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In this episode, expert accountant Ray Kondler gives us a crash course on poker taxes so that amateur and professional players can understand their tax responsibilities and liabilities. Ray explains the pros and cons of filing as an amateur or professional, and stresses the importance of filing – no matter what.
Listen in to hear a tax educator give tips and strategies on how to properly record, file, and deal with the IRS – whether you’re an international player or not – so you can maximize your earnings and keep your head in the game.
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Time Stamped Show Notes:
[00:50] – Introducing poker taxes and guest Ray Kondler
[01:18] – Ray will give a crash course on poker, taxes and how they impact players
[01:37] – Taxes are a common issue, especially for international players playing in America
[01:44] – Kondler and Associates are national experts on taxation of poker players and serve both national and international players
[02:00] – Services for American players
[02:12] – Determining if to file as a pro or as an amateur, providing tax-saving strategies through investments, foundations, LLCs, etc.
[02:26] – Services for International players
[02:30] – Some countries take 30% out of the winnings, and his company works to get their clients as much of that back as possible
[03:15] – Discovering the niche of serving poker players
[03:22] – It started by educating people; most accountants and CPAs don’t understand the gambling industry and it’s intricacies
[04:00] – If gambling is a person’s profession, they must file differently
[04:20] – The advantages and disadvantages of different filing routes
[04:30] – If you file as an amateur gambler (not poker-specific), you can only take your gambling losses against it, but it can be all gambling losses
[05:30] – If you file as a professional, losses and buy-ins can count against income
[05:45] – Professionals can file a schedule C as a business and write-off other related expenses like travel, cell phone, office, meals, etc.
[06:25] – Professionals can even take pension plans
[06:34] – A disadvantage to filing as a pro is that if there’s substantial income, they’ll pay regular and social security tax, since they are a business
[07:10] – If a person doesn’t travel a lot, they wouldn’t file as a pro because they wouldn’t have the write-offs to make up for the social security tax
[08:14] – Many accounts just show gambling and don’t consider all the other expenses; Ray’s having an issue with the IRS
[08:30] – The IRS labels professional poker players a business
[08:45] – If you win big one year and lose big the next, you can’t write it off in a subsequent year against a prior year income; Ray believes this is unfair
[09:15] – The poker industry is an up and down game, and the taxation system should consider that
[09:30] – He’s trying to take this issue to the next level because if the profession is considered a business on paper, it should be treated as such
[10:10] – Deductions, making sure you file, and the use of Bitcoin
[10:25] – If high-winning players don’t file, they can have an issue with the IRS
[10:50] – Players are using and playing with Bitcoin and they found out some information had to be given to the IRS
[11:15] – Ray gets 10-20 people at the booth each year who haven’t filed in years so he works to educate them on the process
[12:00] – Tax tip for players: If you win, pay quarterly, and keep record of your earnings
[12:30] – Bitcoin
[12:50] – Some websites show Bitcoin records, but even the IRS is having trouble classifying what is taxable
[13:41] – The IRS has classified Bitcoin as a stock, so the taxation rates are based on the length of time you’ve held it
[14:00] – Keep record of your purchases and coin so your accountant has numbers to work with
[14:40] – Always file something; the IRS will work with you if you’ve filed
[15:55] – He’s working with foreign players to get their refunds from the past three years, but they usually don’t have expense records
[16:30] – They can recreate their expenses with bank statements and credit card bills; the chances of a refund review are unlikely for foreign players
[17:30] – He can get his foreign clients a tax ID number so they can get their refund; it takes 2-4 weeks to get their ID number and 3-6 months for the refund
[18:30] – A certified copy of their passport is necessary for the process to be started, but it can be challenging
[20:30] – Ray plays in events and knows what it’s like for players in the industry
[21:20] – Ray never charges for calls and advice, so any tax-related questions should be directed to him
3 Key Points
- The biggest difference between filing as an amateur and filing as a professional is that a professional files as a business.
- Always file because the worst thing to do is not report anything at all.
- Always keep records of your expenses and earnings, and pay quarterly if you win.
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