Can IRS tax your winnings

[aslan]

Well how THAT works is if your income is coming from something illegal, you don't put "selling illegal drugs" as your occupation on your tax return. You simply report it as "other income".

The general policy is the IRS won't question where the money came from if you're reporting it as other income or something. Now if you're a dumbass and write down you're doing something illegal on your tax return then you're kind of putting them in a position where they have to do something about it now.

Well, let me know how it goes when you put that political hit ($100,000) along with those two mob hits ($15,000 and $10,000), plus all the drug income ($235,000) under the Other classification. That's $365,000 in income of undisclosed source. Don't pay any attention to that white van parked two doors down and across the street for nine days now. Or that echo sound you sometimes hear on your telephone, Don't ponder why the gas man took so long reading your meter in the basement. So it didn't look like your trash service picking up your trash this morning; so what? Why would anyone want your garbage anyway? Did you see that man walking quickly away from your car? Probably just someone late for supper.

 

[QFIT]

Well, let me know how it goes when you put that political hit ($100,000) along with those two mob hits ($15,000 and $10,000), plus all the drug income ($235,000) under the Other classification. That's $365,000 in income of undisclosed source. Don't pay any attention to that white van parked two doors down and across the street for nine days now. Or that echo sound you sometimes hear on your telephone, Don't ponder why the gas man took so long reading your meter in the basement. So it didn't look like your trash service picking up your trash this morning; so what? Why would anyone want your garbage anyway? Did you see that man walking quickly away from your car? Probably just someone late for supper.

You list it on schedule C under gross receipts. There is no place to explain the source and you need no other documentation.

 

[aslan]

You list it on schedule C under gross receipts. There is no place to explain the source and you need no other documentation.

Good idea! That will certainly work better than "Other Income" as Blackriver proposed.

Let's see, first we'll have to name our business. How about Phreelance Pharmaceutical Enterprises, with a subsidiary, Whackmaster Service Company. Hmmm, that means two separate Form C's. Okay, then on Line A we'll have to describe the professional activities that provided the principal source of income reported on Line 1 (gross receipts). Let's see... Product Marketing and Distribution for the first, and maybe, Accounts Receivable Collections and Maintenance of Territorial Integrity for the second. There are other informational requirements, as well, which I am sure Blackriver will no trouble completing. Go for it, Blackriver! You're almost home free.

 

[QFIT]

Good idea! That will certainly work better than "Other Income" as Blackriver proposed.

Let's see, first we'll have to name our business. How about Phreelance Pharmaceutical Enterprises, with a subsidiary, Whackmaster Service Company. Hmmm, that means two separate Form C's. Okay, then on Line A we'll have to describe the professional activities that provided the principal source of income reported on Line 1 (gross receipts). Let's see... Product Marketing and Distribution for the first, and maybe, Accounts Receivable Collections and Maintenance of Territorial Integrity for the second. There are other informational requirements, as well, which I am sure Blackriver will no trouble completing. Go for it, Blackriver! You're almost home free.

Line A instructions do not require detailed information. Leave lines C, D and E blank. Line F, check Cash. Line 1 is income. For a big-time drug-dealer, I suppose Line B could be 424990-Merchant wholesaler-Other miscellaneous nondurable goods. For a small-time drug-dealer, 454390-Nonstore Retailers-Other direct selling establishments. A hitman could use 561710-Exterminating & pest control services.

The IRS cares about underreporting, not reporting income for which they have no record.

As always, I suggest getting an accountant to fill out your forms. My accountant has many gamblers as clients.

 

[aslan]

Line A instructions do not require detailed information. Leave lines C, D and E blank. Line F, check Cash. Line 1 is income. For a big-time drug-dealer, I suppose Line B could be 424990-Merchant wholesaler-Other miscellaneous nondurable goods. For a small-time drug-dealer, 454390-Nonstore Retailers-Other direct selling establishments. A hitman could use 561710-Exterminating & pest control services.

The IRS cares about underreporting, not reporting income for which they have no record.

As always, I suggest getting an accountant to fill out your forms. My accountant has many gamblers as clients.

:laugh: :laugh:

Nonstore retailers... Perfect!
561710 - Exterminating... IRS has a category for everything! :laugh:

 

[Meistro]

Gambling income is treated like any other income by the IRS. For that matter, Canadians who gamble in America are obligated to pay income taxes to the IRS on their net winnings as well. The legal penalties for evading taxes are severe so d̶o̶n̶'̶t̶ ̶g̶e̶t̶ ̶c̶a̶u̶g̶h̶t̶ make sure to file reports of gambling income to the IRS.

 

[gronbog]

Amounts withheld by the IRS from Canadians are recoverable. There are several firms who will help you with this.

 

[Meistro]

The recovery method involves showing or manufacturing losses. Canada and the US have a tax treaty which states that Canadians are taxed like Americans when it comes to gambling income.

