Originally published on bj21.com Green Chip
McBain: If you have for example $50k in investment income, and $30k in declared gambling income, and no other income, can you deduct $20k of travel-related expenses associated with the earning of the $30k? Is there any sort of cap? I have many questions related to taxes and related information for full-time play; any recommended references?
Gustav Shoe: To deduct and expenses from gambling winnings, you have to file Schedule C and declare yourself a professional gambler. Whether or not you meet the requirement of a pro is another issue.
McBain: I'm considering early retirement in the next 10 years, with 500 hours/year AP. How does one meet the "pro" standard according to the Internal Revenue Service (IRS)? I think every answer will trigger another question. I was hoping for a resource. So before posting this, I looked for myself and found one: ProfessionalGamblerStatus.com
It spells everything out. An interesting thing- you have a better chance of qualifying as a pro by setting up an LLC with separate TIN. This has a clear legal advantage for cashing out >$10k while under a pseudonym. You can completely legally comply by giving a TIN, which I suspect could be set up so it's difficult to find a real human name associated with the TIN -- just some company name like “McBain Rocks.”
Harold Harvey: If you have no additional employment and substantial gambling winnings, you will have no trouble qualifying as a professional gambler because, in fact, you are. Filing Schedule C as such, you will have to pay self-employment tax, which may eclipse your gambling expenses. You should be sure to set up a tax-deferred retirement account as well. Schedule C also serves as a substantial bulwark against theft of your bankroll by unethical police officers seeking to pay their salary at your involuntary expense. Preponderance of the evidence is substantially on your side that your bankroll funds are for legal purposes if you have voluntarily paid taxes as a professional gambler. Today's cops may not listen, but a judge will.
Stand by for disappointment as you attempt to avoid showing photo ID at a casino cage for a > $10K cash out by just supplying a TIN.
McBain: I was referring to a hypothetical situation where someone might use a novelty ID. So you show ID and provide TIN.
Captain Jack: It would be a very bad idea to attempt to circumvent a CTR using a TIN instead of your SSN despite what you think the form states. Remember, you don't fill out the form, the casino does. You'll need to provide name and SSN...if you decide to just provide TIN and a fake name, you're inducing a false report. If you provide a business entity and TIN, the casino will likely not accept it. If you push back in any way, they're going to file a SAR against you. If you accidentally misspell your name or your SSN, you risk facing fraud charges. Stockpiling chips and limiting buy-ins are really your best methods for avoiding detection via CTR.
The real criterion for filing as a professional gambler is conducting yourself professionally. This means documenting everything -- having a business plan, keeping contemporaneous records, etc.
The following should be of interest:
*Neither the above contributors nor this website provides professional tax, legal or accounting advice. This material has been compiled and presented for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.