Good afternoon.

You're listening to Gambling with an Edge.

Now here are your hosts.

Bob Dancer and Richard Munchkin.

Good afternoon, Welcome to Gambling with an Edge.

I'm Bob Dancer and I'm Richard Munchkin.

Today we're talking taxes.

Until very recently, I believed I needed to give up gambling effective the end of this year due to the Big Beautiful Bill signed in the law this past July.

I recently learned that Gary Conler, representing the Conlor and Associate CPA firm, believes that the Big Beautiful Bill is not doom and gloom for gamblers, and he's here to talk about this.

Gary Condler, Welcome to Gambling with an Edge.

Thank you so much for having me.

It was a pleasure to kind of meet with you last week and really learn about your situation a little bit more in depth.

And I'm really excited that we were able to find you some different kind of filing options.

So looking forward to just being able to discuss with every one here in the future how we really want to be handling the taxation in regards to the Big Beautiful Bill, so we can definitely we'll make sure that we touch on a few different reporting options, helping clients understand ways in which they can file their gambling taxation, and then we can start to look at some of the court cases we can start utilizing from the past in regards to keeping our net losses as low as possible for this ten percent reduction.

Okay, it turns out that your father, Ray Condler, was on Gambling with an Edge in twenty thirteen.

I believe this is our first case of father's son experts on our program, while the older program is worth listening to as he discusses various types of deductions professional gamblers can take.

Today, we're talking about the new law, which of course was not in effect when Ray Condler was on.

Our audience includes all kinds of advantage gambler and want to be advantage gamblers.

Let's start with slot and video video poker players who get a lot of W two g's.

Tell us how the new tax law isn't as bad as many of us think it is.

Yeah, so, really great question.

So you know, obviously, when we're you know, more or less on the slot side of things, and we are accumulating a lot of W two g's, the first thing that I will always just reiterate back no matter who I speak to.

Is really just having a good understanding of what our W two G total is throughout the year.

I do understand for people that are drawing up hundreds, if not thousands of W two g's, they are very difficult to track throughout the year, but I will, you know, just try to reiterate for the clients and the taxpayers to make sure that they really have a good representation of what this wdog total is.

Whether you go to the casino and ask them to do a print out, you know of your profit and law statement.

A lot of the times the jackpot winnings are there, but essentially, you know, what we always want to be looking at is I tend to see that the most trouble that people will ever get in with the IRS or even state level entities is just by not tying to the W two g's.

It's realistically, the only time I see letters and audits come is when we significantly miss a big portion.

So what I recommend in a situation where people have this many tax forms, it's more than okay to submit a tax return, you know, prior to April fifteenth, But the most important thing and I will label all of these clients in my system is that two months later in June of the In June of the year, the IRS will always release what is called their wage and income transcripts.

So I urge my clients to just make an account on id me.

Takes you two to three minutes, and I have them just download the transcript for me pdf, email it over to me, and then I'll do an adding up of all of the w twogs just to make sure that our starting point was properly picked up, because you know, the IRS will essentially be running an algorithm against that wage and income transcript to your tax return, and if they think you missed the you know, twenty thousand dollars, they'll probably send you a letter.

It won't be that threatening, but it will come with the tax that they think that you owe.

And if you start to miss six figures up into the half a million mark, I will see it go to audit right away.

Now, the reason I give a long winded explanation of this is because hey, it's okay if we have to sit there and amend your tax return in June of every year.

Just remember it is going to take the IRS eighteen months to probably do a complete review of this return anyway, So if we can just get in there, fix it up, amend it.

And remember when we amend the tax return, we're just moving up the gross income, but your profit's still saying the same, so you probably won't owe any more tax.

But this is always going to be a great double checking for people with high W two G totals, just to make sure the tax return was properly presented.

So I have a question about that.

So are you listing I mean my understanding was if I go out and play, and let's say I hit a W two G for five thousand dollars, but I actually only won thirty seven hundred for the session, then I thought I was listing thirty seven hundred as the win for the session as opposed to the W two G.

All right, great question.

Okay, Yes, so you're gonna see here there's going to be a difference a different number of what the W two g's total versus the other methodology that you're referring to, meaning how are we tracking our wins and losses?

Now?

Okay, because I will be using your session method per your example right there, to track the numbers that I'm going to be entering into the taxable let's say income and deductions.

However, I have to then leave a paper trail using disclosure statements that tie to your wtwog total, so that I didn't spark an audit because they now think that hey, he underreported his income.

It's like no, no, no, wait, he didn't not under report the tax forms they're sitting in there in either a disclosure statement maybe schedule.

See, if we're professionally, we'll get into that as well.

So I need to kind of tie to the high number first high number meeting wtwog total.

But then we're going to be utilizing either the court cases that you just referred to in order to track the true net income and what the profit was at the end of the day.

So two sets of numbers here.

Okay, But so on, assuming you're a professional, you have to list your wins and your losses separately, right are you?

