Now please understand that I am not a rich person. I live modestly, drive an older car and have one gasoline company credit card. The only thing that separates me from the 'average' tax payer is that my Schedule 'C' had 'Blackjack Player and Teacher' listed as the business in which I was engaged. I'm certain that was why I was chosen for the audit; after all, how many idiots are there who will report their earnings on Blackjack?

The initial visit was to take place at my house. I'm sure that was done so they'd see how I lived; is there a pool in the backyard and a Mercedes in the driveway? Well, not at my place. So, the agent and his supervisor came over and I had, as they'd requested, copies of my bank statements, canceled checks, my blackjack record sheets and other info which I thought was important. They were professional in their actions, though you've gotta snicker over some of their 'innocent' questions

"Gee, Mr. GameMaster, do you keep a lot of cash around? Golly, that could be dangerous. Theft, I mean."

My reply "Yeah, well it's tough to get to the bank at 2 AM when I need $200 to double that 11 against the dealer's 6."

Well, maybe not quite that smartass in tone, but these guys think it's the worse thing in the world if we operate with cash. So, here's a news flash for the IRS: Casinos want cash! I'm a good lookin' guy, but even for me, the casinos want cash on the nail. And bank hours don't coincide with casino hours.

Anyway, they asked a few more questions, like do I control anybody's checking account besides my own, how much did I spend on groceries each week, and what was the size of my playing bankroll for Blackjack. At the time, I was working off a $6000 bank and told them that.. They gathered up all my records, including the very detailed records of my Blackjack play which I keep. I list when I played, where, for how long, how much won or lost in that session, etc. I also had kept all of my boarding passes which Missouri casinos require to limit a player's purchase of chips. On most of those I had noted my playing time and my win/loss for the session. They took those as well and promised to get back within 30 days.

The auditor contacted me within a couple of weeks and said he'd like another appointment. We agreed to another meeting at my place, and I have to tell you that I really thought the guy was going to come over, tell me I had missed a hundred or two, let me know how much I owed, I'd write a check and that would be the end of it.

When he got here, the IRS agent showed me how he had made up a spread sheet showing my monthly blackjack wins and losses and other income and compared that to the deposits in my checking account on a monthly basis. He included my $6000 bankroll in those calculations as though it was cash available to me (which it was) and determined that I had under-reported my income by over $6000! His premise was that I had exhausted my bankroll by August, 1994 through deposits to my checking account to cover rent, gas, and the like. Therefore, the money I put in my checking account after August basically had to be unreported income and that was to the tune of about $6000. He didn't have this on any official document and it seemed to me that it was something of a 'trial balloon' to gauge my reaction at that number. He gave me a copy of all that and asked me to get back to him within 30 days.

I went through his information and recognized that he simply had prepared a 'worst case' scenario to give us a place to start the bargaining. What I mean by that is he treated every deposit to my checking account which didn't come from casino winnings, my $6000 bankroll or my other consulting income as unreported income. The fact that my dear ol' mom had sent me $100 for my birthday (a non-taxable gift) , or that I got a refund from a utility company deposit (only the interest earned was taxable and I had reported that) and other items like that didn't not count in the least.

So, I started putting all that together. You'd be amazed at the source of deposits to your checking account other than income. I had a refund from a canceled reunion, a friend lent me $200 at a casino one night; I won, deposited the money and wrote him a check the next day; I had received a refund from my 1993 tax return. None of that was noted in his analysis; it was all unreported income to him. I detailed all this in a letter, used his figures in calculating everything and showed that, even by using his method, I wasn't nearly as 'short' as they implied. I then explained that I have cash reserves which are not included in my Blackjack playing bankroll and that 'shortage' was covered by those funds.

The auditor called me several weeks later and said he'd like to show me a report he had prepared. Here again, naive little me, I thought they had gone over the figures in my letter and realized that I owed nothing. Boy, was I ever wrong.

