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Timely Tax Advice for Gamblers

5 February 2008

By John Grochowski

I think I've heard more tales of big wins from Jean Scott and her husband Brad than from anyone I know. Big tournament wins, big video poker hands, even a BIG stuffed gorilla they once won in a promotional drawing.

The latest big one came in late November, when Brad hit the button a quarter Hundred Play video poker machine, and up popped, in order, Ace-10-Jack-King-Queen of hearts. A royal flush, worth $1,000 on a quarter machine. And since this was on the initial deal, before the Hundred Play draw, he got that royal 100 times.

That's right. One hundred thousand dollars.

There's an interested third party in a prize like that. The Internal Revenue Service. But the Scotts are well prepared. Brad and Jean, "The Queen of Comps" and author of The Frugal Gambler, have been keeping careful records for years. She and co-author Marissa Chien, a certified tax consultant, show just what gamblers need to do to meet tax requirements in their new book, Tax Help for Gamblers ($24.95, Huntington Press, softcover, 167 pages).

The book reads as a conversation between Scott, the gambler, and Chien, the tax expert. One thing they make clear from the beginning is that although federal tax code allows players who itemize deductions to deduct gambling losses from winnings, you can't satisfy requirements by just reporting a single yearly net figure. The IRS wants to see wins and losses from each gambling session in the tax year.

What if you win a jackpot of $1,200 or more, where the casino is required to have you sign a form W2-G before paying you? You aren't permitted just to deduct losses from that jackpot without reporting all sessions, wins and losses alike, from the entire year.

Scott and Chien walk through IRS requirements, record-keeping, treatment of comps, cash back and free play, tournaments, playing together as a group with a shared bankroll, tax responsibilities while playing online or on a cruise ship --- a wide-ranging toolkit for staying on top of your tax situation.

A section near the end of the book also breaks down state tax requirements, and they can be a real challenge. Residents of Iowa and Missouri, to use a couple of Midwestern examples, can deduct losses up to the amount of winnings on their state tax returns --- the same situation as with federal taxes. But in Illinois, Indiana, Wisconsin and Michigan are not permitted to deduct losses at all. In those states, you'll be paying taxes on big wins even if losses in other sessions put you in negative territory on your play for the year.

If it all sounds like a bit of minefield, Scott is well-experienced in finding the right path. And it's never too early to start keeping your diary of gambling wins and losses.

** ** ***

In 2005, Blair Rodman and Lee Nelson caused a sensation with their poker book, Kill Phil: The Fast Track to Success in No-Limit Hold'em Poker. Kill Phil gave even inexperienced players a plan of attack for combating the top player at their table.

Now Nelson is back with co-authors Tysen Streib and Kim Lee with Kill Everyone: Advanced Strategies for No-Limit Hold'em Poker Tournaments and Sit-n-Go's ($29.95, Huntington Press, softcover, 348 pages).

If you want to kick your game up a notch beyond Kill Phil, then Kill Everyone is for you. Whether you want to work on your early game, accumulating chips and getting yourself in position to win, explore end game strategies or work on anything in between, Kill Everyone is chock full of specific advice, strategies and hand charts.

I found fascinating a detailed analysis of a professional sit-and-go tournament in Monte Carlo, involving poker pros Phil Ivey, John Juanda, David "Devilfish" Ulliot, Chris Ferguson, Gus Hansen, Phil Hellmuth and Mike Matsuow. Hand-by-hand, play-by-play, situation-by-situation, you get a pro's-eye view.

Nelson is more than up to the challenge of all that Kill Everyone takes on. Known as "Final Table" Nelson, he was the top-rated player in Australia/New Zealand from 2000-2006, with the $1 million he won in the 2006 Aussie Millions contributing to his more than $2 million in tournament winnings. Co-author Streib, a profitable player himself, specializes in the mathematical aspects of tournament structures and game theory, while Lee is a university professor who designed the computer models used in Kill Phil.

Nelson doesn't forget his Kill Phil roots. Along with advanced play in short-handed or heads-up situations, discussion on play when short-stacked and adjustments to recent tournament changes, there is a chapter on playing against better players. That's where we all came in with Kill Phil, and it's a situation all but the best of us face from time to time.

If you've read and taken the lessons of Kill Phil to heart, it's time for the next step. Kill Everyone can help you to improve your game.

John Grochowski
John Grochowski is the best-selling author of The Craps Answer Book, The Slot Machine Answer Book and The Video Poker Answer Book. His weekly column is syndicated to newspapers and Web sites, and he contributes to many of the major magazines and newspapers in the gaming field, including Midwest Gaming and Travel, Slot Manager, Casino Journal, Strictly Slots and Casino Player.

Listen to John Grochowski's "Casino Answer Man" tips Tuesday through Friday at 5:18 p.m. on WLS-AM (890) in Chicago, with podcasts at www.wlsam.com/sectional.asp?id=38069. Look for John Grochowski on Facebook (tinyurl.com/7lzdt44) and Twitter (@GrochowskiJ).

John Grochowski Websites:

www.casinoanswerman.com

Books by John Grochowski:

The Craps Answer Book

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