A client of mine received a SC2000 letter from the computer center which matches information with filed tax returns. The item was a 1099 on gambling winnings. The client professed to be a professional gambler but in practice, he lost more than he won.
The item was one item missing in a stack of records that he had won cruising the poker casinos in Gardena and other places where tournaments are played.
We had reported all but that one item in his tax returns and responded that he had offsetting Schedule A losses to wash out the additional winnings that were missed, but the person behind the IRS machine ignored our information.
I appealed to the San Diego Tax Court and we presented our case. That day the Revenue Officer learned a big lesson on how people lose huge amounts of money gambling, as this client had gambled both his business and an inheritance away at the casinos.
* Phillip B Chute is an Enrolled Agent, tested, licensed, and appointed by the IRS directly. He has prepared or supervised over 25,000 tax returns over 30 years.