Speaker 1: Good afternoon. You're listening to Gambling with an Edge.
Speaker 2: Now here are your hosts.
Speaker 1: Bob Dancer and Richard Munchkin.
Speaker 2: Good afternoon, Welcome to Gambling with an Edge.
Speaker 3: I'm Bob Dancer and I'm Richard Munchkin.
Speaker 2: Today we're talking taxes.
Speaker 4: 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.
Speaker 1: 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.
Speaker 2: 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.
Speaker 1: 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.
Speaker 3: 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.
Speaker 1: 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.
Speaker 3: 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.
Speaker 1: 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.
Speaker 3: 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.
Speaker 1: 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.
Speaker 3: 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.
Speaker 1: Not if you went off the WTWOG total. But if
you go off I.
Speaker 3: Mean, if my session total is five million, but.
Speaker 1: How could the W two g's then equal five million?
Speaker 3: 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.
Speaker 1: 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.
Speaker 2: Huh.
Speaker 3: That's surprising to me because you have sessions where you
win money, but you didn't have a W two.
Speaker 1: 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.
Speaker 3: Well, but I had losses at the at some of
the casinos, right.
Speaker 1: 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.
Speaker 3: 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.
Speaker 1: 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.
Speaker 3: You know.
Speaker 1: 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.
Speaker 3: 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?
Speaker 1: 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.
Speaker 3: That's actually really helpful.
Speaker 1: 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.
Speaker 3: 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.
Speaker 1: 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.
Speaker 3: 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.
Speaker 1: 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.
Speaker 3: Actually, if you only played in one single casino for
the whole year, then.
Speaker 1: 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.
Speaker 3: Do you have a solution for tournament poker players or
are they just basically screwed?
Speaker 1: 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.
Speaker 2: Right now, what type of gambler would benefit from creating
an LLCES corp and using that for tax purposes?
Speaker 1: 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.
Speaker 2: 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.
Speaker 1: 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.
Speaker 2: Do you recommend players file on time or getting extension
and why?
Speaker 1: 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.
Speaker 3: Actually don't you need to get it in by January fifteenth.
Speaker 1: 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.
Speaker 2: 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.
Speaker 1: 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.
Speaker 2: Here, if someone wishes to retain you for tax or
other services, how do they get in touch with you?
Speaker 1: 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.
Speaker 2: 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.
Speaker 1: 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.
Speaker 3: But that would be a short term capital gain right.
Speaker 1: 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.
Speaker 2: 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.
Speaker 1: 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.
Speaker 2: 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?
Speaker 1: 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.
Speaker 2: 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.
Speaker 1: 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.
Speaker 2: Thank you very much. Thank you, Richard, go out and
hit lots of Royal Flush is Everybody Free. Audio post
production
Speaker 1: By Alphonic dot Com.