AP company with quasi full-time employees
- I, as an employee, would not have to declare myself to be a professional gambler and would not have to add gambling winnings (or losses) to my tax statement (since any amount I win is company income, not personal --- PLEASE correct me if this isn't right).
- No self-employment tax
- All employees wouldn't have to show ridiculously high AGIs, placing them in a high tax bracket -- AND they don't need to worry about states who don't allow gambling losses to be deducted.
- Multiple CTRs? not a problem -- easily explained -- it's in the core nature of the company's business for its employees to handle large amounts of cash.
- The company could issue "bonuses" at the end of the year that would ensure zero income.
- Employees would get W2s. That means the company would need to withhold a certain amount (social security, fed tax, medicare), and the employee would be responsible for his liability depending on if he/she got additional income (from a day job?) and would be placed in the tax bracket befitting the amount of money he actually made.
- No need to explain the bank teller where the hell all those bennies came from.
- Much easier to play higher stakes with larger buy-ins (front-money accounts would be linked to the company, rather than the employee's personal bank account).
- The company can carryover losses from one year to the next (which is only true for an individual if he declares himself a professional gambler)
Thoughts? what disadvantages come to mind? I'm not looking for views on how tricky team play can be and how you have to trust each other etc. -- I'm really just interested in the accounting aspects.
Link please.Quote: arcticfun
- The company can carryover losses from one year to the next (which is only true for an individual if he declares himself a professional gambler)
.
I don't know how much you do know or don't know about that kinda stuff. I mean no disrespect.
@RS: No disrespect taken. I have decent startup experience, although I've never founded my own. I'm trying to see if people can come up with downsides to the general idea of gambling through a company rather than as an individual.
Quote: kewljDouble taxes on winnings. The company would have to pay tax on winnings (earnings) and then the employee would have to pay tax on his salary/bonuses.
this came up I think in a few older threads -- the idea is to offset any company income (earnings) with a fitting payroll expense (employee bonus) so that the company's true income is zero.
Quote: arcticfun@Axel: gambling loss would be an operational loss, and companies (as well as individuals who are professional gamblers from the IRS's perspective) are allowed to carryover such losses from one fiscal year to the next.
Where did you come up with this part that individuals filing as professional gamblers are allowed to carryover losses??
Quote: arcticfunthis came up I think in a few older threads -- the idea is to offset any company income (earnings) with a fitting payroll expense (employee bonus) so that the company's true income is zero.
I know little to nothing about business taxes (I file as an individual), but I don't think it works like that. I think the earnings would be taxed at 2 different levels.
I'm not sure this will fly with gambling. You can get away with a number of things for a while I guess, I'm not a tax person so I'm not sure exactly. Do you know of anyone reputable that has done it like that? Many have filed as legitimate gambling businesses, however I never have known anyone that has successfully carried over wins and losses. I'm very interested in knowing the facts on this.Quote: arcticfun@Axel: gambling loss would be an operational loss, and companies (as well as individuals who are professional gamblers from the IRS's perspective) are allowed to carryover such losses from one fiscal year to the next. Link 1 , Link 2 , Link 3
@RS: No disrespect taken. I have decent startup experience, although I've never founded my own. I'm trying to see if people can come up with downsides to the general idea of gambling through a company rather than as an individual.
Quote: kewljWhere did you come up with this part that individuals filing as professional gamblers are allowed to carryover losses??
I'm wrong about individuals -- in my mind I was thinking about deducting gambling losses which some states don't allow individuals to do unless they are professional gamblers. Individuals can't carry over losses as far as I know. Sorry KJ - hope I didn't make the heart skip a beat there...
You gonna have all team members draw from the same account too? LOL.
Quote: arcticfunI'm wrong about individuals -- in my mind I was thinking about deducting gambling losses which some states don't allow individuals to do unless they are professional gamblers. Individuals can't carry over losses as far as I know. Sorry KJ - hope I didn't make the heart skip a beat there...
No problem. I wish what you thought were true. I wish a gambler could carry over losses (which hasn't been an issue for me yet, as I haven't have a losing year) and I wish we could do some sort of averaging from year to year (this would have come in handy)
Quote: sc15You're going to set up a front money account under a corporation name who's sole business is AP play?
You gonna have all team members draw from the same account too? LOL.
