Online Winnings - Taxes

[Crummy]

Speaking on Audits....... everybody here within the United States knows they are required to keep all records of everything from Bills, Checks, Receipts, ect..... for 7 years!!!!! If you were selected for an Audit they can only go back 7 years, so just an FYI.

 

[rhulp1]

For those who are interested: in the netherlands you have the pay 29% of the amount you have won (1000 dollar you pay 290 dollar tax).

 

[RogueRivered]

(I believe it's just pay tax+interest+penalty for negligence and extra fines/penalties and probable jail time for actual fraud).

I used to work for the IRS (20 years ago!) and it was hard to believe how much the tax bills added up to after penalties and interest. Sometimes a $2,000 tax deficiency would result in a bill of over $10,000. Jail time was extremely unusual, though, and only for serious fraud. Criminal cases were really rare in my office. Nevertheless, Zachvac is right, better safe than sorry!

Speaking on Audits....... everybody here within the United States knows they are required to keep all records of everything from Bills, Checks, Receipts, ect..... for 7 years!!!!! If you were selected for an Audit they can only go back 7 years, so just an FYI.

You could be right, but I'm not sure about that. Generally the IRS has 3 years to challenge your return from the filing date, but I suppose they can go back from there to prior years if they find something funny. There is no statute of limitations on fraud, however.

 

[ChurchSkiz]

The cool thing is when your self employed you can write things off. I don't know if this would work for a Poker player, as I have never reported anything win wise on my taxes, because I have yet to have the pleasure of doing so. As a business person and being self employed you can write off so much of all of your personal bills such as your house payment, electric, water, ect... As you have a "home office"..... It is worth asking a tax professional if this is what you do for a living.

IANAA but being a former small business owner I can give a good starting point for some deductions should you have to report winnings.

1. Your computer is deductible for the % of time you use it for your business. So if you spend 75% of your computer time playing poker, you can deduct 75% of the expense.
2. Assuming you have a "poker area" say an office or desk, you can deduct the % of sqft that you are using as a percentage of your total rent and utilities. So if you have a 2,000 sqft house and your office is 100 sqft, you can deduct 5% of your rent and utilities. This is assuming your area is 100% used for poker.
3. Where most people will find help is in travel. ANY travel to play poker can be an expense. This includes travel to and from a local casino (and this year I think the write off is $.53 a mile) or long distance (say for a tourney). I believe even driving to your friends for a local game would be considered.
4. Another area that you can deduct is tools such as books, lessons, or any business get togethers. So if you take your poker friend Bob out for dinner with the intent of discussing your poker business, you can write that off.

Again I'm not an accountant so please research on your own, but these should be a good starting point. The write offs help offset the insane amount of taxes you will pay (15% off the top + whatever your federal taxes are). As a standard I would always take 35% of my earnings and hold them in an account I couldn't touch. I thought that was extremely aggressive and I still owed a few grand in taxes at the end of the year.

 

[DogzBestFrnd]

Maybe I missed it, but if the money isnt withdrawn from the poker site, do you still have to claim taxes on it? If yes, then I have to ask the site for documentation of deposits, winnings/loses, withdraws?

Also, say I play $100 and lose it all, then quite gamleing. On my taxes I would claim winnings as $0 and loses as $100 and it would equal out to $0 because loses cant be more than winnings?

 

[BelgoSuisse]

My advice: move to france. Poker winnings are not taxable as long as it's not your main job.

 

[colquhounx]

Going back to the Barry Greenstein thing, if you make one $9000 deposit
you probably can get away without reporting it. If you are consistantly making
$9000 deposits you are going to send up more red flags then at a communist rally.

 

[JDVB]

I have never been taxed on my winnings. And I have with drawn more than 1000 dollars at a time from bodog. Was I suppose to claim that on my taxes?

 

[JDVB]

Maybe I missed it, but if the money isnt withdrawn from the poker site, do you still have to claim taxes on it? If yes, then I have to ask the site for documentation of deposits, winnings/loses, withdraws?

Also, say I play $100 and lose it all, then quite gamleing. On my taxes I would claim winnings as $0 and loses as $100 and it would equal out to $0 because loses cant be more than winnings?

Yea, that is right. I only have to claim it when I win? What happens if I lose? You see, wouldn't have to go both ways?

 

[RogueRivered]

IANAA but being a former small business owner I can give a good starting point for some deductions should you have to report winnings.

1. Your computer is deductible for the % of time you use it for your business. So if you spend 75% of your computer time playing poker, you can deduct 75% of the expense.
2. Assuming you have a "poker area" say an office or desk, you can deduct the % of sqft that you are using as a percentage of your total rent and utilities. So if you have a 2,000 sqft house and your office is 100 sqft, you can deduct 5% of your rent and utilities. This is assuming your area is 100% used for poker.
3. Where most people will find help is in travel. ANY travel to play poker can be an expense. This includes travel to and from a local casino (and this year I think the write off is $.53 a mile) or long distance (say for a tourney). I believe even driving to your friends for a local game would be considered.
4. Another area that you can deduct is tools such as books, lessons, or any business get togethers. So if you take your poker friend Bob out for dinner with the intent of discussing your poker business, you can write that off.

