United States Online Poker & Taxes

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FoBreeze

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So, say you play poker online in the United States and you win a substantial amount of money and want to report it on your taxes. Does anyone know how to do this?

Also, is it even legal to make money playing poker online in the USA?
 
Jillychemung

Jillychemung

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Answering the 2nd question 1st, it is not illegal to play online and winnings are not ill-gotten gains.

As for paying taxes, some people do, many do not. Each situation is different. A lot of it depends on the real amount, your likelyhood to be audited such that the taxing authorities would discover the winnings, whether online poker is your 'job', etc. It's the same question if you are a sports bettor withe a local bookie albut there would be more of a paper trail with online poker winnings.

If you believe that you have a large enough profit from online poker to worry about it then you also have enough $$ to engage a CPA that specializes in gambling winnings. I know I would as I use a regular CPA anyway for my taxes.
 
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FoBreeze

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Answering the 2nd question 1st, it is not illegal to play online and winnings are not ill-gotten gains.

As for paying taxes, some people do, many do not. Each situation is different. A lot of it depends on the real amount, your likelyhood to be audited such that the taxing authorities would discover the winnings, whether online poker is your 'job', etc. It's the same question if you are a sports bettor withe a local bookie albut there would be more of a paper trail with online poker winnings.

If you believe that you have a large enough profit from online poker to worry about it then you also have enough $$ to engage a CPA that specializes in gambling winnings. I know I would as I use a regular CPA anyway for my taxes.

So sports betting with bookies isn't illegal? What about betting on sports online?
 
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JamesMoroski

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Paying Taxes

You need to get a 1099 Independent contractor form from the state or county and if you make more than 600 dollar you need to report it for instance i made 25K this past year playing online and i owe about 8K in taxes on that maybe a little more.
 
thetick33

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james is right and bottom line keep records wins losses etc.. any write off accountant can come up with.

HERE IS THING you can keep small checks not pay but with software out there right now for wpn carbon etc..? Govt can come get you based on reports that are out there you cannot hide. At least your tourney wins. Not sure how the sites are doing for sng's or ring? Someone could clarify this. sharkscope is keeping track of what am doing on carbon and wpn whether I like that or not.

Govt could simply demand the records or pay a fee run report have fbi or whatever arrest a few thousand people at a time haha for not paying taxes on winnings or whatever.

So yes if you win 600 get an accountant and pay.

If you win in a casino a lot of them take the taxes right there haha.
 
or3o1990

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Don't listen to these guys. What you do is you move to Australia or the UK.

I'm joking, I've been dreading this for awhile now. I just started seriously grinding a few months ago an no ill have to pay taxes on 2015 for sure. I hate it. It's sickening to hear you lost almost 1/3 james. To think I have a 3k check coming and I only get 2k is robbery. But better that than prison I suppose. Eventually I hope I can get out this country though.
 
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FoBreeze

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You need to get a 1099 Independent contractor form from the state or county and if you make more than 600 dollar you need to report it for instance i made 25K this past year playing online and i owe about 8K in taxes on that maybe a little more.

Where exactly do you get the 1099 form? Is it a blank form and where exactly do you pick this up? Can Turbo Tax provide this form?

Do you have other income? 8K seems really high for 25K in earnings.
 
Gothams Son

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Will you have to pay taxes on winnings if you do not withdraw it, or is it just based purely on when you win the money?
 
or3o1990

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I'm no tax lawyer but I'm pretty sure it's when you withdraw.

I know a little bit about bitcoin and that's how it works with that.. you can make 100 million in btc and you wouldn't ever have to pay taxes on it unless you exchange it for cash. I do wonder if it wouldn't affect your net worth though?? Probably.
 
ZekeRam

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Here's the short answer to your questions:

1. 1099 isn't required, just enter it under other income. Not exactly sure how, my accountant handled it for me.

2. No it's not illegal.

The long answer:

Technically, all gambling winnings must be reported. Whether you cash in a tournament, ($5000 and up, you get a w-2g) win in a cash game, or win $40 when playing with a couple of buddies at home. When it comes to the latter, I'm sure people avoid it or even forget about it. All of these are taxable income.