Yes, and I plan to name the company "Beat Blackjack By Counting Cards, Inc."
You will need team shirts and jackets.Quote: arcticfunYes, and I plan to name the company "Beat Blackjack By Counting Cards, Inc."
A few teams of the past have came up with some creative names to jab fun at the casinos.
Corporations have way more rights and flexibility when it comes to taxes than an individual.
Quote: kewljI know little to nothing about business taxes (I file as an individual), but I don't think it works like that. I think the earnings would be taxed at 2 different levels.
While I think the OP's scheme is doomed. He is right that the corporation he would set up could legally have zero net income by paying it's employees more. Not to get all CPA on everyone but essentially corporate entities pay taxes on net income, that is revenue minus expenses. IF your revenue is say 1M per year, and your expenses are say 900K per year. You could reduce your net income to zero by paying out the remaining 100K to employees as bonuses. Or buying a piece of equipment, or whatever. It's obviously a little more complicated than that. There are lots of different types of corp. entities for one thing. How and when you file taxes varies greatly among those types. Every state has it's own unique set of regulatory issues as well. But at it's most basic level yes, you could avoid double taxation by structuring your costs so that the corp. has zero (or near zero, net income). It some states the first 50K of net income on some classes of corp. is not subject to corporate tax anyway. The corporation would be responsible for matching taxes on income it pays it's employees SS, medicare and such. But that is an expense that comes off net income anyway.
Having said all that. No way this idea would work. The legal and tax implications are the least of the problems here.
Quote: vendman1Having said all that. No way this idea would work. The legal and tax implications are the least of the problems here.
I certainly want to believe you -- can you share specific hurdles that come to mind?
No one operates a business year after year that makes no money. Eventually, they would go out of business.
I would show some profit, even if it was for only 40K to show that the business was viable. To do otherwise, would raise a red flag if I was an employee of the IRS.
Quote: darkozWhy would you want to have a company that makes no money (to the IRS)?
No one operates a business year after year that makes no money. Eventually, they would go out of business.
I would show some profit, even if it was for only 40K to show that the business was viable. To do otherwise, would raise a red flag if I was an employee of the IRS.
You can show a net operating loss in any 2 of 5 years you're in business, then you have to start showing some sort of profit or the IRS starts questioning what you're doing. They don't accept a structure that leads to no taxable money in some direction, though it's acceptable in a small corporation (S corp) for them to take their taxes from the shareholders (at their individual rates) rather than the company itself. Paying your employees more than the company earns does not keep you out of trouble, especially if any owners or shareholders are also listed as employees.
Tried (casually) to find the relevant paragraphs of the IRS code and didn't. I suggest anyone considering doing it consult a tax accountant; they generally consider themselves your confidential consultant.
Quote: darkozNo one operates a business year after year that makes no money.
LOL. That is so so wrong. There are many companies that make no taxable profits ( or at least negligible profit ) . Certainly true in the UK, and i well expect it's true in the US.
http://americasmarkets.usatoday.com/2014/08/12/20-big-profitable-u-s-companies-paid-0-taxes/
To the OP if you want some specific advice to your situation I'd be happy to give it for free, PM me if you want, but I'm not an expert. I still think it's probably more trouble than it's worth to start a company with AP gaming as it's core business. It didn't work (at least long term) for the guys at MIT and they tried it several times.
From what I understand, it was their tax filings that helped lead Griffin to them. They were able to get the prospectus and other company info that listed all the players. Not exactly what an AP team would want.
Quote: arcticfunI'm interested in founding a company whose core function is to hire salaried APs. There are multiple tax-related and other advantages I see:
1. I, as an employee, would not have to declare myself to be a professional gambler and would not have to add gambling winnings (or losses) to my tax statement (since any amount I win is company income, not personal --- PLEASE correct me if this isn't right).
2. No self-employment tax
3. All employees wouldn't have to show ridiculously high AGIs, placing them in a high tax bracket -- AND they don't need to worry about states who don't allow gambling losses to be deducted.
4. Multiple CTRs? not a problem -- easily explained -- it's in the core nature of the company's business for its employees to handle large amounts of cash.
5. The company could issue "bonuses" at the end of the year that would ensure zero income.
6. Employees would get W2s. That means the company would need to withhold a certain amount (social security, fed tax, medicare), and the employee would be responsible for his liability depending on if he/she got additional income (from a day job?) and would be placed in the tax bracket befitting the amount of money he actually made.