So it may be the case that your whim side of the ledger is greater than course.

The some of all the w twogs of course, of course, So and the most important thing that I care about is that does the irs see the top line number and if that's yes, then I'm gonna kind of what I call clearing you through the algorithm.

But then we're gonna then go and track your profit at a way different number.

And I can almost use the perfect example here.

It kind of goes back.

You know how crypto now can be calculated on attach return.

You can use a few different inventory basises like LIFO FIFO weighted average.

It's a similar situation to that where you can see we're just using we're just bringing in a different methodology of accounting, using these court cases that we'll discuss here soon of how we're now going to track that.

And you ask a really good question, because I probably will go about it differently for instance of a professional gambler, because the professional gambler files on a schedule that just nets out, which means it doesn't matter if I show five million in four million out just to get down to your million dollar profit.

That is a little bit more burdensome for the amateur gambler because those figures that five million dollars then hits into the word called adjusted gross income.

So there's two different ways as you can see here, and I'm probably going to go about things and That's why it's not just black and white.

Like every gambler that comes to me, like and Bob totally saw this the other day.

The conversation that I'm going to have with him is probably going to be completely different than the conversation I have with a poker player, a sports better.

You know everyone's situation, you know, where do they live, what other types of income they have.

It's all going to kind of go into you know, how I'm going to go about and present the numbers on a tax return.

But really, great question that you asked.

You know, I see exactly where you're coming from.

So that's why I always just urge clients when I start working with I just really want them to be able to answer two questions for me to go about this, And question number one is always what are your taxworms total?

And what's your profit on the ear?

Okay, if I know those two figures, I'll go then figure out how it has to be properly presented in a tax return, What statements I need to be putting into the return, what numbers I need to be tying to.

But like you could see, everyone's a little different here.

Okay, But so let's go back to the example, because I'm not getting yet how this isn't horrible.

So in your example, let's say we have five million in and four million out, and I have a profit of a million dollars.

Yeah, correct, but the four million out, My understanding is I can only right off ninety percent of that, which means I'm only writing off three point six million an io text on a million four instead of on a million which was actual profit.

Great question, and this is where we're gonna now bring in the two court cases here.

Okay, So the first court case that we're then going to take a look at is called Stollenberger versus Commissioner, and this is what mainly most people know as what we call the sessions method of accounting.

I will now be using your session's method of accounting to now calculate your ten percent reduction.

We are not taking a ten percent reduction off of the W two G total because now we can bring in these court cases to track our wins and losses at a much lower netting level rather than a gross receipt level.

So we're now going to bring in instead of and great, great example, the five million in the four million out is a great example.

A lot of people come to me, a lot of slot players come to me with that example.

But we are not going to be taking this ten percent reduction off of the W two G total.

We're going to now be using the court cases to now figure out how we're going to apply this ten percent reduction.

So if we look at Schlallenberger versus Commissioner, that you know, more or less is a court case where we now want to be tracking, and I probably would urge people just use excel in you know how and setting up a few different columns in this spreadsheet.

So let's say we call column A the date range you know, January first to December thirty first, And if we have a winning session, meaning you know, if we profited there, and I think you gave an example where you know we had a you know, thirty four hundred dollars profit or whatever, let's put that in column B as a winning session.

And then let's if you had a losing session, let's now put that in column C as the losing session.

Now, under Shallenberger Versus Commissioner, we would then add up your winning columns, see how much you want, and then we would add up your losing columns, see how much your losses were, and then under Stollenberger versus commissioner, we then will take the ten percent reduction on what you're losing sessions added up to and that, and then you can see that yes, I know we're still backing into your million dollar profit.

But now we may be dealing with different numbers where we see one point two million in of wins two hundred thousand dollars of losing sessions.

That is then where the ten percent reduction would then come into place.

So as you can see, no, not on the WTWOG now netting it through using session right.

But in my example I was I was using an example of exactly that five million wins, four million losses, but I only get to write off three point six so I'm paying tax on an extra four hundred thousand dollars there, am I.

Not if you went off the WTWOG total.

But if you go off I.

Mean, if my session total is five million, but.

How could the W two g's then equal five million?

Then oh no, let's say the let's say that the W two g's total four point three million and my session total is.

Five Yeah, I've never seen an example where it comes in at a way higher amount.

The W two G is always going to be the way higher amount because that's where your grocery seats is going to really be coming to.

So I never see, you know, I in for my slot players, I never really see a profit come in higher than what the W two G is totaled.

Huh.

That's surprising to me because you have sessions where you win money, but you didn't have a W two.

G correct, right, correct, And that's going to be you know, maybe on the video poker side of things, that could definitely sit here and be a little bit different.

So okay, that's fine.

Now here's what I'm just going to suggest in a situation like that, and actually I can, I can openly talk about this.

So I am.

I'm assisting a client in a state audit right now, going back a couple of years ago.

And the really nice thing is is that he had all of his session method tracked and even though this client, for instance, is this real life example.

