re: Poker & Poker Pro Tax question
Apologies for bumping a few-weeks-old thread, but I ran across an article in Card Player (Feb 2006 issue) last night which addresses this issue. It's by Ann-Margaret Johnson, a CPA and author of the book How to Turn Your Poker Playing Into a Business
). Here's what she has to say about taxes and Internet poker:
There has been a lot of bad advice going around in chat rooms as to what to do when you win money on an Internet site. People are telling each other that as long as you don't move more than $10,000 from your account on the Internet gambling site to your bank account, you don't have to claim it with the IRS. We all know that Internet gambling sites are in foreign countries, which are not governed by United States laws, especially by the IRS. However, the poker player who is playing on a asite at home in his pajamas certainly is.
When you travel out of the United States and come back in through customs, you have to declare if you are carrying $10,000 or more in cash, bonds, checks, and so on. Also, there is a law that you have to declare to the IRS any deposit of $10,000 or more in cash in a financial institution. This is where I believe players are misled.
The rule stinks, but it is this: If you win money on the Internet -- or anywhere else for that matter -- you are supposed to claim it as income on your tax return. As we know, online casinos
do not issue government, forms. It's basically on the honor system at this point. Be aware of this: If you get audited, the first thing the IRS will want to see is your bank statements, so that it can look at the deposits going into your account. If the front page of your tax return does not closely resemble the deposits going into your account, you will have a lot of explaining to do.
So, you may think the answer to this may be to just leave all of your money sitting in your Internet account to avoid all of these problems. Not so fast -- as here is another consideration: There is a rule that states that if you have $10,000 or more in a foreign account, you must check box 7A on Schedule B of your tax return. The bad part is that by doing this, you are almost assured of being audited. So, if you keep that money in your account, you need to check box 7A on Schedule B, and
you had better report your winings on the front of your return.
So... basically, if you win money anywhere, including on the Internet, you're supposed to claim it on your tax return.