7. No need to explain the bank teller where the hell all those bennies came from.
8. Much easier to play higher stakes with larger buy-ins (front-money accounts would be linked to the company, rather than the employee's personal bank account).
9. The company can carryover losses from one year to the next (which is only true for an individual if he declares himself a professional gambler)
Thoughts? what disadvantages come to mind? I'm not looking for views on how tricky team play can be and how you have to trust each other etc. -- I'm really just interested in the accounting aspects.
Replaced your dashes with numbers...
General question: What corporate structure are you planning in using? S-Corp?
1. that's probably true, at least if table games are your only play. But any W2G winnings have to list an individual, who would then probably want to document off-setting losses
2. I think this one nets to 0. There's not a penalty for being self-employed, it's just that the same person pays both halves of SSI and Medicare taxes. In an enclosed system like a small company, I think you're indifferent whether the company pays a 6.5% tax on your behalf and issues a W2 or pays you 6.5% more and issues you a 1099.
3. Probably true. But I think the company would have this concern. If the business conducted is gambling and losses can't be netted off, then the company is going to be deemed to have income in those states regardless of any bonus netting scheme.
4. Wasn't a concern anyway, no need to explain. Would the employees have needed to explain their CTRs to someone if they were playing for themselves? I'd be more worried about the bank(s) and their reaction to all the cash transactions in and out of the company account.
5. This is common enough. In an S-Corp the employees are shareholders and the company's profit or loss flows through to them directly (the company pays no taxes directly). So you could either do distributions for corporate taxes, or you could just bonus the crap out of them. Note: bonuses are instantaneous events, so you'd really want to do it at the end of the year - not in calendar January.
6. The company would also need to withhold state, county, and local taxes depending on where the employees live and "work."
7. Not sure that's true. Bank reporting requirements are more strict than casino reporting requirements, and the source of the cash is less evident in a bank than in a casino. An all-cash national company would almost certainly raise a sea of red-flags.
8. Does this really work? How does the casino determine that I have the right to access the company's funds? With my own bank account, they check ID, voided check, SSN, etc. With a corporate account they...?
9. How are you going to determine and document your losses? Corporate audits are WAY more common than individual audits. When the IRS comes knocking, you...?
Quote: vendman1While I think the OP's scheme is doomed..
How would you belong to such a company
if you're an AP and don't want anybody
to know who you are. Casinos would get
wind of it and make the first 'AP gang'
arrest when they got ahold of the members
list.
Quote: arcticfun- I, as an employee, would not have to declare myself to be a professional gambler and would not have to add gambling winnings (or losses) to my tax statement (since any amount I win is company income, not personal --- PLEASE correct me if this isn't right).
If you win a taxable jackpot, I don't think they are going to accept company ID for your W2-G. They are going to make it out in your personal name and SSN.
Quote: rsactuaryI don't think they are going to accept company ID for your W2-G.
IRS Form 5754.
The problem with that is that it's the exact opposite of camo. As soon as you fill out the form and hand it to the casino, they know you work for an AP company. As soon as they know you work for an AP company, I suspect your play will be discontinued.
Quote: DieterIRS Form 5754.
The problem with that is that it's the exact opposite of camo. As soon as you fill out the form and hand it to the casino, they know you work for an AP company. As soon as they know you work for an AP company, I suspect your play will be discontinued.
You're a corporate officer, who owns the corp. What would prevent you from declaring it on the corp's return? Your name and social are on the business tax form, I'd imagine.
Quote: arcticfunThese are all excellent thoughts. Let's assume no W2-Gs for the time being (ie, only payouts less than 300:1). Bish -- how much more can you tell me about your devilish scheme?
Never went thru with it, not much to tell. I did plan on talking to my CPA and having him do everything for me if it was workable, I would never just do it on my own and hope I wasn't breaking the law or hope I wasn't going to owe a ton in taxes. I worked for a family business, which is why I would have been able to convince them hire my corporation instead of paying me; I doubt this would work in most employer/worker relationships. I also wanted to avoid taxes on gambling, without filing a schedule C. The main thrust of my plan was to reduce my income to avoid paying for health insurance and avoid any associated penalties. I ended up paying the 1% which was small (smaller than it would cost to set all this up, no doubt--not to mention the work in maintaining it), and for this year, insurance isn't a problem. In future years, as the penalty increases, depending on whether I have insurance paid for or not, this plan may be revisited.