In that year, the client triggered five and a half million dollars of W twogs and when he went back and did his session method of accounting, we actually figured out that his gross session wins were like one hundred and thirty thousand dollars.

So, as you can see here, for him, using the session method took his gross adjusted gross income from five and a half million all the way down to one hundred and thirty thousand dollars just by utilizing this court case.

I'm not saying it's going to work for everyone.

So now let's kind of talk about another court case that I've also uncovered.

And what I am just recommending to a lot of people right now is for them to track their incommon losses on these two different court cases, and then we'll have to go throughout the figures all year and really just see what is going to be the more beneficial court case for them to use.

But the more information that you can track now for me will realistically give me a better opportunity to you know, take a way less you know, reduction in the future for them.

So the other court case that you know, Bob and I spoke about this the other day is another court case that I've located called Bonaparte versus Commissioner.

And in the Bonaparte Versus Commissioner case, this client, Bonaparte was audited about ten to fifteen years ago he tried to file it to be a professional gambler, and the irs, you know, kind of just pinpointed that they didn't think that they agreed that he met that classification.

It's not really the important part of the argument.

But in the court case, Bonaparte gambled at fourteen different casinos.

He won at three of them and lost at eleven of them.

So the way that Bonaparte calculated his gross income was is that he added up the three casinos that he won at, which was about eighteen thousand dollars, and then from the eighteen thousand he backed out the losses from the other casinos.

In summary, what Bonaparte did was is that when he tied to his gross income calculation, he used the three casinos of his year end profit, which meant that Bonaparte used a yearly session method per gambling establishment.

Wow yes, wow, which meant that if you win at and this again, this is my interpretation of the court case.

I've spoken to some pretty good tax attorneys all over the country, even a guy, a lawyer out of Texas Tech.

I think his name is Brian camp.

I showed it to Bob the other day.

I wrote a wonderful article about his interpretation of as well.

But now you can see my point about Bonaparte, meaning that we now just want to look at what the profit is on the year, and if you guys can gamble, for instance, at five different casinos, and we use a yearly session method per Bonaparte, do you now see how there's no reduction to take because you didn't have a loss at a casino so.

Well, but I had losses at the at some of the casinos, right.

Okay, that's then where we would then look at what you lost at what casino, and let's just say you lost twenty k.

Okay, we would come in with a two thousand dollars reduction and then it would be a two thousand dollars reduction times or tax rate.

Not really that bad.

I know some of these's are not that bad.

But okay, so let's let's move to the sports better, right, and let's say that you could apply this method or either method.

But let's take a sports better that has let's say one hundred million dollars worth of wins and ninety eight million dollars worth of losses, and this would not be I mean, this would be a very top level sports Better with a two million dollar win.

But to have those kind of volume would not be unusual.

No, No, that would not be unusual.

On all, I see figures like that all the time.

Of course, I know that you know the ROI is going to come out of the sports betting world, and so you know, if a Sports Better was forced to take the ten percent ten percent reduction off grocery seats, no, they cannot continue.

They would have no viable business option going forward.

They would owe so much in tax every year it would be an absolute disaster.

So they're going to have to look down on other methodologies of accounting in order to keep the gross winds and the gross losses as low as possible, and then we'll come in with a ten percent reduction.

And I think, if we can actually look at these two court cases, that's wonderful.

But what I actually want to say too is that when the client provided me his documentation the other day for the state audit that I'm working through right now, I was actually under the impression, just logically in my head, that I thought Bonaparte was going to be a better way to keep net wins and losses down, and it was actually funny that under Bonaparte his gross winds ended up being like two hundred and thirty thousand dollars because he had a big win at a casino.

But under the sessions method, I actually was able to go all the way as low as one hundred and like fifteen thousand.

So that's why, And I'm really happy that I got to see that example here kind of sitting here in November and December of the year, so I realistic it can start telling clients, Hey, look, I have an extra piece of homework for you, but this is how we're going to, you know, keep this reduction as low as possible, keep them in both two different ways of accounting for me, and then we'll go figure it out at the end of the year.

You know.

And similar to the to the crypto thing, Hey, when do we really want to realize the tax?

Did we want to go hipho?

Did we want to go li fo?

You know, even companies that value their inventory have a few different ways to do it.

As you can see, the gamblers are now just going to have to bring in a different form of accounting practices so that we don't have to use, like your instance, that one hundred million in and ninety eight million out.

No, that person is going to go pay so much tax.

They'll never they'll never gamble again.

So let me ask you this.

Let's say that I'm a sports better and on Sunday NFL, I make two or three hundred bets over many different sports books.

Can I count the whole day as a session?

Yes, that would be a twenty four hour session, where then I just want to know your net from the day.

I don't care that you made one hundred thousand dollars of bets.

I just want to know you won seven thousand today or I lost seven thousand dollars.

That's actually really helpful.

Yeah, extremely helpful.

And that Schlollenberger versus commissioner.

