Paying Taxes On Poker?

Okay I just came to realize that if I cash out a certain amount from my poker site (pokerstars) will I be charged tax on my winnings??

Yes, you have to file your taxes and you have to be honest and declare poker winnings. If you don't and are caught you will be charged with tax evasion or fraud or whatever it's called. Not all people do declare it, but legally in the United States you are required to report poker winnings, both live and online.

had a buddy who won close to 10k on PS, and he ended up gettin it out by transferring a lot to friends and having them pay him in cash, plus a little juice money.=) i dont know if sites report substantial winnings like that to the gov or not. anybody??

I don't think most would, considering most are based overseas, but being Canadian I may not be correct as I am not familiar with US laws.

I don't believe any of the poker sites, other than Duplicate, report taxable winnings to the USA. I know Duplicate poker does. I needed to fill out a form allowing them to report my winnings over $600. This is all gonna change when USA figures out how to tax the other winnings from poker rooms...if...and when they allow playing at the now unavailable sites.

For Swedish citizens, winnings from online gaming sites based within the European Union are free from income tax. Winnings from sites outside the EU must be declared and are subject to tax.

I am a tax accountant and any winnings are taxable to the IRS. Any winnings from casino winnings over $1,000 must be reported to the IRS. It is $600 for horse racing and lottery. The catch here is that since it it illegal for American citizens to play online poker most of the sites do not report your winnings to the IRS. My advice to avoid problems in the future is to keep track of winnings vrs losing from all types of gambling and claim the profit as misc. income from gambling. If anyone recieves a 1099G for gambling winnings and is not sure what to do with it I will gladly help you out with it. Every tax situation is unique to the individual taxpayer and must be treated that way. If your total winnings for the year are less than $1,000 minus loses I would not worry about it.

i heard on the radio station the other day starting after april 09' next year that if you win or make or wd anythingg over 4500.00 $ you have to declare it,thats so lame , so i'm ok w/freerolls lol

This is illegal and if the IRS ever figured it out all of the participants would be guilty of conspiracy to defraud the IRS a major felony and they do not give up if the choose to go after you.

I'm no accountant, but the way I understand it is if you do not file as a professional gambler you need to declare every winning session add that to your income then you can deduct all your loosing sessions on a separate line item.

Thats a lot of work. If you declare as a professional ou can total up all wins and losses and just declare the difference.

Withdrawing has nothing to do with it, amount of money has nothing to do with it. If you make ANY MONEY in online poker, the money MUST be declared. No exceptions. If you want to try to cheat on your taxes, that is up to you, but not declaring anything is cheating and if you get caught you can be prosecuted for it. It's that simple. Yes this includes freerolls, $1 games, CC private games, etc. Legally every penny you making playing poker must be reported. Period.

As Joey said, you will have a better chance of being hit by a meteor than experiencing problems with anyone if you don't make and/or withdraw more than $4500. The number may have actually increased slightly since 2007, but as far as I'm informed, this is the "magic" number.

yes, you are suppose to report your gains to the IRS! THere is a miscellaneous gambling section to report your winnings. Conversely, if you aren't winning anything and you are losing a lot you can report your losses too I think.

The craziest part is HOW the taxes are calculated.

You do NOT report your net winnings.

Let me clarify.

If you play for a year. End up with $10,000 in december in your account after a 100$ deposit in January (well done by the way) you DO NOT Pay 30% of $9900.

Certainly it seems like you would.. but here is what ACTUALLY happens.

You must pay 30% of ALL YOUR WINNINGS no matter what. Your losses don't figure in (yet).

So lets say you are a tourney player. You won $45,000 at a cost of $35,000 (netting our juicy 10k).

Well you OWE THE IRS 30% of $45k. Period.

So technically, when you bubble in your tourney and crash and burn just ITM... well you are not really ITM If you pay 10k to play a tourney at a casino and win 10k in that tourney, the casino will withhold 3k for taxes! (I know this hurts).

Your losses are reported as "gambling losses" and are part of your deductible. The good thing is you are not limited in the amount you can claim in this regard, so in the end this balances out (sort of although it can screw with your other (medical etc) deductibles).