But letting the casino know in any way that you're playing on behalf of a corporation is going to get you 86ed fast.
So you can forget about using the company's tax ID To CTR or collect a slot machine payoff, or using a company bank account to apply for credit/front money.
Quote: sc15Setting up a corporation for the purposes of AP play so that you can have more tax flexibility or even things like group health insurance are definitely doable.
But letting the casino know in any way that you're playing on behalf of a corporation is going to get you 86ed fast.
So you can forget about using the company's tax ID To CTR or collect a slot machine payoff, or using a company bank account to apply for credit/front money.
These are just some of the reasons I thought the idea was doomed from the start. Good points all.
Some others:
1. Anyone that has run a small business will tell you that finding good help is the hardest part. This would really be true here. If you hire novice AP's, once they figure out the ropes...what's to keep them from going out on their own. I'd have a hard time seeing a veteran successful AP wanting to join. Why? he's got it figured out.
2. Cash business. Proper tracking of cash in and out, in this situation would be nearly impossible. What's to keep an "employee" from putting the occasional purple chip in his pocket. Nothing I can see.
3. Overhead. If you are based anywhere but Vegas (and probably then too). You'd have to travel some to spread around the action. With a larger group this is going to eat into already thin margins.
I'm just getting warmed up. But my bourbon is calling so nighty nite.
In addition, as professional gamblers, I think we are already scrutinized more than most by the IRS. I myself have not been audited yet, but I did receive some sort of "pre-audit information inquiry" requesting additional information last spring. My tax guy responded with the requested info and I have heard no more. Do we want to do things that are going to send up more red flags. I look at it much the same as playing blackjack. I want to draw as little attention as possible.
Quote: kewljI myself have not been audited yet, but I did receive some sort of "pre-audit information inquiry" requesting additional information last spring.
Oh, it's coming if you got a pre audit
info inquiry. The IRS moves at glacial
speed, especially now that they're
short handed. They don't send those
requests for fun, some computer
noticed you and put you on an audit
list.
Quote: EvenBobOh, it's coming if you got a pre audit
info inquiry. The IRS moves at glacial
speed, especially now that they're
short handed. They don't send those
requests for fun, some computer
noticed you and put you on an audit
list.
That's fine too. I have nothing to hide. Just would prefer not to waste my time.
Quote: vendman1These are just some of the reasons I thought the idea was doomed from the start. Good points all.
Some others:
1. Anyone that has run a small business will tell you that finding good help is the hardest part. This would really be true here. If you hire novice AP's, once they figure out the ropes...what's to keep them from going out on their own. I'd have a hard time seeing a veteran successful AP wanting to join. Why? he's got it figured out.
2. Cash business. Proper tracking of cash in and out, in this situation would be nearly impossible. What's to keep an "employee" from putting the occasional purple chip in his pocket. Nothing I can see.
3. Overhead. If you are based anywhere but Vegas (and probably then too). You'd have to travel some to spread around the action. With a larger group this is going to eat into already thin margins.
I'm just getting warmed up. But my bourbon is calling so nighty nite.
I agree and think #2 is by far, the biggest problem (although there are probably lots of others that are bigger but I haven't even thought of yet). You send out the AP employee on his own, he's good at and wins consistently. He says "Yup, up $2500 for the session", you have no way to know he was actually up $3000 and just kept $500." Even if these were people you could inherently trust (and personally, I know MAYBE 5 people I could inherently trust in something like this--and none of them come close to being APs---most don't even gamble), why would they do this?
I don't mean to be discouraging to the OP. I actually get what he's thinking here and I like the idea. But beyond the logistics, I don't see how you actually make it "work".
Edit: I just looked this up. You can't assign the income to the S-corp from a W2G. Looks OK with a sole-proprietorship. Seems like you could just reduce your income from the S-corp by any w2g winnings. CTRs are not taxable, and there would be no ramifications for not disclosing business info. Don't see a problem, unless youre a serial jackpot winner.
http://www.reviewjournal.com/columns-blogs/inside-gaming/casinos-shudder-over-possible-federal-requirement-divulge-source-high
Now if you are under the CTR limit I do not think FINCen will require fund source knowledge but if you will be gambling at or above the CTR level then this article may be of some concern.
