bagles said:
do you have to pay taxes on BJ winnings? I'm starting to get to the level of play where i need to think about that.
and lets say you play on a team. does every member have to file there own taxes? or do only the BP's have to file taxes since they are the only one's who actually won money? and if so can the BP's use the money paid to the other counters as a deduction?
Income from playing blackjack or from any other form of gambling is certainly taxable. Chiefly, there are two possible ways of reporting this income.
A casual gambler will report gross wins on the "other income" line of Form 1040. Note that I said gross wins. If you are following the letter of the law, you are not supposed to net losses against wins. You can then claim gross losses as a deduction on Schedule A. This can lead to a number of problems. First, if, but for your gambling income, you would not be itemizing deductions, you effectively get no benefit from deducting losses equal to the difference between the standard deduction and the total of your other itemized deductions. You pay an added, unfair tax for the privilege of gambling. Second, having large gross wins and large gross losses can lead to alternative minimum tax problems, which essentially means you will be tied up and flogged until you give up most of the blood in your body. Third, it is essential that you keep meticulous records, or the IRS may successfully assert that your losses are not properly documented, and should be disallowed, leaving you with a big phantom income on which you are nevertheless assessed taxes. It's worth remembering that there are several forms of large (or even not so large) payouts of gambling proceeds that casinos are required to report to the IRS.
Alternatively, a person who can legitimately assert that he is in the business of gambling with a reasonable expectation of profit can file Schedule C, listing wins as income and losses as business expenses. This avoids the problem of losses below the amount of the standard deduction not being effectively deductible on Schedule A, and the alternative minimum tax problem. It also allows you to deduct travel, education, and other miscellaneous expenses of your gambling business. However, it does raise the problem that you will have to pay the very substantial self-employment tax (which pays into the Social Security system) on your net business income.
This is a gross oversimplification. I encourage you to search for the many past threads on this subject on this and other blackjack Web sites. As Pro21 says, this is a complex subject, and reliable advice is in short supply.
As has been mentioned, you also need to consider your state tax liability. Unfortunately, there is a small number of states, notoriously Hawaii, which just changed the law in an unfavorable way, that do not allow Schedule A filers to deduct gambling losses at all. That's right, they want to tax your gross winnings while giving no consideration to the fact that you are probably a net loser overall. The tax liability can be huge, very likely exceeding your net worth. And if you don't come up with the scratch, maybe they put you in jail. It's utterly ridiculous, but no one ever said that the law was required to be rational. A small number of other states may have especially punitive versions of an alternative minimum tax that have a very similar effect. Schedule C filers can probably get around these punishing state laws. Everyone else (including the hordes of Hawaiian tourists that fill the California Hotel in Las Vegas) is left with the following unpleasant choices:
o Don't gamble. At all.
o Pay the state obscene amounts of money for the privilege of gambling.
o Become a criminal.
o Move to another state.
I have an idea which option many of the tourists in casinos around the country have chosen, whether or not they realize it.
Proper accounting for team play can be complex. However, the basic principle should be that any wins that you keep, or receive as a result of the play of others, are your income, and any amounts that you have to pay out to others because you are playing on a shared bank should be deductible in one way or another.
What a bummer.