The start of the new year brings many resolutions, some that will be kept and others that will be broken. Whether it is a resolution, or not, everyone should make an effort to begin documenting their tax year starting today. Many of my clients have heard me say this year after year, and most of them have listened and are no longer unprepared when it comes time to file their returns. Although it is critical for all taxpayers to keep accurate records throughout the year, today I am going to focus on professional gamblers and which records they should be keeping on a daily basis to minimize the stress of their returns.
Where to Start:
The best place to start is to determine which method of documenting your gambling activities will be convenient and efficient, but still provide accurate results. There are many computer programs and apps that make tracking everything related to gambling quite simple. I would suggest browsing the internet or the app store to see which interface best suits your needs (Pokertracker is a popular choice). This way, at the end of the year, you will have all of your activity stored in the program and you will simply need to print the summary to complete your return. If an app isn’t your style, you can always create a customized excel spreadsheet or journal that will allow you to track the necessary data throughout the year.
What to Track:
The IRS has laid out its guidelines regarding the information needed to substantiate gambling winnings and losses:
- The date and type of your specific wager or wagering activity
- The name and address or location of the gambling establishment
- The names of other persons present with you at the gambling establishment
- The amount(s) you won or lost
However, I recommend tracking some additional items as well. This will not only cover you from a tax perspective, but it also gives more insight into your overall bottom line from gambling:
- Length of your session
- Game played
- Stakes
- Buy-in Amount
- Cash-out amount
- Profit/(loss)
I recommend having separate journals or separate sections for each type of gambling activity. For instance, if you play live poker, online poker, blackjack and partake in sports betting, I would create one section in a journal for each, in order to keep the best records possible. I would even go one step further and separate type of poker played (tournaments and cash games) for best practices. If there is ever a case where you need to present your records to the IRS, it is best to impress them with your attention to detail, rather than attempting to create records from memory.
Expenses:
Many professional gamblers are aware that they are able to deduct expenses related to gambling, but most are unaware of the extensive list of deductions available. Below is an expansive, but not-all-inclusive, list of deductions available to professional gamblers:
- Losses (to the extent winnings)
- Travel (including airfare, hotel and ground transportation)
- Meals and entertainment
- Computer or monitor for online play
- Gambling seminars or online memberships
- Contributions to a SEP
- Health insurance premiums
- Professional fees
- Dealer tips
I highly recommend keeping a separate log that details all of your gambling-related expenses. I also suggest paying for all expenses using a dedicated credit card. That way, if you forget which expenses were gambling-related, you can check your credit card statement and see each transaction. It is very difficult to recreate a list of these expenses at the end of the year. That is why it is essential to begin tracking these expenses at the beginning of the year! It has become even more critical in the last few years, since professional gamblers can carry these expenses forward, as Net Operating Losses, in an unprofitable year.
Starting today, take a few minutes and determine the necessary items to log in your journal. If you begin the year by making daily entries it will start to become a habit and I promise you, this habit will lead to future tax savings and less stress when it is time to file your returns.