And you don't have to be one of the ~5% of online poker players who are profitable. You even have to pay taxes (and claim a deductible) when you net a loss. Though it has been correctly noted that the vast majority of online poker companies do NOT report to the US government.

*IF* you make your living FULL TIME as a poker player you can ask to be granted professional status. Then you pay taxes on your net winnings just as you would any other income.

The details of how to calculate your poker taxes might be best left to an accountant who knows the ropes. They can likely save you some money because of the way you do things like define a "session".

You MUST keep your records. Even if you don't use a poker analysis tool you need to hold onto your table histories for the year.

here's to hoping you pay a lot in this year,
cAPS

Yes, and in light of the Feds seizing 24 million dollars from Bodog accounts in the U.S you had better do it. They may be able to use what they seized to get a hold of records concerning those winnings of yours. If it has happened to Bodog then Poker Stars and Full Tilt may not be far behind.

Feds Hound Bodog - Forbes.com

Wrong. Withdrawing has nothing to do with it. No matter where the money is, if you make money you must report it on your taxes. It's that simple.

This thread is so full of errors and falsehoods I don't even know where to start, but here goes:

As pointed out by other posters, the sites themselves to NOT take out taxes, nor do they report your winnings in any way. It is up to YOU to report your income from all sources at tax time.

This is simple ignorance. It is NOT illegal for US players to play online poker (although some local and state jurisdictions have passed laws making it so). Never has been. I suggest you educate yourself and stop spreading this unfortunately still common myth.

"while the US Justice Department recently stated that the Wire Act covers casino games in addition to sports wagering, the Federal Appeals Court has directly ruled that that interpretation is not correct."

The recent UIGA that the Republicans sneakily hid in a Safe Ports Act makes it unlawful for financial institutions to process transactions from online gaming sites. It does NOT make it illegal for an individual to play poker, or to make said transactions themselves.

See here and get more depth and updates and info on other laws and developments here.

One more time, playing poker online is NOT illegal. Not paying your income taxes is illegal.
As stated above, it has ALWAYS been your responsibility to declare ALL your winnings, regardless of amount. It's income, you have to play taxes on it.

There was a recent move to try to collect taxes at the time of the winning but it was rescinded. Now casinos are only reporting the winnings, not taking the taxes out at the time. It remains, as, again it always has been, the responsibility of the individual to play their required taxes at the appropriate time.

False. You do not have to withdraw-- any WINNINGS are taxable and must be declared. It is similar to interest earned in your bank account, or dividends paid on your stocks: just because you don't remove it from your bank or brokerage account doesn't mean you don't have to pay taxes on it. It's income that you have access to and it is taxable.


Lots of half truth and misconceptions.

The IRS wants you to be able to document all your gambling "sessions", one line for wins, one for losses, and you play tax on the difference. However, it is VERY important to understand that you can NOT simply net the difference: you have to declare ALL your winnings, then are allowed to deduct your losses (in a separate place). Please note that the effect is that you pay tax on the net winnings only, although you have to document it in a somewhat convoluted way.

Both professional and recreational/amateur gamblers end up paying taxes on the NET win, although they go about it differently and file different forms.

You can deduct your losses in so far as they offset your winnings only. Say, however, that you NEVER won a single session, or that you gambled only once and lost: you can't deduct that loss as an offset to your regular income (only your gambling win income).

Anyone interested in not cheating on their taxes should buy these books (and an extra copy for their CPA too):





How to Turn Your Poker Playing into A Business : Knowing What to Deduct to Improve your Odds With the IRS by Ann-Margaret Johnston


and
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**** so if i withdraw 10 bucks from my account i have to report it to the tax man ??? or ill get ****ed over ??

Everything AG said is layed out very well. But I do want to focus on this part of what he said, because I think it's where people are getting mixed up.

The analogy to interest is good but banks and brokerages report your interest earnings to the IRS. Online sites do NOT report your winnings to the IRS.

So this is where the difference lies. AG, Zach, etc. are correct in saying that you should report your winnings online even if you don't withdrawl. Most people figure they only have to do it if they withdrawl because the IRS has no record (from the online site) that you played and won. And if the money isn't in your bank account and you get audited, how will they know you won?

There are two easy things you can do to avoid all of this. 1) Just be a losing player. 2) Win big and you'll have enough to hire a nice tax attorney and/or accountant that can help you out.

