""Paying taxes on my gambling wins? You’ve got to be kidding. Sure, sometimes I win, but my losses are always much larger than my wins by the end of the year. So I don’t have to mess with it on my federal or state tax returns."

Wrong! You probably should "mess with it," especially if you hold any of the following common but mistaken beliefs:

- I can lump together all my wins and losses for the year and, if I have a net loss, I don’t need to put wins or losses on my income tax returns. After all, I didn’t have any gambling income.

- The IRS can’t "catch" me, even if I win a lot of money gambling, as long as it’s done slowly over a considerable period of time in different gambling venues and I get no official forms like a W-2G or 1099.

- Federal and state tax agencies know most gamblers lose over the long term, so they aren’t very interested in auditing them.

- If I do get a few W-2Gs, I can just count that total as my gambling income for the year and be safe in an IRS audit.

- If I gamble online, the IRS doesn’t get any records of this so I don’t have to report any of my winnings.

- If I gamble on a cruise ship in waters three miles from U.S. soil, I don’t need to report my winnings.

- If I play poker only in home games, I do not have to report my winnings.

- Winnings from illegal gambling are not taxable."

"I'm sorry to report that the huge majority of gamblers do not keep any sort of record of their play. The truth is that a good gaming log is hard to keep up to date. When you finish gambling, you’re often tired, maybe a bit bug-eyed, or even intoxicated. If you’ve won, you’re on a high and want to celebrate, not write in a log. If you’ve lost, the last thing you want to do is record it for posterity. Perhaps, if you think about it at all, you figure that, whatever your result, you’ll remember it if a time ever comes when you need to. Or you actually do write down your result—on a cocktail napkin that comes clean in the wash. Or you actually record your win or loss in a small spiral-bound pocket notebook, the kind reporters carry around, but you don’t note enough details of your gambling session to appear authentic in any IRS audit.

Sure, keeping a log isn’t easy. But trust me on this: It’s easier than having to pay more in taxes than you’re liable for, or worse, trying to justify a claim of gambling losses, without adequate documentation, to a steely-eyed bean-counting representative of the U.S. government."

Here’s a quote from Henry Tamburin that appears on the back cover of the book:

In an audit, the session method you use, in the absence of specific IRS guidance, has to be based on consistency, reasonableness, and practicality and depends on the circumstances in each individual case. The more conservative you are, the finer you should define a session. The most conservative definition (and the safest in an audit) for a poker player is to treat each table at which you play as an individual session. Although that sounds like a record-keeping challenge, it really isn't. There are great computer programs on the market that can keep track of your wins and losses by table. ("Poker Tracker" is by far the best and most recognized program on the market.)

If you’re a gambler, you’re lucky if you reside in one of the six tax-haven (or tax-heaven, in my opinion) states that don’t have any form of state income tax (Washington, Nevada, Texas, Alaska, South Dakota, and Wyoming). This is also true if you live in the near tax-haven states, like Florida, which only tax intangibles, or in Tennessee or New Hampshire, which only tax investments. Why are you lucky? You won’t have to pay your state any taxes on your gambling wins.

However, you’re not completely safe from all state income taxes. You may gamble and hit a jackpot in another state, one that does have a state income tax, a few of which automatically withhold state taxes from any win that generates a federal W-2G, regardless of the residency of the jackpot winner. This list of the latter (and the percentage that they withhold) includes:

Louisiana (6%)

Iowa (5%)

Missouri (4%)

Indiana (3.4%)

Mississippi (3% withheld for all W-2G wins, but this is what they call a non-refundable state income tax - see further explanation in this chapter)

Michigan (3.9% in 2007. This withholding is for non-residents only and covers winnings from casinos, racetracks, and off-track betting.)

Connecticut (5%) No withholding for anyone unless federal withholding is required, i.e., non-resident aliens.

Summarized below is the book’s Table of Contents, so you get a flavor of all the topics covered in the book.

Table of Contents:
Foreword by Phil Gordon
Author’s Notes

Part I Federal Taxes
        The Basics
        Player Record-Keeping
        Special Gaming Situations
        Filing Your Tax Return
        Federal Government Issues
        Tax Help for the Poker Player
        Audits and Other Scary Tax Problems for the Gambler

Part II State Taxes
        States Add Insult to Injury
        How All 50 States Handle Gambling Wins/Losses

Summary

Appendix A
        Casino-Issued Forms

Appendix A1
        Certain Gambling Winnings

Appendix A2
        Form 1099-MISC

Appendix A3
        Form 5754

Appendix A4
        Form W-7

Appendix A5
        Form 1042-S

Appendix B
        Sample Tax Forms

Appendix B1
        Recreational Gambler—Non-Itemized

Appendix B2
        Recreational Gambler—Itemized

Appendix B3
        Professional Gambler

Appendix B4
        State and Federal Tax Forms for Indiana Residents

Appendix C
        Basic IRS Information for Gamblers: Revenue Procedure 77-29

Appendix D
        The Groetzinger Case: Gambling as a Business

Final note from Henry: