Fees for representation

[taxea]

Fees for representation

Sounds to me like it is the "on face value" that the IRS is questioning. I didn't see anything in the original post that indicates to me that the TP provided documentation of the losses.

Although it is ultimately the taxpayer that must provide the preparer with accurate information, the mere fact that the poster mentioned "recreating losses" leads me to believe the original preparer didn't have the necessary information to report equal loss to gain. When it comes to areas that I know the IRS is likely to question, I make sure that my client has the proper documentation to support his/her claim. This is one area where I don't just take the client's word for the expense. I would not be doing right by my clients if I didn't use my expertise to insure there is no question from the IRS.

It does not appear that the original preparer was looking out for the client in this case.

Another comment was that people usually lose more than they win and though that may be true you can't just write off an equal loss to win without proof and expect the IRS to accept it. taxea

[MLINDER42]

Fees for Representation

The audit is for 2007 I told the client to be prepared for prior year audits. Thank you for all your help.The prior preparer is the reason that we need some kind of licensing in our profession.I am in MD and they just passed a law for registration of preparers and testing for non 230 persons.

[DaveO]

I usually believe my clients when they claim their losses. Most are probably being conservative with losses against large wins. If they have $40k in wins they may claim $30k in losses. Small wins of a few hundred or so are most always offset.

After all those glitzy casinos were not built on the backs of winners.

[Jiggers]

Gambling wins/losses

I see clients who come in with that W-2 G showing some slot machine win.

For example $5,000.

He also has a casino printout that shows $9,000 wins (only $5,000 on W-2G) and $11,000 in losses, or whatever they call them. I see them called as "Ins" and "Outs".

Do you report the $5,000, with $5,000 in expenses on Schedule A?

Or do you report $9,000 in wins and $9,000 on Schedule A?

The proper way is to report the $9,000 in wins.

[DaveO]

Most gamblers will have printouts from several casinos. I report the total wins and losses up to the wins.

[Jesse]

How many of you take your clients word for it when they tell you how much they lost? I do. I warn of documentation that they will need if they are in an audit situation how much more am I obligated to do?

In the past I have had several bigger lottery jackpot winners, I tell them to keep a diary of when they buy the tickets or go to the casino, just a big brown bag full of lottery tickets and scratch off's won't suffice. How far does my obligation to make sure they are bonifide losses go? Do I take their word they bought the loosing tickets or should I look for footprints to see if they might just be picking them up off the street?

[JohnH]

My clients tell me those footprints are a result of their flattening the tickets by standing on them when they get creased & wrinkled from stuffing the tickets in their pockets. Should I be questioning whether the client is a neatness freak?

[OtisMozzetti]

Substantiation via statistics

The client was at the casino 204 days during the year.She has 105 IRS reported individual wins.She did not use her casino card. In 2006 she had $ 54,000 of wins took the same amount of losses no audit. In 2005 she had $132,000 in wins took same amount in losses no audit.When i say recreate we went over debit card withdrawals at the casino ATM.matched them against wins and against tolls on her Eazy-Pass to prove days at casino.

Knowing what we do know about the odds at casinos, I would say that the odds are at least 99.9% or more that the losses incurred during 2006 were $54,000 or more, and at least 99.9% or more that the losses incurred during 2005 were $132,000 or more. It is POSSIBLE but very, very unlikely that the taxpayer had more winnings than losses in one or the other of those years. That is the reality of it. What the IRS is willing to accept is a separate issue. There is a category of Offer in Compromise entitled "Doubt as to Liability". It would be interesting to research whether the U.S. Tax Court has been a stickler for documentation, or whether the Tax Court accepts statistical evidence that it is 99.9% or more likely that the taxpayer did incur the losses.

If someone wins $1,000,000, or even $100,000, on a state lottery ticket, it is going to be likely, however, that their total wagers were less than the amount of the winnings.

[Zee]

Knowing what we do know about the odds at casinos, I would say that the odds are at least 99.9% or more that the losses incurred during 2006 were $54,000 or more, and at least 99.9% or more that the losses incurred during 2005 were $132,000 or more. It is POSSIBLE but very, very unlikely that the taxpayer had more winnings than losses in one or the other of those years. That is the reality of it. What the IRS is willing to accept is a separate issue. There is a category of Offer in Compromise entitled "Doubt as to Liability". It would be interesting to research whether the U.S. Tax Court has been a stickler for documentation, or whether the Tax Court accepts statistical evidence that it is 99.9% or more likely that the taxpayer did incur the losses.

If someone wins $1,000,000, or even $100,000, on a state lottery ticket, it is going to be likely, however, that their total wagers were less than the amount of the winnings.

Of course, you may be correct. But, I don't think an IRS auditor would buy it without substantial documentation. It also means nothing that the IRS didn't audit prior years since the odds of audit are less than 1%.