I expect poker to become my sole source of income later this year and am curious about my tax options given the following scenario:
Basics: Nevada resident, $80k annual poker winnings, live cash game player, no other job
If I just use a personal tax return would this be taxed as "normal income" or would I have to pay gambling tax on all winnings?
If I were to form an LLC what tax scenario would I be looking at? Does the fact that income comes from "gambling" mean that I would be taxed differently than if I was some random LLC? Would my income paid out to myself still qualify for Nevada's no income tax?
Say I earned $70k in Nevada and $10k in other states. Would that affect my taxes differently based on if I formed an LLC or not?
It looks like I'd have to pay self employment tax either way. Are there notable deductions/tax obligations that would vary based on what I do?
Thanks in advance for help on any/all of those questions!
Not a tax expert ...
1) If you are a professional 'anything' you typically use Schedule C to work through your income and allowable expenses to determine your taxable income. Then that number goes on the appropriate 1040 line, page 1.
2) An LLC must make an 'election' when formed as to how it's going to be treated come tax time. Typically this will end up on your tax return each year 'anyway' unless you elect to be a 'corporation' LLC. In a corporation LLC your earnings may end up being double taxed, which is probably not something you want. Nevada may have it's own specific rules on LLCs ... like not allowing one person LLCs to exist at all. LLC typically reduce (or eliminate) personal liability of the owners, something that probably really doesn't apply to poker players IMO.
3) You typically have to file in each state where you earn income. Some bordering states have 'reciprocal' agreements to limit the flow of paper on each side and then they settle up somehow later.
4) You can take 'allowable' deductions that most any business can take. Like if you play poker online in Nevada you can write off your computer as long as it's used exclusively for poker.
5) You have eluded to it, as an independent you are obligated to both sides of the FICA/MEDiCare taxes that would normally be split between you and an employer. The SEP or Alternative Minimum Tax may apply as well.
Make sure you make quarterly deposits to cover most of what you will owe to both the Feds and State. And all of this is from an outsider!! Just imagine what a CPA is going to tell you. I assume there are one or two in Vegas that specialize in helping professional gamblers with their returns ... CALL THEM NOW< not in December when it's too late to (perhaps) learn how to track things the best way. GL
