FULL TILT POKER BLOG

#389 – Attack of the Tax Monster

Posted by Editor | Filed under Books

I had not expected to write about the importance of understanding taxes and getting good tax advice today, just 4 days before 2007 income tax returns are due. On the one hand, this information would be more useful if you got it earlier. On the other hand, I’m just now starting to think about estimating my 2007 taxes for the purpose of getting an extension. So it’s either too early or too late, right?

Maybe so. But if you’re like me, this is the beginning of tax season, not the end. And particularly because this attitude would scare the crap out of any qualified tax advisor or preparer, it’s a good idea to generally understand the tax issues that, as poker players, we encounter.

One of the friendships I’ve made through poker is with Marissa Chien, EA. She is a Las Vegas tax accountant who prepares tax returns and provides wealth management for some of the biggest names in poker. We haven’t been in touch much because she’s been so busy at work. And if she wasn’t, my tax unpreparedness is such an embarrassment to me that I don’t think I could stand being scolded by her. (I’ve had a Chicago accountant doing my taxes for more than a decade and, though it would definitely be an asset to have an accountant with her experience in gambling-related tax issues, there’s the familiarity thing. The Chicago guy knows me and has forgiven me and it’s hard to put a dollar-value on that.)

As I picked through the avalanche of papers on my desk to give some general numbers to my accountant – who I’m sure is thrilled to be receiving about 5% of the information he needs just 4 days before the return/extension/payment is due – as well contemplating paying my March bills, I came across a book Marissa sent me early in the year. She wrote it with Jean Scott – Jean herself being an accomplished gambling author (The Frugal Gambler) – and it’s called Tax Help for Gamblers (Huntington Press).

As far as I know, most of the top pros follow the advice of Doyle Brunson, which I’ve read in many contexts over the years. The message, essentially, is that if you ever want to want to accumulate wealth (at least in the United States with our Internal Revenue Service), you have to pay your taxes. And with Treasury Department reporting of cash transactions and the government cracking down on payment processors (not to mention the “anti-terrorist” laws that conveniently allow the U.S. government unbelievable encroachments on privacy), it’s just not practical to believe Big Brother isn’t watching.

On the other hand, I believe the leading cause of poker players getting cheated by shady business promoters isn’t lack of savvy or a get-rich-quick mentality. I think plenty of otherwise-smart poker players, given a choice between investing with a Wall Street hedge-fund manager and a guy in the poker room who knows a guy who has an invention will choose the latter. No forms, all cash (or chips), no names. Therefore, no tax consequences, either for the money invested or the “profits.” Of course, that’s not true and there’s also no recourse when you get ripped off, which of course you always do. But the (false) idea that you’re pulling the wool over the government’s eyes has led several top poker players to Broke Street.

Nothing can substitute for expert tax advice from someone like Marissa, but this sort of book will clarify a lot of things, dispel wives tales, and keep its readers from, out of ignorance, neglecting to do things that are sometimes not even difficult or costly but are frequently prudent or legally required.being so scared that their ignorance leads them to make bad decisions about their taxes and how they handle their money in general.

These are the kinds of things the book is great at familiarizing gamblers with:

* The importance of keeping a log of your results, what information you need to have, the tricky situations where “my losses net out with my wins” doesn’t do it, and how to keep records.

* How your personal records of wins and losses may be even better evidence of your results than casino won/loss statements.

* How you often don’t have to declare the value of comps or casino promotions but the occasions on which you do.

* What wins you can offset against your losses and how to figure it out.

* Differences in tax preparation between recreational and professional gamblers.

The authors point out repeatedly that the book is not a substitute for advice from an expert tax preparer and advisor. That’s not because Marissa is hustling for the business; it’s because every situation is unique and the details of a couple generally similar situations can alter the tax outcome significantly. So while lots of poker players, out of ignorance, don’t handle their taxes responsibly, a lot of others erroneously rely on something a friend told them or something they remember reading.

Tax Help for Gamblers is a 167-page security blanket. Naturally, Marissa and Jean will nag you some (keep records! save receipts! pay taxes!). But they also bring into much greater focus the boogeyman that is the Internal Revenue Service. By being prudent and realistic, you and your accountant can sort it out and stay out of trouble, both with taxes and the ridiculous things people do to avoid taxes.

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