None of this counts unless you're a professional poker player. There are rules regarding how to declare this to the IRS and have it approved. Being self-employed in some other field doesn't count.

Maybe I missed it, but if the money isnt withdrawn from the poker site, do you still have to claim taxes on it? If yes, then I have to ask the site for documentation of deposits, winnings/loses, withdraws?

Also, say I play $100 and lose it all, then quite gamleing. On my taxes I would claim winnings as $0 and loses as $100 and it would equal out to $0 because loses cant be more than winnings?

You have to keep your own records of wins or losses. The sites don't do it for you. They are off-shore. That's why our government doesn't like unregulated Internet gaming. Regulated casinos in the U.S. have to report to the IRS or withhold some winnings right off the bat.

In your $100 dollar loss example, I'd say if you lost it all at once, then you don't need to report anything. But that's not how it usually happens. You usually lose some, then win some, then lose some, then win some, etc, until you finally lose it all. It that case, you need to keep a log of it all, and report your winnings, which can be offset on your itemized deductions by your losses. See the my long post above quoting from the IRS Publication.

I have never been taxed on my winnings. And I have with drawn more than 1000 dollars at a time from bodog. Was I suppose to claim that on my taxes?

The U.S. has a self-reporting tax system; it's up to you to claim your income. If you don't and they find out about it, it can be messy.

 

[ChurchSkiz]

Also, say I play $100 and lose it all, then quite gamleing. On my taxes I would claim winnings as $0 and loses as $100 and it would equal out to $0 because loses cant be more than winnings?

If you lost it all on one hand you wouldn't put it on your taxes. Most likely you won several hands and lost several hands.

Let's say you played 5 hands

Won 50
Lost 50
Won 25
Lost 75
Lost 50

You would report winnings of 75 and losses of 75 and would end up not paying any taxes on it.

 

[BelgoSuisse]

In your $100 dollar loss example, I'd say if you lost it all at once, then you don't need to report anything. But that's not how it usually happens. You usually lose some, then win some, then lose some, then win some, etc, until you finally lose it all. It that case, you need to keep a log of it all, and report your winnings, which can be offset on your itemized deductions by your losses. See the my long post above quoting from the IRS Publication.

So when zachvac is going to play something like a million hands in 2009, he'll win about 100000 of those and lose money in 150000 of them, he needs to report all individual wins and losses ?????

Note that grouping those hands per session doesn't make any more sense as when you play ring games, it's really all one big session from beginning to end.

 

[RogueRivered]

So when zachvac is going to play something like a million hands in 2009, he'll win about 100000 of those and lose money in 150000 of them, he needs to report all individual wins and losses ?????

Note that grouping those hands per session doesn't make any more sense as when you play ring games, it's really all one big session from beginning to end.

Good question. I don't know how detailed you have to be, but I'm sure more detailed is better than less. I'd say that for those of you using PokerTracker or HEM, either by session or date would be sufficient. Again, I don't know for sure, so don't quote me. All I know is that no one is going to want to wade through every single hand should you be audited, so if you present reasonable proof, it will probably be accepted. If it isn't, you can always go to Tax Court. The judge really won't want to wade through it all, so he'll encourage the two sides to make a deal.

When it comes to reporting stock market transactions, from my experience, you have to list every single closed position. Too bad you can't count your poker site account as an unclosed position. Maybe they'll do that someday when it's regulated. I doubt it, though.

 

[Crummy]

If you lost it all on one hand you wouldn't put it on your taxes. Most likely you won several hands and lost several hands.

Let's say you played 5 hands

Won 50
Lost 50
Won 25
Lost 75
Lost 50

You would report winnings of 75 and losses of 75 and would end up not paying any taxes on it.

Maybe I suck at math, but yours does not add up!
Won 50
Lost 50
Won 25
Lost 75
Lost 50
='s -100

 

[zachvac]

Maybe I missed it, but if the money isnt withdrawn from the poker site, do you still have to claim taxes on it? If yes, then I have to ask the site for documentation of deposits, winnings/loses, withdraws?

Also, say I play $100 and lose it all, then quite gamleing. On my taxes I would claim winnings as $0 and loses as $100 and it would equal out to $0 because loses cant be more than winnings?

Pretty sure you don't have to report losses. You only have to write them in if you want to use them as deductions. Technically if you win some then lose it all you'd have to write them as winnings and then itemize the deductions but I doubt that if you didn't then got audited that you'd owe a penalty since you didn't cheat the irs out of taxes. Personally if I lost money overall at poker I probably wouldn't file but I'd check with a tax attourney (or my mom says the irs has a number you can call and they're very helpful without looking at individual information) rather than follow my advice.