That's the session method of accounting used that twenty four hour window, and that and if we can kind of continue down that path right now, as you can see, as the numbers net out, we have less of a reduction to take, which is, you know, absolutely wonderful for ourselves.

We'll be right back with more from Gary Condler.

We're back.

We talked to a different accountant who said that every you know, sports book for the day would be a different session, or or if you were playing in the casino.

If you were playing at Caesar's and then walked over to the balagio, those would be two different sessions.

Yeah, So my interpretation of Shallenberger is going to be if your sports betting in a twenty four hour window, to me, that counts as a session.

I don't care if it's across eight different books.

When a new session would count would be when you change the game type.

So if I went from sports betting to them playing blackjack, that would technically, under the law, then be a brand new session.

To have another calculation, for I go more on game type changing during the course of a twenty four hour period rather than maneuvering all over all over the sports betting websites, because of course all of my clients are going to be on fifteen different websites a day moving money around.

So I like a twenty four hour session under the game type.

But like I said, if you're now going to move to roulette and blackjack and three card poker, those technically under the law would start a brand new session.

What about if I'm in the casino and I play blackjack and three card poker and roulette on the same day.

That's still all one session as well, because it's.

I would view that that because the game type changed from three card ploker to box jack to roulette, that that starts a brand new session.

But I would be more than okay if my gamblers took a twenty four hour session just for the sports betting or whatever game type their there.

They play on a daily basis.

Some of us obviously like one one thing I'll just say too, and you know one thing that I would really love, you know, and searched out every single tax court case that I could over the past couple of months.

And of course everyone's going to come to me get and say, Gary, can you find me some court case where we can use a yearly session method for our accounting across the board.

No, I don't have that court case right now.

You know that that would really make things, you know a little bit different for me.

But you know that's something that I wouldn't be comfortable putting, you know, necessarily on a tax returnaround.

Actually, if you only played in one single casino for the whole year, then.

Then see you got it, you got it, because then we use bonaparte, so youre are one hundred percent correct.

Now, well, if you look at this objectively, I think one of the problems that I have is is that the BBB now doesn't apply the same to every person out there.

Okay, so let's take a look, for instance, at my arbitrage sports betters, who they're more than okay making their two or three cents on every dollar, but they kicked the volume up into the millions of dollars every year.

Well, if the arbitrage better under Schallenberger versus commissioner, he's never going to have a losing day, meaning what reduction applied to him.

Okay, for my sports betters, you can see I have these two core cases.

For my slot players, I have these two cord cases cash game poker players, I have these two court cases.

Well, my business idea actually starts because I started in the tournament poker space of things, growing up playing being a poker player.

The one the court cases that actually do not really work.

These two court cases don't work for my tournament poker players that are high rollers traveling to forty different casinos during the year, stop to stop.

They could still bring me a million dollars in profit every year and lose at thirty seven of the forty casinos they played at during the year, meaning that if I used Bonaparte, well, now I got to go look at thirty seven different casinos that all had losses.

Because you know, tournament players, we don't cash every tournament.

Yeah, Bonaparte doesn't really work for them that great.

Shallenberger don't really work great because they're pretty much only firing one or two bullets a day on a tournament.

They're probably both losses.

All right, fine, maybe nets out a little bit, So I have a problem with that.

It doesn't apply evenly across the board to everyone.

But you know, we're just really going to have to put our best foot forward, continue to do our research on these cases and just see what we can come up with.

But you know, for a majority of the clients, I'm going to start applying these two cases see where we come.

But as you can see, I still have a few people I gotta worry about.

Do you have a solution for tournament poker players or are they just basically screwed?

Not?

Right now, I think that the example that I'm providing to you is a very small amount of the tournament player.

I'm kind of referring more to that high roller player who's playing in one hundred k buy ins, two hundred and fifty k buy ins all over the all over the world.

I think for like your regular you know, a tournament player who just brings me a couple hundred thousand of income a year.

Yeah, he's probably not.

He may not visit more than ten casinos on the year.

Probably not that big of a headache.

He'll he'll profit at maybe half the casinos and then we'll have to apply a loss on the other half.

So for the one percent of the one percent, No, I don't have anything yet for them, and we're going to have continue working through that.

Right now, what type of gambler would benefit from creating an LLCES corp and using that for tax purposes?

Yeah, great question.

So when I kind of look at a situation like you know, creating the S corporations for clients is again remember you know, they are management companies.

They're not gambling entities.

They're management company of your gambling behavior and activity.

When I want to look at S corporations for clients, it really has everything to do with, you know, specifically, what state do they live in, what type of expenses do they have, do they want to be putting money into retirement accounts.

Do they have other partners or shareholders in in this So it's really not like a set way of saying, oh, you're definitely going into an S corporation.

I don't really think, for instance, if you know you're not going to come with a lot of deductible expense is it really doesn't make too much sense for you.

