> Date: Thu Mar 26, 2009 7:20 pm ((PDT))
>
> Has anyone else dealt with this problem?:
>
> - In 2007, I kept a pretty good gambling journal, which showed winning days
> totalling about 32K and losing days about 38K. I filed a 1040, noting the 32K in
> earnings but itemizing 32K (only up to my winnings).
>
> - Well, today I receive a letter saying I owe $1,700! They added up the W2-G's
> and it comes to 38K, above the 32K I reportedly won. This part is true, HOWEVER,
> they only see teh w-2G's and not the losses that came immediately after being
> paid those jackpots. I mean, it's possible to win a 4K royal jackpot and then
> within hours blow that entire sum back playing $5 VP. So net for that day is
> zero, not 4K.
>
> I can file a response, they say, with documentation. Should I file my complete
> journal for that year with an explanation on the cover sheet? Or can I take it
> to an IRS office?
>
> Or am I screwed?
>
You are "screwed" only to the extent that your best efforts don't guarantee a correct determination by the IRS, and it might, in the end, turn out to be most economical to just pay them.
But first... DO try every step they allow you that's not too costly / burdensome to you. Start with the response, explaining that you used the session method of determining your wins and losses and how that can result in more W2G money than reported winnings. I'd send them copies of the entire gambling journal to show them you are keeping your records contemporaneously and in good faith. If they still try to collect the tax, there is probably (my last audit was 30 years ago, thank goodness) still a process for an appeal, first to a low-level IRS officer and then to a higher-level, that you can do yourself without hiring a tax professional or attorney (which would be good advice for larger amounts or a charge of tax evasion / fraud, but not for what you owe, most likely). It used to be that only the second level of appeal was a person who had the authority to "make a deal" or really do something about your case.
It consumes a little time, but is not as unpleasant as some suggest, and again, the worst that can happen is they still assess your income "their way" and you have to pay the tax, interest, and penalty (you might at least, if all else looks like it's going to fail, be able to talk your way out of the penalty).
--BG
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