Well I think we said pretty much the same thing. I assume you only glossed over my post. It was too long.

You report you TOTAL winnings. And declare your TOTAL losses as a deductible.

But as I said. This is not really the same as a tax NET gains.

But the sort of fine detail we are arguing about is the type of thing I think a knowledgeable accountant should be used to clarify.

Wonder how much business hornellfred wants?

How is this at all doable when most sites don't afford you any reasonable way to do this. Results documentation is way too tedious to do correctly. Fulltilt has tourney history which is easy to paste into excel, but even most tracker programs can't handle all the sites.

The IRS requires you to do this for B&M Casinos too. What software are you going to rely on to track that? the IRS doesn't care if its easy or not, the just require you to do it. Use a notepad and track your sessions.

If you think you can convince an IRS lawyer that a session lasts from the time you deposit until you withdraw more power too you, and good luck.

And be kind to our US institutions, perhaps, by depositing in overseas accounts only?? After all, one would not like to get them in trouble with online gambling transactions; they have enough woes of their own, given all the gobble-D-gook and confusion going on today, e.g., all the sub-prime rate shenanigans. Just a thought that comes to me reading this very useful thread.

I have done many returns for gamblers before, but never for poker players and I know the laws are different as far as this goes. The problem with winning say $1500 on a slot machine is that you have to itemize your losses and if you do not have enough other deductions in reality you do not get to write of the $1500 even if you lost way more than that (which most do). The money derieved from poker winnings is considered by the IRS to be illegally obtained. I got this from an IRS bulletin in the 2006 tax season and am trying to find it. You still must pay taxes on your winnings as you are on any illegally obtained money. Playing poker online is not illegal but the winnings are condidered illegally obtained. If a tax court has changed this I am not aware of it. The LAW says you must claim ALL gambling winnings, even the fifty bucks won at the church raffle. The reality is that almost no one does this and only claim the amounts reported as winnings to the IRS. With the government so against internet poker, I would agree with alien genius that you do want to be extra careful. Also what I said was it is illegal to give the money to friends as dexters post stated I quoted the wrong message.

uhh, no. In fact, I'm starting to doubt your credentials as a professional.

In Baxter vs. US the courts ruled that it is possible to be a professional gambler, and it is now treated as similar to any other business/self impolyment. Yep, 7x wsop bracelet holder and poker hall of famer Billy Baxter sued the IRS: The Nevada judge who heard the case ruled in favor of Baxter, declaring "I find the government's argument to be ludicrous. I just wish you had some money and could sit down with Mr. Baxter and play some poker."

I really suggest you buy the two books I listed above.

In any case, it DOESN'T matter if your income is illegally obtained: the IRS is (theoretically) prohibited from reporting your illegal income to any other governement branch/law enforcement under what is commenyly known as the "silver platter" law. In other words, if you report and pay taxes on money obtained from dealing drugs the IRS cannot then forward that to the DEA and "serve you up on a silver platter" becasue you obeyed tax law.

Tax Aspects of Online Gambling

This here is a good source of info on taxes and online gambling.

Few people actually do this but legally you have to. If you make a substantial amount of money you have a good chance of being caught. All big transactions catch some form of attention. And attention=audit to this IRS. If they audit you, you're boinked.

Yep, heard that if Al Capone had filed his taxes and claimed that he was paying taxes on illegally obtained money, the prosecution would have had no case against him.

I would check with a tax accountant and see what is required. Or you could move to Canada, any money we win is tax free.

I understand it's illegal if the US player doesn't claim the winnings, that much I understand, but the Question was, Does the pokersite have to inform the IRS of any substantial winnings made by a US player even if the poker site is based overseas'?

asked and answered

I think we are saying the same things, my problem is I forget to keep saying that this involves only "internet poker." It is legal to play poker in casinos and your betting if tracked by the casino. If you make a living at poker then you can be a professinal gambler. This I know. I managed the Liberty Tax Offices in Jamestown, Buffalo, and Olean and casinos are near all three locations. We prepared many returns for gamblers at all three locations. I will get those books you mention.

i just always thought that it depended on how much you win. Like anything under $600 and you don't have to report it. Does anyone have any clarification on this for sure?