 

[gronbog]

My experience has been a bit different and it's important that we reach the right conclusion, whatever it is. My big wins in the US have been from tournaments and the casinos have varied in their policies regarding withholding. I've had 30% withheld on as little as $1,000USD and had as much as $12,000 USD paid to me without withholding or any tax forms. In all cases, I was able to get the entire amount back (less commission) without showing any losses other than tournament entry fees.

See the link below. It could be because these were blackjack tournaments or because they were deemed to be a "contest". I don't know. I can only report on what my experience has been.

https://www.blackjacktournaments.com/threads/tax-info-on-u-s-gambling-for-canadians.8419/#post-48960

 

[Meistro]

Please refer to this thread for more information :

https://forumserver.twoplustwo.com/65/tournament-events/canadian-winning-vegas-taxes-withheld-832851/

Also, you should note that the position of the CRA is that professional gamblers do owe the Canadian government taxes on their winnings. Their legal track record in making gamblers cough up the dough is not very impressive, the tally is 7-1 in favour of the gamblers. According to the CRA however, if you have a reasonable expectation of profit or the majority of your income is derived from gambling then you must pay income taxes on your winnings.

Of course, I am not addressing the issue of whether or not withholding can be reclaimed, or what is the likelihood of legal trouble if you circumvent either the CRA or the IRS, I am simply trying to relate my understanding of the legal situation facing Canadian gamblers based on the positions of the IRS and the CRA as well as those of the American and Canadian governments.

 

[ZeeBabar]

Given what our country dries with our tax dollars, it's a form of rebellion to give as little tax as you can get away with. Trillions of dollars to go maintain the Empire, get to defense industries, to "aid" to other countries (a form of money laundering) as the money ends up in contracts to corporations.

I'd rather give it to charity, to the poor.

 

[Meistro]

I couldn't agree more ZeeBabar. A lot of the time foreign aid ends up doing more harm than good, because it is used to prop up a corrupt government that is actively empoverishing their nation, or is used by one ethnic group to control or subvert another. Poverty in third world nations is a problem that needs to be seriously addressed but the solution is trade and private investment, as well as legal and economic reforms in the struggling nations, not foreign aid programs. And as for Western imperialism, I for one am firmly opposed to it. Peace, trade and friendship with all nations, but wars and entangling alliances with none.

 

[Splittingten's]

I was always under the impression that IRS couldn't tax your winnings because casinos don't report winnings for table game players because they claim that they dint know how much a player is in for so they don't know if they're actually winning.

 

[Meistro]

Casino staff do keep pretty close tabs on how much people buy in for, but those records are just for internal use I guess, such as backing someone off at a certain aggregate win. I guess there are two separate issues, the legal situation, and then the risk incurred by committing what is termed 'tax fraud' and not giving uncle sam his cut.

 

[Splittingten's]

Yeah, casinos do keep records of your winnings bye they don't like you paying taxes either. If you pay taxes you can't gamble that money back to them. It also acts as a deterrant to gamble if you're forced to pay if you win.
Unfortunately, it's very easy to avoid paying taxes on your gaming winnings at the tables. I know that I would keep close tabs on all my winnings so that I could pay the IRS in full.

 

[Joe Mama]

Gambling income is treated like any other income by the IRS. For that matter, Canadians who gamble in America are obligated to pay income taxes to the IRS on their net winnings as well. The legal penalties for evading taxes are severe so d̶o̶n̶'̶t̶ ̶g̶e̶t̶ ̶c̶a̶u̶g̶h̶t̶ make sure to file reports of gambling income to the IRS.

Not exactly, you do not need to pay social security taxes on your winnings unless you file a schedule C as a professional gambler. If you do not file as a pro, you may only deduct gambling losses up to the amount of your winnings. If you do file as a pro, you are subject to SS taxes(self employment tax) but you can deduct any expense associated with your gambling business (travel, hotels, meals, software, disguises?, etc.)

 

[Meistro]

Thank you for that clarification Mr. Mama.

 

[Splittingten's]

I would never play the WSOP because the traverses are so high I would never be able to justify the cost of play! You can never run from taxes on a poker tournament!

 

[Meistro]

You play poker?

 

[Splittingten's]

Yeah, I made somewhere in the vicinity of 5 thousand back when I use to grind out my local 1 2 games. I did that for about 6 months. I ended up quitting because I was only making 10 dollars an hour afterwhich use to be 20 an hour.
I could still probably beat the game. Lower limit poker games are stupid easy. Especially on the weekends. One mistake I made playing poker was trying to turn my part time / friday saturday sunday poker night thing in to a 9 to 5 days a week job. The problem with that is that the monday morning regulars are a lot harder to beat than the weekend warrior who is taking a break from the main cadino floor. All the good promotions are on the weekends too, when the fun players are in. Promotions can be a huge deal.