Originally Posted by
Filmoz
No problem. Accurate records is crucial, and is your starting point. As long as you keep accurate records, you can figure out the tax stuff when you need to. But if you don't keep good records, you are going to have a big mess on your hands and a lot of unneeded stress come tax time.
If you are making your living solely off sports betting you would generally be a sole propietorship (you could conceivably organize an LLC or something like that but, to be fair, you don't seem to be at that point yet). So your starting pointing is the IRS form Schedule C. This is where you tally up your gross wins, deduct your losses, and potentially deduct other reasonable and necessary expenses if its allowed (mileage, etc). Your bottom line on your Schedule C will be your income from your sports betting "business." Then you take this number to transfer over to the Schedule SE to figure out your self-employment taxes. Remember, we pay more than just income tax - we pay social security, medicare, etc. When you work for someone else, this gets automatically withheld from your paycheck and you don't really think about it. Because you are not working for anyone else, you are not having those things withheld, so you have to fill out the Schedule SE to figure out what you owe on those, which is separate and on top of your income tax (sucks).
After completing that, with both your completed Schedule C and Schedule SE in hand, you can fill out your 1040, where you may be eligible for more deductions depending on your situation. You also get to deduct half of the self-employment tax you pay on your SE, which helps mitigate the sting a little. Your 1040 will ultimately spit out your final number of all taxes owed. Pay that by April 15 and you are good to go.
Now, in theory, you are supposed to be keeping continuously updated records, and be able to estimate the taxes you will need to pay at year-end, and pay quarterly estimated payments to the IRS during the year. There is a voucher form to send in your payments every quarter, I think it is the 1040-ES. If you do this, it is just like when you get withholding from a normal job - you are paying up front and will avoid getting hit with a big bill at tax time; if you overpaid, you will get a refund. If you do not pay quarterly estimated payments, it is not illegal, they just tack on a penalty fee. The penalty fee is pretty small, and many people intentionally fail to make quarterly payments because the penalty fee is small enough that they would rather just pay that at tax time than bother with making quarterly payments during the year. (For example, I didn't make quarterly payments last year and my penalty was $39).
Disclaimer: the foregoing information is general in nature and is not formal legal or tax advice directed at any person, and in no way is to be construed as advice on how to evade the lawful imposition of taxes by any jurisdiction.