Your losses should be reported as well, but you can only deduct as much as you've won. For example, you won $10k from a tournament, but you've put in $30k in buy-ins for the year. Although you report the full $30k as losses, you can only deduct $10k from taxes. Even without any formal paperwork that states you're paid out, you MUST report winnings and losses.

Lastly, no you're not really doing anything illegal. Federal law enforcement doesn't really target poker players, they target the facilitators. BUT when it comes to the IRS, they want to make sure they get their share, so even if you report as generic gambling winnings, they really won't come after you UNLESS you don't pay the tax on it. The thing about online winnings though is that it's not reported to the IRS, so they won't even know about it until you get audited. I'm actually a proponent of making sure I pay my taxes, so I reported my online gambling winnings. I know of people who find ways around it but I couldn't tell you how.

The proper way to go about it is to report your winnings and losses as accurately as you can. Even if you deposited $1000, withdrew $3000, and kept $500 in your account, you have to properly note the buy-ins for each tournament, and the amount you won for each tournament, instead of "Win $3000, loss $1000."
 
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Does that mean that someone who loses can claim that on their taxes? I'm sorry, I just read and re-read, and still don't understand fully... I think what you said means that if I win $200, but lose $100, if I can account for everything, I am eligible for a deduction/return of some amount? It's interesting, as I've always done my own taxes, and back in the days of US pokerstars, I cashed and never encountered any taxation... Unless they took it directly out of my cash out, which, I don't recall. It's been too long to remember correctly.
 
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9betterluck9

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I have always thought about all of this stuff, and I guess wished someday I'd be lucky enough to have to worry about it.. That day has yet to come. :D I wwould be almost certain that the majority of the players out there who cashout large sum frequently probably file some sort of taxes on it.. On the same note, I think most players, (90%+ in my opinion) don't file an sort of taxes associated with online poker winning/earnings. I have a question, when you say some needs to file if the cashout/win $600+, does it matter if they had deposited more than that amount in the same year? Just curious if it based of any cashouts, or moreso net winnings.
 
ZekeRam

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Does that mean that someone who loses can claim that on their taxes? I'm sorry, I just read and re-read, and still don't understand fully... I think what you said means that if I win $200, but lose $100, if I can account for everything, I am eligible for a deduction/return of some amount? It's interesting, as I've always done my own taxes, and back in the days of US pokerstars, I cashed and never encountered any taxation... Unless they took it directly out of my cash out, which, I don't recall. It's been too long to remember correctly.

Yea, not sure about back in the day, but you probably just didn't report it.

At any rate, if you win $200, and lose $100, then you can deduct $100 from your taxable income. However, you have to report that you won the $200, so say you're in the 28% tax bracket, you'll owe $28 in taxes after it's all said and done.

Let's say, you win $300, but lose $500. Well, you can only deduct $300 from your taxable income, so although you're not going to pay taxes on the $300 winnings, you're still in the hole by $200. Pretty much win/win for the IRS.
 
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satirist

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Yea, not sure about back in the day, but you probably just didn't report it.

At any rate, if you win $200, and lose $100, then you can deduct $100 from your taxable income. However, you have to report that you won the $200, so say you're in the 28% tax bracket, you'll owe $28 in taxes after it's all said and done.

Let's say, you win $300, but lose $500. Well, you can only deduct $300 from your taxable income, so although you're not going to pay taxes on the $300 winnings, you're still in the hole by $200. Pretty much win/win for the IRS.

Thanks for the info, Zeke, I'll be sure to consider that when I file my taxes next year... 2015, plan on winning : )
 
ZekeRam

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Thanks for the info, Zeke, I'll be sure to consider that when I file my taxes next year... 2015, plan on winning : )

Yea, no worries, but I have to warn you, no matter how many times you tell yourself that you're paying X amount in taxes because of that payout you've always asked for, it still hurts. Good luck this year!
 
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12shark4u

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What really sucks is that the USA government...... crooks. Want their share of taxes the take away the game we all love. IDIOTS IMO
 
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i think its ridiculous that they expect people to pay taxes but don't regulate or help us in any way. when you play at an over seas site its just play at your own risk but they still want paid.
 
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