So if you take a look, for instance, at like my online sports betters who just sit at home all day and bet sports, they're not going to be coming to me with a lot of expenses, which means they're not going to see too many tax savings because they don't really have the deductions.

Whereas if we then go look at that tournament poker player, all right, he's spending a lot on travel, spending a lot on meals, maybe carmiles, he has a coach, solvers, dudes in subscription, legal accounting fees, everything like that, that may make a little bit more sense.

There also are other opportunities where you know, there are about ten twelve states out there that exist in the United States that do not allow gambling losses at the state level.

So let's just play an example out you know, you're from Connecticut.

You go up to Foxwoods, you have two and a half million dollars a W two g's you break even during the year.

Federally you end up paying no tax, but then to the state of Connecticut you pay tax on two and a half million dollars.

So, as you can see, it's not just a yeah, you go into an escort where you don't.

It's kind of a case by case basis of what's going to make the most sense to them.

You know, I'll have a lot of then you know players that can you know, put a lot of money away in retirement accounts.

That's probably the most common question I'm going to be probably answering today after this podcast, is how we're getting all of the money into solo for oh one k's defined benefit plans doing four oh one K.

So a lot of different examples, and you know that's kind of why you just come here and consult with me for a half hour, figure out the situation, see what's going to work best for you, and then I'll start running some numbers for them, and then we'll put our best foot forward.

If getting them into the best option going forward.

Casinos typically make available to the players annual win loss statements.

I actually do not pick them up because they're almost always inaccurate.

Yes, do you advise players to use these as a form of keeping records or I think, yeah.

It's a really good question because I've seen a lack of consistency coming out of the IRS whenever I see things questions.

I've sometimes seen clients go through an audit and I've seen IRS agents be perfectly okay with what we call third party documentation meeting that print out from Bolaggio or Cosmo.

It says your profit at the end of the year, and I've seen agents say, no, we don't accept those.

How did we know your card was in the machine the entire time?

I wish it was a little bit more black and white.

I am one hundred percent with you, though, Bob, in the stance that they're not very accurate all the time.

The online ones are even worse.

A lot of times they're a little confusing about what they added back into back and bonuses and what you unlocked during the year.

I think it's a solid starting point, in my opinion of a rough ballpark of you know, what does the casino know about you?

But there's always a lot of determinations, and this is why, like we're just going to have to do better, you know, with our record keeping.

And that's why, like I'll more or less pay more attention to my clients Excel spreadsheets than I will ever look at those profit and loss statements because first off, they could be a little bit difficult to read.

Sometimes you'll see the coin in coin out jackpots, you'll have no idea how the calculation was calculated through.

So I like to go a little bit off of more spreadsheets because I do not trust those pnls at the end of the year, but they are a good starting point in some instances.

Do you recommend players file on time or getting extension and why?

Yeah, okay, great question.

I always recommend clients to file timely.

I know a lot it could be a little burden some do.

I have a lot of clients that say, Gary, I want to wait until that transcript comes out so I know what the w TWOG total was, so we don't have many red flags.

Yes, I do understand that.

But what people really have to have an understanding here is is that realistically, whatever tax you owe at four fifteen, even if you put an extension in and you file one month later, you now just kicked in almost five percent of penalties and interest per month.

So what I try to do a lot of times is I will kind of you'll never see me really doing a tax return on April fourteenth or April fifteenth, because what I will do on that day is I'll try to pinpoint what tax returns just came in, who needs numbers ran so that if I can just go throw around some loose estimates for them calculate a fifty thousand dollars tax liability.

I'll then kind of recommend that client at April fifteenth to go send in doll because at least if it looks like you made a payment there then is no outstanding liability when me and you filed a month later.

So it's a little bit all over the place because I'm a little bit different when it comes to estimated tax payments, because I am fully understanding that if I have a gambler up a couple hundred thousand dollars in the first couple of months of every year, yeah, probably the last thing I want them going to do is sending it one hundred thousand dollars estimate with nine more months to gamble with, they may kick their stakes up, they may go play other things.

And now, all of a sudden, we just gave one hundred thousand dollars interest free loan out to the government, and then I can only unlock that for you twelve months from then if you then gave it all back.

So I run a lot of my estimates for my clients during December.

I say, hey, please just send me a number, let me run it through my tax calculator.

Let me just send you off with roughly where I think your tax bracket is going to fall.

If you want to be the person to go send the estimate in wonderful, But I need you to roughly know as me and you kick into twenty six of a rough ballpark of things, because I do not want to see these penalties and interest to come through.

He just did a return for a person who sold off a lot of crypto, didn't really do any planning during the year.

We filed that tax return in October.

He owed about two million dollars and he's going to get that bill for about two and a half million dollars once penalties and interest kick in.

We can't have that going forward.

So my rule of thumb is to just say, hey, work with your tax prepair, work with your CPA in December, have a good understanding of roughly where you fall into.

If you want to send the estimate in great okay.

If you want to go pay it by four fifteen, that's fine too.

