Tax Question

[Scav]

Originally Posted by Port Conway Lane

I won $5,000 in a free online contest. Can I write off $1,800 in gambling losses against that? Because the contest was free I thought I couldn't but called h&r block and the guy said I could but it wouldn't be worth it unless I had enough itemized deductions on schedule A blah blah blah. I have nothing to itemize and didn't quite understand what he was trying to tell me. Any tax experts out there ? Thanks

You can write off the $1800 if it is larger then the standard deduction, which I think is $3200 this year. So unless you have an additional $1400, you might be SOL. It also depends on if they kept money for taxes up front, which I am guessing the didn't?

Quick question and I am not saying you can do this or that, but did you win this money from a US based company or off shore?

What I would do is put all your information into Turbo Tax and go through the steps and let it plan it out for you. It is a very good tool.

--Accountant in training

[SniperSB23]

Originally Posted by Scav

You can write off the $1800 if it is larger then the standard deduction, which I think is $3200 this year.

What I would do is put all your information into Turbo Tax and go through the steps and let it plan it out for you. It is a very good tool.

--Accountant in training

Really? I was under the impression I couldn't write off losses from gambling from winning a free contest. Of course last year wound up being the year I was actually up on the year so I can't claim losses anyways. Naturally I'll wind up with big losses this year and won't win any contests to write them off against.

[Scav]

Originally Posted by SniperSB23

Really? I was under the impression I couldn't write off losses from gambling from winning a free contest. Of course last year wound up being the year I was actually up on the year so I can't claim losses anyways. Naturally I'll wind up with big losses this year and won't win any contests to write them off against.

I kept my tax textbook for this very reason, tax law is really hairy.

I'll re-look at it in a couple minutes, but it is gambling winnings versus gambling losses. How you win shouldn't matter. Give me a couple minutes

[SniperSB23]

Originally Posted by Scav

I kept my tax textbook for this very reason, tax law is really hairy.

I'll re-look at it in a couple minutes, but it is gambling winnings versus gambling losses. How you win shouldn't matter. Give me a couple minutes

But does it qualify as gambling winnings if it was a contest free to enter? I think that is the problem with it.

[Scav]

Originally Posted by SniperSB23

But does it qualify as gambling winnings if it was a contest free to enter? I think that is the problem with it.

it might be considered a 'prize' which throws things all out of whack...

[Scav]

"The fair market value of prizes and awards (other then scholarships) must be included in gross income, therefore, TV giveaway prizes, magazine publishers prizes, door prizes and awards from employers are fully taxable.

It can be excluded from gross income if the prize/award is recieved in recognition of religious/charitable/scientific/educational/artistic/literary, you transfer the prize to a government unit, the recipient was selected without any action on his or her part to enter the contest or proceeding, the recipient is not required to render substantial future services as a condition for recieving the prize or award"

If it is considered a prize, you might be able to argue the bold.

It obviously isn't considered gambling winning, thus they are right about the losses. I just read that ALL those requirements have to met to be considered so the bold is garbage. I'll look into it more

[SniperSB23]

Originally Posted by Scav

"The fair market value of prizes and awards (other then scholarships) must be included in gross income, therefore, TV giveaway prizes, magazine publishers prizes, door prizes and awards from employers are fully taxable.

It can be excluded from gross income if the prize/award is recieved in recognition of religious/charitable/scientific/educational/artistic/literary, you transfer the prize to a government unit, the recipient was selected without any action on his or her part to enter the contest or proceeding, the recipient is not required to render substantial future services as a condition for recieving the prize or award"

If it is considered a prize, you might be able to argue the bold.

It obviously isn't considered gambling winning, thus they are right about the losses. I just read that ALL those requirements have to met to be considered so the bold is garbage. I'll look into it more

Wow, that part in bold is interesting. I got a tax form in the mail so was planning on declaring it. I'll have to look into that and see whether there are precedents for not declaring something a prize on that basis. It would seem the majority or contests would fit that definition.

