Totally disagree with king spews advice. The only reason to give the government an interest free loan is if you are a complete degen and you will likely lose all your $ plus what you owe in taxes before it’s time to pay.
First off if you are filing as a pro for the first time you don’t need to pay estimated taxes that year. I think it’s well worth it to just pay the penalty and pay zero in estimated taxes, it allows you a lot more flexibility with investments / bankroll, etc and the penalty is quite low.
If you do decide to pay estimated taxes just pay 100% of the previous year, you can never be wrong doing that. Also if you don’t already know this and you are starting to do really well with Poker you can contribute ~55k pretax to a self employed 401k. Huge tax savings.

I am not a real expert other than having 40+ years of paying taxes, the last 10 I have worried/studied what exposure there is to underpay taxes for gambling. I only have about 30 years of having to worry about estimated tax payments.

You are likely not on the IRS radar and can easily slide under whatever bar is set for auto-audit. I worry about audits; therefore I am not aggressive in my tax returns...I want to stay under THAT bar...always. I don't claim a home-office exemption though I CLEARLY qualify because....a HO deduction is like waving a red flag to the IRS. (Kinda makes it a When will they audit instead of will they Ever audit). I also always pay what is expected/when it is expected.

So I would absolutely pay to the 90%...and get back a handsome refund next April* in a losing year. You will hear many people snicker that "you are loaning the gov't tax free cash"....let em snicker imo. I'd rather stay away from an audit. (Understand, to the best of my knowledge, all my returns are legit and I am not hiding anything from Uncle Sam. But THE COST of defending an audit in time and money doesn't appear worth it to me. Maybe costs me a grand or three every year that I could have expensed......)

(*next April: I have my preparer do taxes for all my businesses and personal
before the end of January. I will file the next day if I am due a refund....and consequently, April 14th for the returns where I owe.)

.

If you want to avoid the penalty (which is actually a separate question and obviously DD and me/KS disagree but I'm guessing DD's situation is way closer to yours than mine), you need to pay 90% of what you owed in 2017 or 90% of what you will owe in 2018, whichever is greater.

1. Yes, you would get a refund, same as when you prepay by withholding.

2. If you project make less than expected partway through the year, you can always drop the last payment or two. Remember that the last payment is scheduled for like December so you should have a very good idea of your yearly by the time the last payment comes around.

In general, I agree with you - I personally wouldn't want the risk either (especially since I file my own taxes so if I **** up my defense in court is going to be the pathetic "plz dont send me to jail i am stupid and disorganized and didnt read the directions plz plz plz" ).

However, it's possible that the chance of an audit for a poker pro is so high that the marginal risk of a full audit is small. I imagine that for many occupations - your example of the home office deduction is apt - you're just gonna get audited anyway so you might as well just budget for it as an expected expense.

fyp

These are all reasonable points, and for an individual they're hard to know.

For some reason, we had a stretch of years where we always got a nasty letter from the IRS. Most often, they'd consider our HSA expenses as non-qualifying -- even payments to hospitals were considered taxable disbursements. First year? High blood pressure. Should we call the accountant? Then after a couple years, just a bored yawn, send the IRS supporting documentation, and then wait several months to get the "based on the information received we've decided not to prosecute you" letter. Part of this is the price of being self-employed. We don't take a home office deduction, in part to avoid more hassle.

Honestly, TheDarkKnight should find an accountant he trusts and get at least this year's stuff figured out by a tax person who knows gambling. One of the things you can pay a good accountant for is "how do I set up my finances long term so that I'm good for the next few year and I don't need you later." He might find that he likes having an expert do his taxes, and the piece of mind is worth the price. Do you cut your own hair?

Both DD's and KingSpew's POV are reasonable. Part of it depends on how risk adverse you are, how much the prospect of an audit drives you, and how close you run to ruin on your BR. From what he's said around here, I suspect that DD is willing to play really big vs. his liquid net worth (let's ignore total net worth, but just cash on hand). I suspect that TDK isn't jumping into any 1K/2K games no matter what, and his tournament successes mean that locking up a few K for a few months from over withholding can't really matter. Just that difference (among many potential others) might result in very different answers to the same questions. Personally, paying penalties drive me nuts and the incremental opportunity value of the cash is really low...