That could sometimes just kick in what we call an underpayment penalty.

To me, the underpayment penalty is a little bit more immaterial because I have a lot of clients who just know that they can make a little bit more money investing their money, put it in high yield savings accounts, make a very safe bet through Kelshi or whatever we want to look at that will cover them on the underpayment penalty, and then we kind of proceed accordingly that way.

So it's okay if people file late it, just make sure that you get a solid amount in by four fifteen so that we don't kick any these extra penalties.

Actually don't you need to get it in by January fifteenth.

That is when the Q four estimate is due from the prior year.

Okay, So that would be like making all of your estimates throughout the year, that is when that estimate is due.

But if you don't have that estimate due on that day, you're just kicking in what we call that underpayment penalty.

Okay, I'm okay with underpayment penalties.

They're a little bit smaller.

And then so what the client can also do, and I'll do this a lot for people, is we can follow what we call one hundred and ten percent you know rule, meaning that you know, let's just say, for instance, last year, when you look at your tax return, line twenty four on the second page of the ten forty will say total.

This is your total tax.

Let's just say, for instance, in this example, it's ten thousand dollars.

If they go now have a big winning year and make way more than tax on ten thousand dollars, they can take one hundred and ten percent of that ten thousand dollars tax, which would be eleven thousand dollars, and I will make them probably send that to the treasury right here in December.

That will cover them on their underpayment penalty, and then they'll then owe the rest by April fifteenth.

So that is another way to do things, and that is kind of what I highly recommend because I know my gamblers are very, very smart sharp individuals.

I know that if I give them three months with an extra fifty thousand dollars, they're going to go make some money off of it for the most part.

So but again, everyone's going to be different here.

I have clients that love to follow their estimated tax schedules to the team.

Okay with that, but let's be let's be smart about where we're kind of putting the money to and from.

But I care most about not surprising people come March twenty seventh of not sticking them for one hundred K tax bill.

Now we're running bad in March madness or whatever is going on at that time of year.

And now we have no idea where the tax dollars are coming from.

Because you know, I will have a lot of gamblers that will ask me to go on installment plans, pay them monthly.

I think you can do it up till seventy two or eighty four months.

Yeah, but just remember, penalty's interests are going to accrue.

We don't want that happening either, because the interest rates are getting a little higher right now.

I know they're coming down a little bit, but they're still pretty high.

At the beginning of Trump's second administration, he had Elon Musk in charge of the Department of Government Efficiency, and it's slashed a lot of federal workers in including IRS.

So I'm guessing there's a lot fewer auditors this year than there were last year.

Yeah, there is a lot.

You know, we may be down half of their staff right now.

This has to help gamblers, doesn't it.

I would assume that it will definitely cut audit rates down because there's just less auditors to be able to do the work.

There's even less employees over there.

My firm, we're constantly on the phone every day with the I R S I run.

We also have a big international tax side of things for gamblers as well.

There's always a lot of letters to clear up on a daily basis here, and even my office is having a hard time getting on the phone with the I R S.

It takes a long time, long waits on hold.

And yeah, there's not a lot of employees over there.

So I think it's going to be interesting going forward of what the auditibility rate could could rue be in And you know where I see auditibility come from is, Yeah, clients that are going to have a higher adjusted gross income are going to be subjected to higher audit rates.

You know.

I think if you kind of look at anyone under about four hundred thousand dollars of adjusted gross income, your audit percentage is probably under one percent.

But as you start to approach into the millions of dollars of adjusted gross income, you can start to see that raise to five to seven percent.

But again, I realistically just see audits kind of tracked through missing tax forms on their tax returns.

So I think that's one of the most important things that we really want to, you know, sit here and discuss, just so that we can figure out, you know, how do we keep the letters and how do we keep the audits, you know, at the lowest rate possible.

I normally tend to see that, like if I've ever been in an audit or represented a client, I always really see like pretty favorable tax stances once we provide all of our paperwork and things like that.

The current state audit that I'm dealing with right now, the client just had absolutely every piece of document that this auditor could have ever need and everything that could ever have been questioned, And in my opinion, they're going to just breeze through this audit without any issues.

But again, the audit is not about challenging gambling wins and losses.

The audit is about the classification of how the client filed as the professional versus the amateur.

So as you can see here, I really don't see the wins and losses challenged too much.

I will see missing half a million dollars of w twogs.

You could then be asked to prove it.

But for the most part, some of them come on the classifications, which is obviously what we always want to be looking into in situations like this, you know of who can qualify as the professional and who should file as the amateur.

Here, if someone wishes to retain you for tax or other services, how do they get in touch with you?

Yeah, So the best thing that I that I always recommend, you know, our website is a you know, COLLMERCPA dot com.

And then there's a client inquiry portion of our website and for the most part you can kind of just leave some notes in there they get pushed all on to me.

But then what I'll do is is that any inquiry that I get, I will always schedule for the most part of just a free half hour consultation call, because as you can see, I need some time to kind of speak to everyone on the individual level to see what is going on.

