Business & farm

Perhaps I misunderstood, but the federal rate on gambling winnings is 24% flat.  I assumed (perhaps wrongly) that this would apply regardless of whether the winnings were "individual" or derived from professionally oriented gambling activity.  If running through as a business just converts that all to ordinary income, then I understand the rest.  That was just a missing piece of the puzzle for me that was causing confusion.

 

I'm actually fine if that's not the case, I simply thought that it was still taxed as gambling winnings.  I have an appointment scheduled with a CPA next week to work through the best way to treat this income regardless.  I was trying to run through a test case in TTax, and ran across this discrepancy from what I understood, so I thought I'd ask the question.

 

It's looking more and more likely that housing this in an S-Corp to reduce the Self Employment taxes to a degree will make some sense as well, but that depends on whether the definition of "reasonable salary" can be substantially below the $160,200 cutoff for the bulk of that tax.  Taking a $75k salary, and the rest as distributions would keep the overall tax rate down until it gets into the upper brackets.