[Scav]

It is considered Miscellaneous Income

http://www.irs.gov/newsroom/article/...175963,00.html

Reporting Miscellaneous Income

FS-2007-26, November 2007

While most people are aware they must include wages, salaries, interest, dividends, tips and commissions as income on their tax returns, many don’t realize that they must also report most other income, such as:

cash earned from side jobs,
barter exchanges of goods or services,
awards, prizes, contest winnings and
gambling proceeds.
This fact sheet, the 18th in the Tax Gap series, will help taxpayers better understand miscellaneous income and what they are required to report as taxable on their Form 1040.

The tax gap, or the amount of taxes that go unpaid each year, results from taxpayers underreporting their taxable income. Fortunately most people want to pay their fair share of taxes and many simply need a better understanding of their obligations.

What is Taxable?

Taxpayers must report all income from any source and any country unless it is explicitly exempt under the U.S. tax code. There may be taxable income from certain transactions even if no money changes hands.

Generally, the IRS considers all income received in the form of money, property or services to be taxable income unless the law specifically provides an exemption. This document discusses a few types of reportable income. Information on how to report other types of income can be found in Publication 525, Taxable and Nontaxable Income.

Self-Employment Income

It is a common misconception that if a taxpayer does not receive a Form 1099-MISC or if the income is under $600 per payer, the income is not taxable. There is no minimum amount that a taxpayer may exclude from gross income.

All income earned through the taxpayer’s business, as an independent contractor or from informal side jobs is self-employment income, which is fully taxable and must be reported on Form 1040.

Use Form 1040, Schedule C, Profit or Loss from Business, or Form 1040, Schedule C-EZ, Net Profit from Business (Sole Proprietorship) to report income and expenses. Taxpayers will also need to prepare Form 1040 Schedule SE for self-employment taxes if the net profit exceeds $400 for a year. Do not report this income on Form 1040 Line 21 as Other Income.

Independent contractors must report all income as taxable, even if it is less than $600. Even if the client does not issue a Form 1099-MISC, the income, whatever the amount, is still reportable by the taxpayer.

Fees received for babysitting, housecleaning and lawn cutting are all examples of taxable income, even if each client paid less than $600 for the year. Someone who repairs computers in his or her spare time needs to report all monies earned as self-employment income even if no one person paid more than $600 for repairs.

Bartering

Bartering is an exchange of property or services. The fair market value of goods and services exchanged is fully taxable and must be included on Form 1040 in the income of both parties.

An example of bartering is a plumber doing repair work for a dentist in exchange for dental services. Income from bartering is taxable in the year in which the taxpayer received the goods or services.

Gambling winnings

Gambling winnings are fully taxable and must be reported on Form 1040.

Gambling income includes, among other things, winnings from lotteries, raffles, horse races, poker tournaments and casinos. It includes cash winnings as well as the fair market value of prizes such as cars and trips.

Even if a W-2G is not issued, all gambling winnings must be reported as taxable income regardless of whether any portion is subject to withholding. In addition, taxpayers may be required to pay an estimated tax on the gambling winnings.

Losses may be deducted only if the taxpayer itemizes deductions and only if he or she also has gambling winnings. The losses deducted may not be more than the gambling income reported on the return.

Prizes and awards

Subject to certain exceptions, the cash value of prizes or awards won in a drawing, quiz show program, beauty contest, or other event, must be included on the tax return as taxable income.

Taxpayers must also report the fair market value of merchandise or products won as a prize or award, as taxable income.

For example, both a $500 cash prize and the fair market value of a new range won in a baking contest must be reported as other income on Form 1040, Line 21.

[Scav]

From my textbook,

"The following expenses and losses are deductible on line 27 of Schedule A as Other Miscellaneous Deductions.

-Gambling losses up to the amount of gambling winnings"

Researching the winnings end of it right now....not in the same spot of book

[Holland Hacker]

Originally Posted by Scav

--Accountant in training

Don't do it!!

Just curious why do you want to be an accountant? I often regret the decision. But then at other times I actually enjoy what I do.