt claim $5000 you won on the roulette table and then take a loss of $3000 on the blackjack table on the same casino trip, you would just claim you make $2000 on your trip. Same theory would apply to online poker, you deposit $1000 and cash out $3000, you would claim gambling income of $2000, no matter what you actually have tied up in your poker account, the win is not realized because the money is still at risk.
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Old 09-29-2011, 02:33 AM   #47
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Re: Risky sites, the casualty loss, and possible implications for *future* play post-Black Frid

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I am an accountant, if you have claimed all of your poker income, yes you can claim the lost money as a casualty loss when you are certain the money is lost. Also you would not claim any winnings until you have collected the money in your possession. You could argue and have a good chance of winning the argument in tax court that until the money hits your US bank account that your winnings would not have to be claimed until then. If you were playing on new years eve, you would have to check your balance at exactly 11:59.59 to determine your wins and losses via the accrual accounting method, which is only for companies. All individuals are under the cash accounting method. Your W2 is always the same as your last paystub that you recieved during the year.... you only pay taxes on stocks and investments when you actually sell them etc.... Same could be argued for online poker winnings, whatever you actually deposited into poker would be your basis for your investment, and whatever you actually recieve from them in your bank account would be the return on your investment. You wouldnt claim $5000 you won on the roulette table and then take a loss of $3000 on the blackjack table on the same casino trip, you would just claim you make $2000 on your trip. Same theory would apply to online poker, you deposit $1000 and cash out $3000, you would claim gambling income of $2000, no matter what you actually have tied up in your poker account, the win is not realized because the money is still at risk.
This makes a lot of sense to me. Couldn't it be argued that until you get the money in your bank account the money is still in play? It's just like one really really long session. I think the mistake is in looking at poker site deposits as if they were bank deposits. In reality a poker site deposit shouldn't really be considered to be equivalent to cash in this environment.
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Old 09-29-2011, 11:41 AM   #48
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Re: Risky sites, the casualty loss, and possible implications for *future* play post-Black Frid

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I am an accountant, if you have claimed all of your poker income, yes you can claim the lost money as a casualty loss when you are certain the money is lost. Also you would not claim any winnings until you have collected the money in your possession. You could argue and have a good chance of winning the argument in tax court that until the money hits your US bank account that your winnings would not have to be claimed until then. If you were playing on new years eve, you would have to check your balance at exactly 11:59.59 to determine your wins and losses via the accrual accounting method, which is only for companies. All individuals are under the cash accounting method. Your W2 is always the same as your last paystub that you recieved during the year.... you only pay taxes on stocks and investments when you actually sell them etc.... Same could be argued for online poker winnings, whatever you actually deposited into poker would be your basis for your investment, and whatever you actually recieve from them in your bank account would be the return on your investment. You wouldnt claim $5000 you won on the roulette table and then take a loss of $3000 on the blackjack table on the same casino trip, you would just claim you make $2000 on your trip. Same theory would apply to online poker, you deposit $1000 and cash out $3000, you would claim gambling income of $2000, no matter what you actually have tied up in your poker account, the win is not realized because the money is still at risk.
This is completely counter to every professional opinion I've ever encountered. People would love to do cash-based accounting with online poker (and then they could structure their cashouts so as to pay a lot less tax...) but, from the information I've helped to aggregate and collect from various sources, the IRS' notions of constructive receipt as applied to online poker are clear and unarguable.

And in your casino example, you absolutely would claim the +$5k roulette and the -$3k blackjack. The guidelines for gambling winnings and losses (for non-professionals) are very clear that different games always constitute different sessions.
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Old 09-30-2011, 04:25 PM   #49
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Re: Risky sites, the casualty loss, and possible implications for *future* play post-Black Frid

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This is completely counter to every professional opinion I've ever encountered. People would love to do cash-based accounting with online poker (and then they could structure their cashouts so as to pay a lot less tax...) but, from the information I've helped to aggregate and collect from various sources, the IRS' notions of constructive receipt as applied to online poker are clear and unarguable.
Wasn't that back when we thought the money in our accounts was backed up by actual cash?
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Old 10-01-2011, 10:30 AM   #50
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Re: Risky sites, the casualty loss, and possible implications for *future* play post-Black Frid

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Wasn't that back when we thought the money in our accounts was backed up by actual cash?
Yeah, for sure, there are definitely arguments that, looking back, constructive receipt did not apply in the case of Full Tilt Poker, particularly after the amendments to the charges last week. But it doesn't seem clean and simple.