On a side note there is debate within the IRS on treatment of winnings from free play promotional credits. A trainer at a recent seminar we sent our Revenue Audit crew too did state that we needed to track all winnings from free play promotional credit and any winnings at and over $600 would need to have a W-2G issued. We requested more information on this and received a response that this was not yet the case but that it was being debated within the IRS.
Quote: sc15Setting up a corporation for the purposes of AP play so that you can have more tax flexibility or even things like group health insurance are definitely doable.
But letting the casino know in any way that you're playing on behalf of a corporation is going to get you 86ed fast.
So you can forget about using the company's tax ID To CTR or collect a slot machine payoff, or using a company bank account to apply for credit/front money.
As far as the Company/Corporate bank account to send in Front Money, I have done this for years and years, C.P./Bellagio/Mirage/Wynn/Planet Ho and more. AC and CT to most properties. There is absolutely no problem in send FM out of a Corporation or LLC account. It is referenced on the incoming bank transfer the players name and players reference number as well. On the books of my company, I take it as travel expense/entertainment and at times payroll, all of no concern to the casinos of course.
As far as credit, I do know for a fact most properties will consider your company bank account if you are a legitimate officer of the company with bank signing privileges that they can verify. The paperwork for most properties says, "personal and business bank accounts" within their terminology on issuing credit (which in all reality is re-paying the casino with a check you pre-authorize and they will draft (ACH) from your listed account, no later than 30 days if you lose, etc.)
I thought it was the fact they all had similar address.Quote: darkozYea, I was thinking about the MIT guys too.
From what I understand, it was their tax filings that helped lead Griffin to them. They were able to get the prospectus and other company info that listed all the players. Not exactly what an AP team would want.
Quote: AxelWolfI thought it was the fact they all had similar address.
Agreed. They all had similar addresses then they found them together in a yearbook. Had nothing to do with taxes. I'm not so sure I want Joe Nobody accessing whatever information he wants from the government regarding random citizens.
Quote: Baccaratfrom79As far as the Company/Corporate bank account to send in Front Money, I have done this for years and years, C.P./Bellagio/Mirage/Wynn/Planet Ho and more. AC and CT to most properties. There is absolutely no problem in send FM out of a Corporation or LLC account. It is referenced on the incoming bank transfer the players name and players reference number as well. On the books of my company, I take it as travel expense/entertainment and at times payroll, all of no concern to the casinos of course.
As far as credit, I do know for a fact most properties will consider your company bank account if you are a legitimate officer of the company with bank signing privileges that they can verify. The paperwork for most properties says, "personal and business bank accounts" within their terminology on issuing credit (which in all reality is re-paying the casino with a check you pre-authorize and they will draft (ACH) from your listed account, no later than 30 days if you lose, etc.)
Yeah, but you're a sucker who's sending money from a random corporate/LLC account. The casino has no concerns where the money's coming from.
The situation's completely different when an APer is sending money from a corporation that's KNOWN to be linked to APers. After the first 'employee' gets backed off, how quickly do you think word is going to spread that they're playing on behalf of a-to-p corporation?
Quote: SonuvabishAgreed. They all had similar addresses then they found them together in a yearbook. Had nothing to do with taxes. I'm not so sure I want Joe Nobody accessing whatever information he wants from the government regarding random citizens.
I'm going by the MIT documentary for Breaking Vegas.
At 01:11 they discuss how the faces were located in the yearbook AND then they discovered strategic investment literature which broke down their entire business strategy.
Quote: kewljNo problem. I wish what you thought were true. I wish a gambler could carry over losses (which hasn't been an issue for me yet, as I haven't have a losing year) and I wish we could do some sort of averaging from year to year (this would have come in handy)
You do file using Schedule C, right?
Quote: vendman11. Anyone that has run a small business will tell you that finding good help is the hardest part. This would really be true here. If you hire novice AP's, once they figure out the ropes...what's to keep them from going out on their own. I'd have a hard time seeing a veteran successful AP wanting to join. Why? he's got it figured out.
I can answer this one. If you're not a full-time AP, the taxes suck (due to not being able to net out winnings). So as long as you are being compensated fairly, this would be an attractive option to me.
But for a full time AP, the benefits start to look not that great, I agree.