You know, what are you gambling at, what other type of job do you have, are you married, what state are you from?

What else is going in?

You know.

A couple of minutes before this call, it was just kind of assisting a client, you know, who sold off a lot of stocks, stocks and cryptos this year.

Yeah, his income is now over one point three million dollars, which means he now kicked in a new tax called a MT tax.

So as you can see, even just from the morning that I've had, the conversation is going to go way different with him than it is going to go about what else you could have potentially going on in your tax return.

So that's realistically the way that I go about things, kind of just telling the clients, Hey, what documentation do I want you keeping?

What's our next steps from here?

How do we go about estimates?

So half hour consultation calls what I always recommend, and that will get us in a good spot and then we'll kind of talk next steps and go that way.

But you know, that's kind of how I work my schedule and you know what I do here at this office.

When I was in your office, we were talking partly about the Bonaparte versus Commissioner, and you refer to a piece by Brian Camp who is a a law professor, and his personal legal opinion about how to do that.

I tried to find that and could not.

So my request to you, Gary, I'll shoot that over to you, send it to both Richard and me, and Richard can put it into the notes.

Of the Absolutely I'll do that right after this call.

Not not a problem at all.

It's a great read.

It was kind of one of the first people that I was able to see write something so incredible for the gamblers all over and then I kind of reached out to him, and me and him actually had a two or three hour conversation because I'm more in the weeds of the tax system.

Okay, I see what the tax software looks like, I know all these numbers that go into the return.

He's more from the legal piece side of things.

So it's actually great to just put my head together with another like minded individual, but more from a legal piece, because remember, at the end of the day, I'm just going to be providing my interpretation of these court cases, but I also have to protect my firm and my clients on the back end with you know, other tax attorney's opinions, just so that there's proper sign off on these things, so we don't really create issues, you know, down the line.

Because when I kind of look at the BBB as a as a projected schedule out, well, let's just take a look at it.

I do the first tax return that has the ten percent reduction in tax here, let's say February of twenty seven, which means I would roughly see an audit come towards the end of twenty twenty eight, which meant that if we then went through let's say the audit process, the appealant process, and tax court, we could be looking at a ruling on the BBB coming out in twenty thirty.

That's a big gap of how many years they are going to be doing these tax returns before there can be another legal precedent that can be set in the place to either help gamblers or kind of hurt them.

And you know, I think where the other interesting situation is coming out of right now is these new websites popping up like Bob and I discussed last week of these CALCI websites popping up where they are now labeled themselves as predictive markets.

Now, if you look technically at the legal definition of what a predictive market is, it now doesn't look like gambling income.

It looks as what is called a twelve to fifty six contract, which is now treated as a capital gain.

But that would be a short term capital gain right.

Correct, It would be a short term cap gain.

But where this is important is because gambling wins and losses, which was amended in the BBB I believe, is under IRC one sixty two.

Capital gains in futures contracts is not under IRC one sixty two, which means if it's treated as a long war a short short term cap gain in the future, then there's no reduction to take.

Now, this is heavily debated in the community right now.

Even some of your biggest accounting firms in the world world, like your KPMG's, are writing articles, but they're not taking a tax stance on it right now.

It's all if then statements.

So I do follow the legislation daily.

There are a lot of states kind of suing one another back and forth of what this income should be labeled that as of right now, it doesn't have a precise label of cap gain or gambling income.

So we're really going to just have to put our best foot forward as we hit here into tax you're twenty six and see the kind of the best way to handle it on tax returns.

So I'm the most you know, I'm trying to figure out, and again when I go about these things, I care the most of just asking that one question.

What tax form is going to be issued, I don't know yet from Calshi.

I think it'll be what's called the ten ninety nine miscellaneous.

Ten ninety nine miscellaneous can be inputed in a few different spots of the tax return and not cause that algorithm to ever kick out any issues.

So I am kind of telling clients right now it's very much of a case by case basis and we'll just have to monitor the situation.

Because even on that call I had right before this podcast, the guy was saying, well, you know what, if, for instance, in the next eight days they don't say anything about it, and they go say something on January fourteenth, is it retrospective back to twenty five or is it now an onward looking towards twenty six.

Yeah, we don't know.

We're going to just have to see because they're going to have to put out a little bit more legal not ramifications, but guidance of how to proceed accordingly, because I think they're going to be You're going to have too many people questioning these things come February March, when everyone's wondering what the count how to count the income.

In we're near the end of our hour.

One of the things you briefly touched on but didn't define is the difference between a professional and a non professional gambler.

Yeah, we talked about how that works.

Yeah, so the IRS is going to sit there and use the following definition.

They will say, you know, taxpayer can not taxpayer must, taxpayer can file to be a professional gambler if they spend a substantial amount of time in the hobby for profit for livelihood.

