For instance, the IRS is known to add gross receipts of all gambling winnings
& stock/security transactions directly to your tax return gross income.

This is done either by the IRS Service Center, during local audit or when the IRS files
“substitute returns” for a taxpayer who hasn't filed tax returns voluntarily.

Sharon has been gambling, and now she admits it got the best of her. Over the last three years she received W-2s from the Casinos that showed she won
an average of about $95,000.00 a year. Her, W-2 from her job showed she earned $50,000.00 in each year too.

Those W-2s also confirmed that she had tax withholdings that were proper for her earnings.  Still, under the surface she was suffering financially.

She was deeply in debt since she was borrowing on credit cards and from friends.  She also had no property to speak of since she sold everything she had.

Destructively, she gambled away everything she had and everything she could borrow. Humiliated and depressed she couldn't function normally and
unfortunately didn't file her income tax returns for any of those years.

Because of that, the IRS filed “substitute income tax returns” for her which essentially acknowledged the gross value of all the W-2s she received in each
year and only took into account her personal exemption. The end result was a delinquent tax, penalties took into account her personal exemption. The end
result was a delinquent tax, penalties and interest and interest total of $105,000.00.

But after we gathered and reviewed her records we established that she lost $90,000.00 each year gambling (on the average) and documented other
deductions. Despite the fact that she did not have documentary proof of all of her losses it was clear that she lost far more at the casino than she won.  
Nonetheless, we established her losses by using other means and since they clearly exceeded her "winnings" the perceived IRS tax delinquency was
In either case the result can be devastating...
Big Tax on Little or No Actual Net Profit..
1) The taxing authority can trump the amount of your taxable income

2) Disallow substantial loss deductions

3) Disregard your personal life circumstances and the underlying facts relating to those losses.
All of that will translate into artificially inflated tax liabilities.
Tax problems involving Gambling & Investment Losses commonly have several things in common
Gambling & Investment Losses
Tax Crisis : Business or Personal
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