Taxes?

I am looking to get a little more educated on tax implications for poker winnings. I am primarily a tournament player, and have been successful in small to medium home tourneys,( 30-100 players). Currently I am looking to start competing at the next level; but am clueless about taxes. Any input would be appreciated.

I happen to help run another forum, non-poker related, that involves affiliate marketing and earning cash and prizes for trying product trials, surveys, etc. (like the free iPod giveways you always see in ad banners) and this question comes up there a lot.

I'm new here and don't know CC's policy on such things, but at our forum we always start first with the disclaimer that you should never seek tax advice from an online forum, least of all one that isn't tax-related. Ask a tax professional before deciding what is appropriate for your situation.

Now, with that disclaimer out of the way, I always take the high road and say that you claim everything you win. That much is simple. Legally, you are required to, so there is really no question there. In the affiliate marketing industry, many of the companies that ship cash/prizes get a W9 from you and send you (and the IRS) a 1099-MISC at tax time, particularly if it's over the $600 1099 threshold. However, whether a W9 is gathered or a 1099 submitted, or whether it's above $600 or not, the fact of the matter is you are legally required to report ALL income. Now I realize that given the certain US situation with online gambling, and these sites being located overseas, you aren't going to get reported by them -- however that doesn't absolve you of your legal responsibility. All it takes is for the IRS to get a red flag (a report from someone, your bank, etc.) and audit you. It really isn't worth the risk of committing tax fraud to try to hide your winnings.

Now *how* you claim it might be open to interpretation. Some claim it as hobby expenses, if it's not your primary source of income. If it is your primary source of income, then you're considered self-employed and will have to file Schedule C (and pay the full load of SS taxes in addition to the income tax). However you probably gain the ability to write off certain expenses related to your "gambling profession." Here's where it can dicey though, and where you really should consult a professional if you have any doubts or questions.

Personally I always prepare my own taxes with software, like TaxCut, and it specifically asks me during the process if I have any gambling winnings, so if you use such software that's where I'd probably recommend you do it.

free bet said:

they are not taxed as these companies operate in tax havens such as gibraltar and malta

Click to expand...

They may not report your winnings to the IRS, but that doesn't mean said winnings aren't taxable. Regardless of the country of origin, legally you must pay taxes on them -- or more precisely, you must claim them as income (whether you owe taxes and how much depends on your own tax situation of course).

To do otherwise is considered tax fraud, and I would be careful about discussing that on an open forum. Not only that, but if you're successful at all with poker and ever cashout, trust me -- your bank will make sure the IRS knows about the income once it reaches a certain level.

The advice to seek advice of a tax professional is accurate. The following is some of the information that is readily available online. It gives the basics. "All income is reportable. You are responsible for documentation for deductions and taxes."

Tax Topics - Topic 419 Gambling Income and Expenses

Gambling Income and Losses

Gambling Winnings and Losses

This is one area where I'm happy to live in the UK... the government stiched up our card rooms by classing poker as gambling (and therefore requiring a casino licence to operate a room), but this also means that as with any winnings from gambling no tax is payable on them.
Which means that whereas after commuting time and expense and income tax halve my 'real' earnings from my real job, playing poker online I get to keep all of it, and the UK government doesn't ask for any of it.

I say if the irs dont know about it keep it that way... but that is just me dont let me get you in trouble. If you win big in a casino they make you fill out tax forms but a home game how would anybody know.

Anybody have any idea whether poker income would affect benefits like child tax credits in the UK?
I haven't taken anything substantial out the sites yet to cause it to be significant, but I'm curious... because a parent of 3 children could stand to not just stop having to pay tax, but qualify for several thousand pounds of additional benefits, and qualify for subsidies on things like Open University degree courses. Seems like it would be a bit unfair on those who do pay their taxes, though.