Tax on winnings...

Just few questions about tax.

1) Do you pay tax in United State on earnings from online poker? What if poker site is not US origin and it pays in other currency?
2) Do you pay tax on earnings from casino tournaments? How about WPT/WSOP?
3) If tax needs to be paid, do we have to deduct the amount we spent on gambling (not only the buy-in for winning tournament but all gambling throughout the year). Just like stocks, you pay tax on earnings but you deduct your investments.

Reply will be appreciated.
Thanks.

I don't think US pays taxes since online gambling is illegal. It's like paying taxes on selling a brick of coke.

I could be totally wrong though.

Well, firstly online gambling is completely legal in the United States. The only place where the laws against online gambling take any effect are with banks making particular transactions. Individuals are still completely free to gamble or do whatever else they wish with their money online.

Second, yes you do have to pay taxes on it. If you have a full time job and you're making an extra $5,000 a year or so, then realistically, you have nothing to really worry about. But if you're making a lot of money playing poker, or if this is your full time job, then you're definitely going to have to report your earnings, just like any other job, lest you tempt fate and possibly face multiple charges of tax evasion, etc.

You are also correct about deducting money spent. You must keep very good records of what you're winning and losing so that if the IRS does in fact decide to look into you, that you can provide them something to look at. You will only be taxed on your total income for the year, i.e. your bottom line.

If you enter 2 tournaments for $10,000, 5 for $5,000 and 25 for $1,000, and win $115,000 over that time, you will only be taxed on the $45,000 profit you have made.

hmm thanx for the great informatin there I figured there was some kind of tax laws here in the U.S. just wasnt sure what they was ...really valueable info since it could be the difference between the IRS forecloseing on you or not

Guys there are numerous other threads about this that you could look up by searching for it. And they have a lot better information that really gets into the nuts and bolts about this.

I own a tax business so let me give it a shot. You are required by the US tax code to report any income whether legal or not. (Even drug dealers are required to report, lol) But whether you report that income or not is a differerent story. If you are not issued a tax form (W2-G, 1099, etc) then the IRS has no way of knowing you received that money. If you are issued a tax form then you better report it or expect an audit. Whatever your decision might be if you do report it remember that you can offset gambling winnings with gambling losses. Which means any money you have lost for that particular year can be subtracted from the winnings but you have to itemize deductions which involves using Schedule A on Form 1040 which may or may not be to your advantage. If you play poker for a living then that is a horse of a different color and I would be happy to discuss if anyone is lucky enough to be in that situation.

they seem to tax everything these days even for online poker

Thanks for all responses. I really appreciate all. Still one question confusing me is how I will prove the LOSS in gambling. If I win a big number, they might issue a receipt (or W-2, etc.) indicating the figure of my winning. But then how can I prove that I lost a particular amount?

Your detailed records should be enough to document your losses. As I understand it, you can deduct gambling losses, but not other expenses as you can with other business pursuits...like 1/2 of your food, your lodging, gasoline, etc. With gambling winnings, I believe that only gambling losses are allowed to be used to off-set winnings.

Also, remember the legality of online gambling in the US is determined by State Law, not Federal Law.