New Tax Law
I got this from Card Player Magazine...This sucks!!! The government is screwing us poker players in anyway they can.
New Tax Law Takes Bite Out of Tournament Winnings
Law Will Require Casinos
to Take 25 Percent of $5,000 or More
A new tax code has been released that spells out just how much money the government will take from those who are lucky enough to cash for $5,000 or more in poker tournaments.
Starting March 4, 2008, casinos and cardrooms are supposed to start withholding 25 percent of any poker tournament winnings of $5,000 or more. This will particularly affect the poker hobbyists who go deep in tournaments with buy-ins that range from $100 to $550, and of course those who make their living humping the tournament poker trail.
Language in the new tax code pointed to a tax court ruling that took place earlier this year. The ruling held that tournament poker is not a skillful competition and should be considered a gambling activity, at least for the purposes of taxation.
The law requires casinos and cardrooms to withhold and report the winnings from a player if it amounts to $5,000 or more in a tax year. The code does not address winnings from online poker sites
or from casinos off U.S. soil.
Here’s an example of how much money the government will be making off of poker tournaments after March 4, 2008. If the law was in effect earlier this month, the top seven finishers of the $500 event that took place Aug. 7, at the Legends of Poker
would have paid a total of $40,221 in taxes.
The runner-up of this tournament, which attracted a healthy 460 entrants, would have taken home $27,972 after taxes ($37,295 before). The winner received $74,585. If the law was in place, that amount would’ve been $18,646 less.
The notice that was released to accounting firms this week follows:
Under Code Sec. 3402(q)(3)(C)(i), payers must withhold 25% on proceeds of more than $5,000 from a sweepstakes, wagering pool, or lottery (other than a state-conducted lottery, covered by another withholding rule). Proceeds from a wager are determined by reducing the amount received by the amount of the wager. (Code Sec. 3402(q)(4)(A))