This time he showed up with a Form 4549-CG "Income Tax Examination Changes" and the figures were still the same; they still felt I had $6320 in unreported income! I told the guy I had explained everything in my letter and that he had ignored all of it. He basically said I had 30 days to pay $1778.00 in additional taxes, $355.60 in negligence fines and $205.22 in interest, or appeal his figures.

I knew I could request a 'Supervisor's conference' and did so then and there. He said he'd call me within a day or so.

I gotta tell you that this is a straining experience even when you know you haven't cheated! I don't know how people who DO cheat can deal with this. Being right was my only ally and I needed all the support it had to offer. I had talked to an accountant and he said to just be prepared to pay 'something', but not to worry, because the IRS would work out a payment system. But I KNEW I didn't owe anything, so I wasn't prepared to pay a dime!

The following week, I got my appointment with the supervisor (the same one who had come along on the initial visit) which was to be held at the federal office building downtown. I had all my analyses, letters, checks and other items of proof that all the deposits to my checking account weren't unreported income. When I got there, I showed how I arrived to the figure of $3700 being an area of 'dispute' and not $6320 as their agent had calculated.

The supervisor couldn't argue with that, so I knew I was dealing with a person who was going to be fair. I also pointed out that I had forgotten to deduct any mileage for travel to the casinos, the cost of some overnight stays when visiting out-of-town casinos and a few other things to which I was entitled. I then explained how my bankroll is separate from my cash reserves.

His statement was: "We consider your bankroll and cash reserves as the same thing."

I explained that, for very good reasons, I couldn't do that.

Just so you understand also, here's how it works. I used, at the time, a bankroll of $6000 for my play. That means my betting schedule was figured on that amount; I had a $120 top bet and so forth. I never said that was all the money I had -- I just said that was how much I committed to Blackjack. If I won, I added to my cash reserves, or I used the $$$ for living expenses or whatever. If I lost, I either added to the bankroll from my reserves or I held off playing until I could rebuild the playing bankroll from other sources of income. I had gone on a losing streak from August until November and would likely have stoppped playing for a while if the Alton Belle hadn't decided to give money away in December, 1994.

The 'Belle announced that they were going to pay 2 to 1 for a Blackjack every Tuesday in December as a 'Christmas bonus' to all their loyal customers. Talk about a giveaway! That alone was worth 1.7% to a basic strategy player (after figuring in the casino's edge off the top) and a helluva lot more to a counter. So, where do you think I was on the first Tuesday in December? Yep, me and about 100 other counters. I walked up to a $5 table and except for one little old lady who was betting $5, the rest of the spots were filled with $500 bets. By 11 AM the limit had been dropped to $200 and by 3 it was $50 where it remained for the rest of the month. In spite of all that, I made a BUNCH of $$$ in December which made me profitable for the year (the income that I reported which started all this), rebuilt my reserves and launched me into 1995 with an intact bankroll.

I saw a light go on in the supervisor's eyes. He now understood that if my cash reserves were, say, $15,000, my top bet could be $300, but I could also lose ALL my $$$ and I'd be out of the Blackjack business for a long, long time. That's why I figure only a fraction of my cash as a 'bankroll'. Sure, I could make it higher, but a $120 top bet is a lot of action for the casinos here in St. Louis and I am more concerned about a sustained income from Blackjack than I am in making a killing.

The supervisor said he'd take my comments into consideration and would be back to me within a few days, but I had a good feeling when I walked out of the federal building.

A letter came the next day which said:

"Dear Mr. GameMaster, I have evaluated the additional information you provided at the meeting this morning and have determined not to make any changes to your 1994 tax return."

I didn't feel like I had 'won', because I knew I was telling the truth all along. After all, how many people out there will declare Blackjack income in the first place? But I learned that supporting documentation is very important in dealing with a situation like this and I further learned that the IRS isn't as bad as some would have you believe, but it sure isn't a whole lot of fun dealing with them.

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