And it's really just in the past the twelve or eighteen months where I just saw the IRS add that last piece in the four livelihood amount, meaning you know, that's where we want to sit here and kind of consult about these things and really take a look and say Hey, okay, what income do you have outside of gambling?

Meaning so let's say who's the problem here.

Okay, the problematic person is the lawyer who comes to me every year brings me a two hundred and fifty thousand dollars W two from his day job.

He goes and makes fifty thousand dollars gambling in Vegas.

I don't care on what game thinks he's you know, wants to go professional with it.

But now he wants to travel the country and write off all his travel expenses.

That person's not going to fly.

That will be picked up right away from the irs.

They will be looking at that W two income to say, no, no, no, you made two hundred and fifty thousand at your day job.

You only made fifty k from gambling.

You got to move the income back into the amateur gambling box.

That is the one person that will be a kind of question.

But you know, how many times a year do you think I have?

You know, let's say kids from out of New York City working for Blackrock and Citadel, they make a million dollars on W two, but they were paid to not work all year.

They were bought out of their contract, paid to not trade all year, paid to not share any information.

So that client may come to me with a million dollar W two and a couple hundred thousand dollars gambling.

But as you can see under the definition, he didn't spend a substantial amount of time at his day job.

Now he could qualify as the professional gambler.

So it is really realistically a case by case basis.

I have seen a few over the past couple of years, Like maybe in clients that I do, I've seen three or four letters, maybe one a year kind of classify or the IRS just saying, hey, you got to move the income back into amateur.

Yeah, there's arguments for everything.

If you ever think, for instance, that you're on the verge of being a professional art amateur, do you put your best foot forward in that kind of Excel spreadsheet and you start tracking your time a little bit, treat it more like a business.

That is what the IRS will want to see.

In the case of this state audit that I'm doing right now, the client was able to document everything, which looks like he is running a legitimate business, which he is.

Everything was documented.

The more documentation the better.

It's more buttoned up.

It's almost a very hard stance sometimes for the IRS to take.

And I've read a lot of state audits and I've read a lot of court cases, and when we look at that word, you know, it's like the motive for profit.

Okay, the irs, the states are always going to have a tough time arguing that US gamblers weren't doing this for profit.

I see that actual side lost a lot because it's impossible because obviously, when we all gamble, we all do it to make money.

I know some of us do it for you know, hobby, but for the most part, we're always doing it to make money.

In this So if you ever think you're on the verge of it, yeah, you're going to have to consult someone.

We want to be as smart as possible.

But the more documentation that you can make it look like a business, the better off it'll be.

If you if you're trying to profit and let's say you make one year out of five year ahead, is that a show stopper?

No, No, not at all.

I have I seen prior tax years looked at to say, hey, was there a motive for profit?

Did the client ever turn a profit?

I've seen it asked a few times but I've never really seen it challenged on a on a regular continuing basis.

You know, you'll start to see like a lot of the tax law and stuff that you read are you know, you'll see they are going to have rules all over the place for businesses of how they turn profit.

Yeah, gamblers are going to be a little bit different.

I have clients that bring me a million dollar or a couple million dollar profit every year, and I don't see a profit for four or five years after that.

No, it's not going to just stop them dead in their tracks of filing that way.

If I ever saw it being, you know, asked more, Yeah, I would make sure I tell my clients because I always think the most important thing that I could be doing on a daily basis is really just helping the industry have an understanding of you know, what are we okay to, what are we okay doing, and where do we stay far away from and then kind of monitoring that situation.

And that's why I can just really sit here and tell you as long as we kind of tie to our tax forms, use these other accounting approaches to back into our profit, that's realistically the smartest way that we really want to go about things in the future here, and of course things can change from time to time.

I have a lot of gamblers who started with me filing as an amateur gambler and now they're a professional gambler.

Now they're back to amateur gambler because they picked up another day job.

Yeah, classifications can go, they can change over a year over year, but I want to keep more of a consistency basis.

But using that definition of what a professional gambler is, as you can see, I can come in and change year over year if we if we really deem that it was you know, true, and we can defend the stance.

Thank you very much, Gary Condler.

The getting to know, getting to hear about you has changed whether I'm going to gamble it else I'm going to stay in the business.

Whereas before I heard about you less than a month ago, I was seriously planning to stop.

So possibly others in the audience are in a similar situation.

Well, yeah, wonderful.

I'm really glad we can help.

And so, you know, like I said, whoever really needs support, I'm more than I'd be more than happy to work with everyone.

Like I said, case by case basis everyone's a little bit different here.

But let's just make sure that we're kind of providing and these gamblers all the profit information so that we can proceed accordingly.

You know, we're still you know, we're still going to take a little bit of reduction, but if we can be smart about these things, we keep it as low as possible and then we kind of maneuver from there.

But yeah, just really happy that it can be in this space, you know, just to assist people like you.

So pleasure to be on and thank you so much for having me.

Thank you very much.

Thank you, Richard, go out and hit lots of Royal Flush is Everybody Free.

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