Certainly memberly's statement that "Also you would not claim any winnings until you have collected the money in your possession" was not right -- we had no idea of this insolvency for our 2010 taxes, and it would have been 100% wrong to have elected some sort of disallowed cash method of accounting. Now, if Full Tilt Poker reopened as Full Tilt Ponzi Poker and made its accounting practices clear, and we decided to play there going forward, then I think there would be a pretty sound basis for some sort of cash-based accounting. But an entity like this would be a brand new thing in the world of gambling taxes, and might require some sort of official guidance or approval by the IRS or something, and I have no idea how that process would work.

I would agree that, logically, if authorities can pinpoint the date at which Full Tilt Poker began running its accounting shortfall, all activity after then should have been counted through some sort of cash accounting method due to lack of constructed receipt.

The issues would be that logic doesn't always coincide with IRS policy, and even if it does, retroactively changing accounting methods, especially going back into having to amend 2010 taxes, is at best a huge mess and at worst somehow not at all possible.
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Old 10-02-2011, 01:13 AM   #51
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Re: Risky sites, the casualty loss, and possible implications for *future* play post-Black Frid

Why anyone ever paid taxes pre-cashing out is beyond me
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Old 10-02-2011, 03:21 AM   #52
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Re: Risky sites, the casualty loss, and possible implications for *future* play post-Black Frid

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Originally Posted by memberley View Post
I am an accountant, if you have claimed all of your poker income, yes you can claim the lost money as a casualty loss when you are certain the money is lost. Also you would not claim any winnings until you have collected the money in your possession. You could argue and have a good chance of winning the argument in tax court that until the money hits your US bank account that your winnings would not have to be claimed until then. If you were playing on new years eve, you would have to check your balance at exactly 11:59.59 to determine your wins and losses via the accrual accounting method, which is only for companies. All individuals are under the cash accounting method. Your W2 is always the same as your last paystub that you recieved during the year.... you only pay taxes on stocks and investments when you actually sell them etc.... Same could be argued for online poker winnings, whatever you actually deposited into poker would be your basis for your investment, and whatever you actually recieve from them in your bank account would be the return on your investment. You wouldnt claim $5000 you won on the roulette table and then take a loss of $3000 on the blackjack table on the same casino trip, you would just claim you make $2000 on your trip. Same theory would apply to online poker, you deposit $1000 and cash out $3000, you would claim gambling income of $2000, no matter what you actually have tied up in your poker account, the win is not realized because the money is still at risk.
This is almost entirely wrong. Even to the point that yes ... you actually would claim $5K income from the roulette table and be allowed to take a $3K deduction from the blackjack tables.

The first sentence is correct though, I think. When you are certain the money is lost you can claim it as a casualty loss. However, there is a limit. From memory I think you can only deduct the amount of casualty loss over 10% of your adjusted gross income.

And it is true, however, that you only pay taxes on stocks and some other investments when you sell them. This is a particular exception written into the tax code. It doesn't apply to money you use to play poker on the internet. Putting money on the internet to play poker is not considered to be an "investment" and tax is not figured using a method of your deposit as your basis and your withdrawal as the return as was mentioned by a poster above. There actually are specific rules as to how to report gambling on your taxes. And this thread seems to do a pretty good job explaining it:

http://forumserver.twoplustwo.com/57...ts-faq-740589/



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Why anyone ever paid taxes pre-cashing out is beyond me
Maybe it was because according to the I.R.C. "cashing out" is irrelevant for tax purposes ....

Last edited by Lego05; 10-02-2011 at 03:37 AM.
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Old 10-02-2011, 04:26 PM   #53
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Re: Risky sites, the casualty loss, and possible implications for *future* play post-Black Frid

I'm not sure about the advice on different "sessions" for non pro's, IMO if you go to the casino and come back with 2k more than you went with, you claim 2k in gambling winnings. The fact that gambling losses are only allowed if you itemize your deductions makes this deduction nil for about 85% of all tax filers who don't have substantial mortgage interest to make itemizing deductions even an option. This fact would make this different sessions theory very unfair. To get around this, anyone who does have substantial gambling income should just fill out a schedule C and treat it as a business, this way you don't have any gambling income, it is now business income and you can deduct all of your expenses incurred.
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Old 10-02-2011, 04:40 PM   #54
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Re: Risky sites, the casualty loss, and possible implications for *future* play post-Black Frid

