In 2011 I played in a WSOP event...I cashed the event for a little more then $10,000. A week later I took this $10,000 and bought in to the Main Event and busted without a cash. Today I received a letter from the IRS saying I owed them $3,100 in taxes for 2011 gambling profits. I definitely lost a lot of money in 2011 gambling and have documents (my Main Event buy in) showing directly where the profits went to. It says I have until Nov 27th to either accept what I owe them and pay or I can submit a claim with documents to dispute it. I filed my 2011 taxes with an accountant who said I didn't need to claim the winnings because I had gambling expenses offsetting it. Does anyone have any first hand experience regarding a situation like this?
Sports247. Biggest question here. Did you itemize your deductions in 2011?
If you did itemize then you should write them a letter if not amend your return.
If you get a W-2g, you HAVE to report this as income. If you have losses (in this case you do from WSOP) then you may deduct them up to your gambling winnings (in this case, $10,000 of deductions) on your schedule A. You didn't report the income but they know about that....they definitely won't know about the losses unless you tell them.
If you do not file a schedule A, or do not itemize you are pretty shit out of luck. Such a big amount we are talking here ($10,000) so even if you didn't itemize I'm sure we can amend it to itemize at this point and get some of that $10,000 deducted. However, if you did not itemize on a schedule A, you will have to pay taxes....just not the full $3100
If you did itemize then you should write them a letter if not amend your return.
If you get a W-2g, you HAVE to report this as income. If you have losses (in this case you do from WSOP) then you may deduct them up to your gambling winnings (in this case, $10,000 of deductions) on your schedule A. You didn't report the income but they know about that....they definitely won't know about the losses unless you tell them.
If you do not file a schedule A, or do not itemize you are pretty shit out of luck. Such a big amount we are talking here ($10,000) so even if you didn't itemize I'm sure we can amend it to itemize at this point and get some of that $10,000 deducted. However, if you did not itemize on a schedule A, you will have to pay taxes....just not the full $3100
You may or may not wind up paying additional taxes, but it's unlikely you'll pay as much as they're looking for. As already stated, you can deduct gambling losses to the extent of gambling winnings claimed and such deduction is an itemized deduction. So using your numbers the deduction would be 10k. It would be smart to obtain documentation for such losses, like a profit loss statement from a casino or a transaction history showing how much you transferred in.
If you already itemized, the net result would be a wash at the federal level (no taxes due). If you did not itemize you can probably itemize now, especially if you're single. If you're married and didn't itemize, the chances are the benefit from taking the deduction will be reduced. Itemized deductions include home mortgage interest paid, real estate taxes paid, motor vehicle taxes paid, state income taxes paid and donations to charity (including non cash donations like clothing)
I don't know where you live so I don't know what, if any, your state tax consequences may be.
If you want my help, PM me with your cell number.
First thing is to fire your tax professional. You have to report winnings and then deduct losses. Just because you netted nothing or even a loss, you still have to report it. Anyone preparing returns should know that and if they don't chances are they have screwed up something else along the line.
Seriously, an accountant told you not to report your winnings. The simplest tax program has you list your winnings and losses. I have used Turbo Tax for years to file and have never had an issue. The only time one should hear from the IRS is for an audit if they want to see your gambling log to substantiate your records.
Thanks for all of the help. When I won this I was in college and just let my parents handle it so I wasn't for sure how it was filed. Before I went back to school I spoke to him about it but never knew how he filed it. I don't think he said ''not to report it'' I just assumed he had it taken care of as it is 3 years later. Before filing he said they would offset so I assumed he filed the necessary paperwork for that to happen. I spoke to him earlier and he said it was not itemized but that I can now itemize the deduction and to send him the paperwork I received from the IRS. He said it might not be dollar for dollar but he thinks I should pay less than 1/3 of the $3,100.
