Gambling and US Taxes

[DeNutza]

I have heard from multiple sources that telling the
IRS that you are a "professional gambler" on
your returns is a big red flag, and you will be possibly
subjected to years of scrutiny.

Starting in the 2003 tax year, online gambling will be my sole
source of income.

Tax advisors recommend using a Schedule C for pro's
(Profit/Loss as a business)

I want to pay taxes on MOST of my net profit, but
don't want them on my back.

Does anyone out there just use a standard 1040? form
and just lump your net wins in the OTHER column? (even
though gambling is your only source of income).

I have heard the IRS may still get mad, because you
are skipping out on self-emplyment taxes (S.S., 12%)

What is a good occupation to use? "Casino"? "unemployed"?

[Blowfish]

While the IRS will deny that placing "Professional Gambler" on your tax return as an occupation will not raise red flags, use some common sense. If you are a professional gambler, your activities that you are reporting are no doubt going to intermingle with others' activities that are NOT being reported. They take a look at you and you may not get into any trouble, but those around you may become subject to scrutiny.

The best thing to put on that line is "self employed". While there is a self-employment tax.....there are a lot of additional exemptions you are entitled to (home office deductions, etc. etc. etc.) that can help reduce or eliminate your income. The rules are somewhat complicated, but if you don't want to pay a tax professional and want to spend some time figuring it out on your own, buy one of the tax packages like Turbo Tax that will walk you through it.

Lumping ALL your income on the "other income" line is a bad idea as you are supposed to disclose where this other income came from. If it is not a significant amount, then they won't take the time to look; however, if you are putting a few hundred grand on that line without further detail....they're gonna ask.

Having them on your back kind of goes with the occupation you've chosen. Unless you move out of the country and live off cash, you always will run the risk of additional "attention".