And another question, for all of those playing on new years eve, how do you do your taxes? What was your balance when the clock struck midnight? I'm sure the people talking about constructive reciept etc are indeed right by law, but in practice who really does this?
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Old 10-02-2011, 04:41 PM   #55
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Re: Risky sites, the casualty loss, and possible implications for *future* play post-Black Frid

who really does this? I do, and so do a lot of other players.
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Old 10-02-2011, 06:23 PM   #56
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Re: Risky sites, the casualty loss, and possible implications for *future* play post-Black Frid

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I'm not sure about the advice on different "sessions" for non pro's, IMO if you go to the casino and come back with 2k more than you went with, you claim 2k in gambling winnings. The fact that gambling losses are only allowed if you itemize your deductions makes this deduction nil for about 85% of all tax filers who don't have substantial mortgage interest to make itemizing deductions even an option. This fact would make this different sessions theory very unfair. To get around this, anyone who does have substantial gambling income should just fill out a schedule C and treat it as a business, this way you don't have any gambling income, it is now business income and you can deduct all of your expenses incurred.
It's, unfortunately, both true and unfair.
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who really does this? I do, and so do a lot of other players.
Me too.
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Old 10-02-2011, 08:55 PM   #57
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Re: Risky sites, the casualty loss, and possible implications for *future* play post-Black Frid

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I'm not sure about the advice on different "sessions" for non pro's, IMO if you go to the casino and come back with 2k more than you went with, you claim 2k in gambling winnings. The fact that gambling losses are only allowed if you itemize your deductions makes this deduction nil for about 85% of all tax filers who don't have substantial mortgage interest to make itemizing deductions even an option. This fact would make this different sessions theory very unfair. To get around this, anyone who does have substantial gambling income should just fill out a schedule C and treat it as a business, this way you don't have any gambling income, it is now business income and you can deduct all of your expenses incurred.
I certainly agree with you that it is unfair. However, it is still correct.

Also, you can't just fill out a Schedule C whenever you want. I do believe that the IRS could challenge you on it and you would have to show that you actually are acting as a professional gambler, rather than it just being a hobby. Also if you file as a professional then you would have to pay a 15% self employment tax.


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And another question, for all of those playing on new years eve, how do you do your taxes? What was your balance when the clock struck midnight? I'm sure the people talking about constructive reciept etc are indeed right by law, but in practice who really does this?
I do it.

The balance in your account is irrelevant for tax purposes. When filing as a hobby you sum all of your winning sessions and report that as income and sum all of your losing sessions and can report that as an itemized deduction. I just use Holdem Manager to filter my results and see the winnings and losses during the year. I also keep a log in Excel as the year goes on, in which I generally use each day as a session for online cash games and each tournament is a session and for live poker each table I play at is a session, etc.

So yea, before midnight on New Year's counts for that tax year and after counts for the next tax year. I've never run into this situation before though. Seriously, who is playing through midnight on New Year's?

Last edited by Lego05; 10-02-2011 at 09:03 PM.
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Old 10-14-2011, 02:23 PM   #58
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Re: Risky sites, the casualty loss, and possible implications for *future* play post-Black Frid

Balance in your account is irrelevant period. It's not income until you cash it out. How anyone could argue anything else is beyond me. It is not actual $$$ in a poker account. Player funds are not even remotely segregated in this current climate. The money indicated in your balance MAY NOT EVEN EXIST. There is another side to this, offshore companies do not give records to the IRS.

The day that the US has nationally incorporated sites, where player balance figures are supported by our legal system, is the day I will treat my balance in any poker account as real money.
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Old 10-14-2011, 04:18 PM   #59
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Re: Risky sites, the casualty loss, and possible implications for *future* play post-Black Frid

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Balance in your account is irrelevant period. It's not income until you cash it out. How anyone could argue anything else is beyond me. It is not actual $$$ in a poker account. Player funds are not even remotely segregated in this current climate. The money indicated in your balance MAY NOT EVEN EXIST. There is another side to this, offshore companies do not give records to the IRS.

The day that the US has nationally incorporated sites, where player balance figures are supported by our legal system, is the day I will treat my balance in any poker account as real money.

Better hope you don't get audited. While you may not treat your poker account as real money the IRS certainly does. They will find it, you will pay.
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Old 10-14-2011, 08:08 PM   #60
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Re: Risky sites, the casualty loss, and possible implications for *future* play post-Black Frid

doesn't this all come down to whether or not money in a poker account would be considered a cash equivalent? I think that there is a strong argument that it would not be considered a cash equivalent in the current climate.
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