1) What qualifies me as a professional
gambler and is there a benefit filing my taxes as
2) Why do I need someone specialized
in accounting /tax preparation?
3) If I gamble online or overseas do
I still have to pay taxes on it?
4) What is the accepted schedule
of play required by the IRS?
5) What is the importance of being AUDIT
6) Is it beneficial to Incorporate
as a Professional Gambler?
7) I'm a non U.S. Citizen who cashed
in a US Event. 30% Federal Withholding was taken out
of my winnings and a W2-G was issued. How can I get
my money back?
What qualifies me as a professional gambler and is
there a benefit filing my taxes as such?
Are you playing “full time” with the intent of earning
a living? By definition, this is your job. You don’t
always have to be turning a profit for this to be
your profession. To be a professional, you need to
treat yourself as such. Professionals must consider
themselves a business and participate in accepted
business practices for the IRS to also treat them
as such. Being a professional gambler allows you to
take additional business expenses: travel, supplies,
dues, etc. Unfortunately, a recreational gamer can
only deduct limited losses against winnings.
Why do I need someone specialized in accounting /tax
There are many different ways gambling wins and losses
can be presented on a tax return. If a person lives
in a state that does not have legalized gambling,
a local tax firm may have little or no experience
with gaming wins with exception of the occasional
winner on vacation. The IRS has specific rules that
are related to gambling, especially when done as a
profession. These laws change often. Taxpayers need
to make sure they are not filing incorrectly, causing
red flags with the IRS. Taxpayers need to make sure
their tax preparer is qualified to handle the complexity
of a return with the professional gambler status.
Ask if they have ever ACTUALLY prepared a return for
a “Professional Gambler” on both federal and state
returns. Tax preparers can be uncomfortable using
this status because of its rarity and complexity.
Ultimately they may be ultra conservative in handling
the player’s expenses and losses instead of maximizing
the true benefits of filing as a professional.
If I gamble online or overseas do I still have to
pay taxes on it?
Under the Tax Code, as a US citizen, all income is
taxable, regardless of where or even HOW it is earned.
With the ever-changing laws regarding online gaming,
professionals need to make sure their taxes are done
correctly to keep them from being criminally liable
to the IRS. Each professional gambler could have many
sources of income, i.e., live play, online play, tournaments,
public appearances, sponsorship, royalties, etc. In
this field, it is harder for the government to prove
winnings and losses, especially with all of the international
ties. Accepting that fact, audits can be very intrusive
and aggressive, as well as expensive.
What is the accepted schedule of play
required by the IRS?
Even though being a professional gambler is a business,
it does not have typical bookkeeping records and files
like a typical business. This makes it difficult for
the IRS to audit the day to day activities
of the business. Since there is no definitive way
for the IRS to truly track ALL your wins and losses,
they require accurate, DAILY, records of activity.
They typically like to see it written down the old
fashioned way. However, in this day and age, more
technological ways of record keeping are being accepted.
There is various software and mobile apps on the market
to assist with this.
The following information needs
to be recorded for EACH SESSION:
of game played/level
amount of win/loss
For live Poker Tournaments, make
sure to keep Buy-in Receipts.
For slot machines, you should
note the machine number.
For other gaming activities,
like Sports Betting, Keno or Bingo, try to keep losing
tickets, receipts, payout slips, racing programs,
Although this sounds easy enough,
most players DO NOT comply with this requirement,
which may cause unfortunate and costly repercussions.
What is the importance of being AUDIT READY?
For an individual, the IRS has a
three year window to audit a return. If the IRS feels
that income was under-reported or reported incorrectly,
they can audit ANY of the previous returns. It is
incumbent of the IRS to prove your income, while it
is the taxpayer’s duty to prove all of their deductions.
If audited the IRS WILL require an exorbitant amount
of paperwork and records.
The IRS can be very aggressive
and intrusive during an audit of a Professional Gambler,
since they MUST rely on the taxpayer’s records. They
don’t have the luxury of having W2’s, W2G’s 1099’s,
etc., for all of their income flow. If an individual
is not prepared, it can be very difficult finding
or recreating paperwork, especially for the “schedule
of play”. If a person cannot supply the correct documentation,
many of their deductions could be overturned, causing
hefty fines and penalties as well as additional income
Having someone represent them in
an audit can also be very expensive and is stressful
for the taxpayer. Being “Audit Ready” means having
all of the required paperwork back-up and “schedule
of play” completed by tax time. It is not submitted
with the tax return, but saved “just in case”, therefore
eliminating future hardships, expenses and stress.
Is it beneficial to Incorporate as a Professional
There are many reasons individuals
“incorporate” in this industry. It is a possibility
the IRS may not agree with a person’s Professional
Gambler Status but performing this function under
the “Corporate Umbrella” may be the answer. Also the
IRS may deny status if a person has another job or
treats gambling as a recreational hobby. This is especially
true for those who do not keep adequate records. Players
may dabble in a variety of income generating activities,
including sponsorships, writing and blogging for magazines,
photo shoots, commentating, personal appearances,
etc. All of these activities are related to the professional
field and can be treated as income under the Corporation.
Nevertheless, there are a variety of pros and cons.
I'm a non U.S. Citizen who cashed in a US Event. 30%
Federal Withholding was taken out of my winnings and
a W2-G was issued. How can I get my money back?
Individuals from certain countries
may have taxes taken out by the US based casino AUTOMATICALLY.
The casino is obligated to withhold up to 30%. In
many cases, SOME of these winnings can be recouped.
If the individual is a “Professional
Gambler”, a 1040NR (non-resident tax return) can be
submitted. This return will offset expenses and other
gambling losses from the same calendar year played
in the US. Unfortunately, a person may not receive
a full refund of all the withholdings.
With an experienced tax preparer,
they may be able to recoup a portion that was withheld.
Individuals must apply for a TIN# (taxpayer identification
number) with IRS before a return can be submitted.
Oftentimes, the casino withholding will help facilitate
this upon request.