Tournament winnings tax question

I just received a letter in the mail saying i owe ~$300 for 3k in tournament winnings from 2007. I looked for receipts from 2007 and all I could find were the receipts to the 2 tournaments I cashed in. So my main question is can I deduct the buy in to the 2 tournaments (~1300) from the 3k I won? This would nearly cut the tax in half. Without a hard copy for other tourneys I played in, im guessing theres not much else I could do at this point, so ill probably just pay the money.

It seems a little odd paying taxes on $1900 in winnings from a $1000 buy in tourney.....

Id re-file showing the winnings and then offsetting all of it as losses. You have some receipts and just claim the rest was lost in vegas. For that low of an amount, they will not argue. Their books just didnt balance so they needed to send you a letter to get it fixed. You won't get audited for this little amount.

lakingsfan is right.

First off, it's important for you to understand that you can deduct ALL GAMBLING LOSSES from gambling winnings for that calendar year. This includes tournament buyins, whether you have the receipts or not. (You can usually prove this through the casino if audited.)

So if you get a form showing that you received $3000, and the IRS wants money, you can deduct the following from that year:

- All tournament buyins, including the tournament you won

- Net losses in sportsbetting

- Net losses in pit games (blackjack, craps, etc.)

- Net losses in slot machines

- Net losses in horse racing

- Net losses in cash game poker

- Net losses in online gambling

- Any other net loss in any other form of gambling

Now, you might ask, "How do I prove all of the above to the IRS?"

If the amount if reasonable, they will basically take your word for it. They may ask you to show them a "gambling diary" of your wins and losses (the ones that aren't recorded by a casino), but they are highly unlikely to audit you for such a small amount.

Therefore, simply re-filing and deducting gambling losses against that win will relieve you of the requirement to pay taxes on it.

Obviously the same is not so simple if you win $1.5 million in a tournament, as the IRS isn't going to just take your word that you "lost it back gambling", but for an amount like $3k, you will never be pressed for it once you re-file.

Also, when you re-file, you do not need to enclose proof of the gambling losses and/or tournament buyins. That will only be necessary in an audit.

just a couple of nit-ish clarifications...i suspect everyone in this thread probably has the right idea about the law and how the OP should proceed, but as this site has a lot of young guys that might be mislead when reading this thread, thus just a few points...

i doubt if you owe the money just yet...rather the IRS has proposed a change to your return and you can agree to the change, protest or dispute the correction or, as you plan accept their change but provide additional information to abate or eliminate the additional tax proposed. But if you do not respond within a specified time, the tax becomes an assessed amount and goes to collections...then even if the IRS was wrong with their proposed change your recourse is usually to pay the tax and sue for refund in district court, and that's a very expense proposition...so act quickly on this matter

re: re-file...the correct terminology is to file a revised, or amended, return along with a Form 1040X which explains the differences between the original return and the new one

re: deducting gambling losses--for anyone who does not gamble for a living, gambling losses are deductible as an itemized miscellaneous deduction (on Schedule A) but only to the extent of gambling winnings...if you do not have other itemized such that when combined with your gambling losses you do not exceed the standard deduction, you will receive no tax benefit from the gambling deduction...and if you were self supporting but renting the place you lived in, you may not enough other deductions to itemize (yep, some more social policy built into the tax law -- this time the some anti gambling in the form of economic disincentive directed at the renting class )

lastly, most people nowdays pay for everything by credit or debit card...and if you charged you buy-ins or withdrew money from a casino ATM you are in luck, you have a record on you statements--just look through them...if you tossed the statements you can have you banks/card companies give you statement copes for that year--they keep records for 7 years.

Thanks for all the feedback. I refiled with a 1040 and a schedule A, showing the winnings they had me down for on extra income and then deducting that same amount on the schedule A. Its been about 20 days now and haven't heard anything back so hopefully all is forgiven.

they should send you a notice withdrawing the proposed assessment it they properly process your revised return.

did you send in your return with a IRS Form 1040X with it? that is best for your situation as the IRS people will know how to process your revised return...

if not, did you send the notice of proposed change with your revised return or include a cover note explaining why you are sending this return in? The IRS is a big organization that has its share of people the don't think very hard about what they do...

so often without an explanitory note/statement they will not know what to do with your revised return.

if you get another notice of the proposed assessment you will know they did not react to your return as you hope...and you can call the IRS to check on the status of your account for that year's return

There was a sheet that came with it that I filled out with the return that said I didn't agree with what they had and that I made the proper adjustements. I did not include any kind of note, although that probably would have been a good idea. My tax return was extremely basic with very few lines that weren't ZERO. Hopefully they can figure it out from there, especially since my old return did not include a schedule A.