I'm pretty sure Jesse reccommended a tax guy in his blog. It may be a decade old but it's a place to start.

Tons of pros around here who could give recommendations.

I’ll be at Bay101 the b do couple days giving $ away to this mid-stakes regs. Come say hi if you are there and so inclined.

Hf

Day shift or night?

Let’s say evening. Like now evening.

I actually got a fair amount of crap for it when I mentioned it, but I have a mutual friend with Lee Markholt (one of the most successful poker pros from Washington state) and I asked our mutual friend if he could find out who did Lee's taxes and ended up using the same accountant. I thought finding someone with that much experience with a professional gambler was a smart idea, but apparently it was the object of much ridicule here.

Unfortunately she is retiring this year and someone new did my taxes. My old accountant looked it over, but it does kind of feel like I'm getting my car fixed and just trusting that the people that are supposed to be experts at their jobs are actually experts and are not screwing me over somehow.

I played at the same table as Lee during the Muckleshoot Main Event the last two days and interacted with him for the first time. I am definitely a fan.

I did put $5k into an IRA right before I filed this year.

I obviously never want to be audited, but I keep such ridiculously accurate records that I'm not worried about it, other than the annoyance of it.

What exactly does "give the government an interest free loan" mean? That you aren't paying quarterly? You just pay when you file? I've been under the impression that quarterly payments are required.

Also, I know nothing about this penalty, which seems odd because it should be something my account would mention to me.

It means paying more than the bare minimum required and paying the balance in April. Most people would rather pay more during the year and get a big refund and think they did something smart. Anyone routinely getting a refund from their taxes is an idiot I promise you that. Money has opportunity cost. If the government is holding it than you can’t use it to invest in something.

Buy the book “the gamblers guide to taxes” or read some gambling tax blogs and buy turbo tax and do it yourself. Most accountants are terrible with gambling stuff and don’t know the law. If I was paying someone to do my taxes I would hire a tax attorney not a cpa. A tax attorney you can have privileged conversations with and they actually know the tax law.

Read everything on the bogleheads forums too so you can make good investments / decisions.

You may want to reread carefully to see what people (presumably including raging *******s like me) were mocking.

DeathDonkey is more famous than Lee and now you have a first degree connection with him.

You can even have a good laugh at the expense of all of us idiots who mainly earn W-2 salary but are stupid enough to pay quarterly.

Bare minimum for what? Certainly not bare minimum to avoid penalties.

Most people would rather do their taxes in a way that in the future if questioned, there is no question of intention.

Grossly and deliberately underpaying comes with the added penalty of criminal liability. You have 3 years to amend a tax return but no statute of limitations on tax related crimes.

The absolute best goal is, indeed, the bare minimum. I would argue that the minimum is the 90% of your tax bill, I don't know if you have a different number in mind or if you have 0% in mind. 90% would be a slam dunk defense of good faith should you ever be questioned.

Your investment has to be short term because it has to be liquid by the following April, and it's a fraction of your tax burden which is in turn a fraction of your total winnings, but sure.

---

Most of us chumps grinding the 9 to 5 struggle with this too. I've filled out like 15 W-4s in 20 years in an attempt to keep my withholding between "gubment out to get me" and "oh god i could buy a car with this refund".

Fatwallet Finance was extremely helpful for all tax and financial related stuff before they shut down. Also second looking into IRAs and other tax beneficial retirement vehicles if you haven't already.

The estimated tax payments are not required but there is a modest penalty for underpaying your taxes (~4% interest rate) before the calendar year is over. How much not making estimated tax payments but paying in full when taxes are due factors into an audit risk I'm not sure.

Congrats on your tourney score.

I agree in principle. That is, I agree that in a rational world with rational actors this criticism of the tax refunds makes sense.

However, for a lot of people, the $3000 "windfall" they get as a tax refund is better for them than the $250/month they would get by adjusting their withholding. It's true that they lose out on some interest that they could be earning, but (especially with interest rates where they are) that's not saying a lot. It functions more like a forced savings account and a once a year financial boost. The small monthly increase just slowly leaks out anyway, preventing them from achieving any sort of financial goal.

You have to keep in mind that most Americans can't even find enough liquid cash to take care of an emergency.

https://www.huffingtonpost.com/entry...b0022830090e5b

This is from 2018, but there have been other such reports in the past. Here is one from 2017:

https://www.cbsnews.com/news/most-am...gency-expense/

From 2016:

https://www.forbes.com/sites/maggiem.../#74fd0c1d4e0d

So the once a year bailout can be more functional than a smaller amounts of money passing through the household over the course of the year.

You might still be right that they are an idiot. But maybe their idiocy is saving them from even worse things.

That's a fairly strong assertion, but let's give that to you for "most people". Don't think anyone here made that recommendation. From what I saw, people here were pushing the idea that you want 2 things. 1) Avoid paying penalties. 2) Avoid potential issues around systematic under-withholding, even if this is just extra audits. You might be more aggressive and disagree with both points as issues.

In my ideal world, I either get nothing or write a small check. Plus or minus a few K on this should be in the noise. If I owed 10K+ and paid fines, a new accountant would be on the table. Getting back 10K in refund would probably feel the same, though I'd look for reasons. Since your average time lost is 6 months, how big a deal is a 10K "interest free loan"?
The whole "most people" thing for poker players is apples/oranges arguing. If you are this bad with money, you'll never have any real poker BR. These same "most people" would never accumulate enough cash to play mid-stakes. TDK doesn't have this kind of money problem. So arguing for/against the effective utility of big refunds is unrelated. It is entirely possible that DD is right that most people want this, that you're right that it may be good for them, and that DD is right that TDK should pay the minimum to avoid jail so he can shot take at the 100/200 game at commerce.

Another kicker to consider is what it would cost you financially and time-wise to deal with an audit. If you are a business owner or shareholder, it would be extremely costly on both fronts. Conversely if poker is your sole source of income and you don't do much else, it's less costly so long as you keep meticulous records.

Actually, the main consideration should be if you have a bad run busto your score, would you have funds to pay at the end of the year. The worst thing that can happen is owing money to the government and not being able to pay it.

If he's busto on the score and filing as a poker pro, he wouldn't owe any money b/c he's lost it. QED. For we recreational players, it would potentially be a bigger deal due to how wins are gambling income, losses are itemized deductions, and potentially high earners run into AMT issues.

Honestly doubt TDK is going busto in this sense -- he seems to play smaller than what he's made in scores and to be pretty conservative, overall.
Just going to come out and admit that I'm irrational. The greatest cost of a serious audit would be lost sleep and mental anguish. Sure, go on about lost work hours and accounting expenses. The truth would be that it would make me miserable far out of proportion to the dollar amounts I might have to pay. If you put DeathDonkey, OTR15, or Jesse8888 in the same spot, I'm coming out far worse due to this stuff.

Set a dollar amount for this. On one side, you pay $X in lost expectation for tax efficiency. On the other side you'll face 3 or 4 annoying audits and one freaking serious one where the IRS agent claims potential jail. Your accountant will tell you the whole time that you're never going to jail, but you spend a few days in meetings and a few weeks/months wondering. Basically, how much in $X will you pay to avoid the other side?

DeathDonkey probably has access to premium short term investments that most of us don't, e.g., high quality tournament staking opportunities.

Oh c'mon now. Facts please.

"Estimated taxes are not required". Hogwash. If you underpay your taxes because you failed to make estimated payments (employer underpayments count too btw....make sure your employer is withholding the proper amount for you always).....you pay interest and maybe a penalty. Yeah, lets pay more on purpose!

The penalty is not the interest you owe. The penalty is in addition to interest owed. The penalty is a floating number based on several factors and can amount to a significant amount of money.

And as mentioned by me earlier and backed up by other's thoughts......the time (lost sleep and anxiety too !) to defend an audit can consume a person. If it is only money, it is cheap. I'll make more. What I can't make up is the lost time....get to my AARP age and financial position and you will understand.

Eh, I doubt those qualify as premium short term investments. I'm guessing cash game action is more likely to be considered premium.