Hopefully poker players and gamblers alike will finally start being treated with a little more respect. By that I mean two wonderful things have happened over the past several months that make us actually smile a little about taxes.
First, the Foreign Bank Account Reporting Form is no longer necessary for poker players to file on their online poker accounts.
To recap, this is a form that was due June 30 of each year, filed separately from your tax return. It was required if you had a “foreign bank account” during the prior year with $10,000 or more in that account for any moment of time. So, in the past, if you won a tournament online and the amount was more than $10,000 you would have to use this form even if you transferred the money out seconds later. Also, if you had more than $10,000 collectively on multiple sites you would have to send in the form. Now, with a recent clarification on what is considered a foreign bank account, our poker accounts are not classified this way any longer. BUT, if you have Neteller/Epassporte, etc. those are foreign bank accounts and fall under the rules.
The other great ruling that has occurred is now we don’t have to worry about our expenses for gambling that throw us into a loss. Let me explain. As (I hope) you know, gamblers of any kind, whether you are a business or not, cannot deduct their losses beyond their income. This is the worst, most pathetic rule in the IRS Code, in my opinion, and needs to be changed. But, that is another battle. So, in the past, some tax preparers felt if their gambler clients had expenses, you couldn’t take them when those expenses threw you into a loss on your tax return. Remember, you can only take expenses, other than gambling losses, if you file as a professional on your tax return. So a lot of tax preparers that had professional gamblers as clients, took the conservative route and did not deduct those expenses because we never had a clear understanding of what we could do.
I never took that approach. I always felt we could deduct those expenses and I always have taken them on my clients’ tax returns. I knew I had a great argument for taking these and I knew I could win. (And if you know me, you know I usually win arguments … just ask my husband!)
What this means is if someone did your return as a professional poker player and did not take these expenses, you missed out. You can amend your returns back a couple of years but beyond that, you lost them. My clients are pretty happy with me right now.
So there you have it. Maybe this is the beginning of more wonderful breaks for players … we can only hope.
Now that tax season is over, hopefully I will see you at the tables. And always remember, if you see me playing, I will be glad to answer any questions as long as you didn’t just win a big pot off of me!
— Ann-Margaret Johnston is a practicing CPA in North Georgia. She is the author of How to Turn Your Poker Playing Into A Business. You can find answers to commonly asked poker tax questions on her website at pokerdeductions.com.