Going back to the Barry Greenstein thing, if you make one $9000 deposit
you probably can get away without reporting it. If you are consistantly making
$9000 deposits you are going to send up more red flags then at a communist rally.

Deposits don't send up red flags at all unless you're not reporting your income you make from your job that you use to fund the deposits. Withdrawals though are another story...

I have never been taxed on my winnings. And I have with drawn more than 1000 dollars at a time from bodog. Was I suppose to claim that on my taxes?

Yes you were, they don't do stuff for you. I'm not even going to try to advise you on what to do here. If you pay now you'll owe interest and fees on top of the taxes, but if you don't report and get caught in a few years you'll owe that much more interest and fees. So I don't know.

If you lost it all on one hand you wouldn't put it on your taxes. Most likely you won several hands and lost several hands.

Let's say you played 5 hands

Won 50
Lost 50
Won 25
Lost 75
Lost 50

You would report winnings of 75 and losses of 75 and would end up not paying any taxes on it.

So when zachvac is going to play something like a million hands in 2009, he'll win about 100000 of those and lose money in 150000 of them, he needs to report all individual wins and losses ?????

Note that grouping those hands per session doesn't make any more sense as when you play ring games, it's really all one big session from beginning to end.

The definition in tax law is "session". No one knows what a session is as it isn't defined. Some say it's the hands you play at a table while you're seated (ie you 24-table for 20 minutes, you played 24 sessions) while others say it's ok to count the entire day as a session (ie you 24-table half hour, take break, play few hours, take break, etc. all that is one session).

Either way it counts the same for income I'm pretty sure since the tax rate is marginal and the deductions are always the top.

 

[RogueRivered]

Maybe I suck at math, but yours does not add up!
Won 50
Lost 50
Won 25
Lost 75
Lost 50
='s -100

It adds up perfectly. The reason is because you can't deduct losses beyond income. So income was $75, all you can deduct is $75, even though you lost $100. Perfect.

 

[RogueRivered]

Besides gambling and bartering income, here are some funny additions to income from IRS Pub 525 that you should report:

Bribes. If you receive a bribe, include it in your income.

Illegal activities. Income from illegal activities, such as money from dealing drugs, must be included in your income . . .

 

[houcowboy]

JDVB, If you are a US citizen, yes.

I have not found the information from the IRS that determines when you are taxed for on-line winnings. Unlike a real casino, your winnings are not readily accessible to you after you win a tourney or leave a ring game.

Since most US tax payers file their taxes on a cash basis (taxed when the money is actually received), I would argue that you should not be taxed until you receive a withdrawal.

If anyone knows otherwise, I would like to see your source.

 

[RogueRivered]

So when zachvac is going to play something like a million hands in 2009, he'll win about 100000 of those and lose money in 150000 of them, he needs to report all individual wins and losses ?????

Note that grouping those hands per session doesn't make any more sense as when you play ring games, it's really all one big session from beginning to end.

Actually I forgot to say that no, you don't have to report all the sessions. You just report the total on your tax forms, but you'd better have backup proof in the form of logs or spreadsheets or something of your sessions in case you get audited. If you're using software, don't delete your database. Keep current back-ups, too!

And if you've never listed your gambling winnings on your taxes, and during an audit an IRS Revenue Agent asks you if you have any gambling winnings, I wouldn't suggest lying about it. If it's a small enough amount, they might do a no-change. If it's large, look out! Don't necessarily accept what they tell you about your new tax liability, though. They are under great pressure to close cases in a hurry and will try to get you to sign, but you do have rights if you don't agree. If necessary, file a petition to Tax Court. That will stop collection activities until the court case is resolved. Just don't rely on your accountant to help you at court. Unless your representative is an attorney admitted to U.S. Tax Court, you're on your own. Also, beware of tax preparers who encourage you to take questionable deductions. It's your neck in the sling. "He told me to" is not a defense.

The other thing they always teach the Agents to ask is: Any bartering?

 

[RogueRivered]

JDVB, If you are a US citizen, yes.

I have not found the information from the IRS that determines when you are taxed for on-line winnings. Unlike a real casino, your winnings are not readily accessible to you after you win a tourney or leave a ring game.

Since most US tax payers file their taxes on a cash basis (taxed when the money is actually received), I would argue that you should not be taxed until you receive a withdrawal.

If anyone knows otherwise, I would like to see your source.

Why not? You can request your money at any time. If you have to reach some sort of play-through milestone before you can withdraw, then yes, I would say that's not income yet.

Your online poker account is owned by you, just like your checking account. A better analogy might be a stock trading account. As soon as you close out a position, it becomes taxable. It doesn't matter whether you withdraw from your brokerage or not.

 

[colquhounx]

Zachvac I meant deposits into your bank account.

 

[zachvac]

JDVB, If you are a US citizen, yes.

I have not found the information from the IRS that determines when you are taxed for on-line winnings. Unlike a real casino, your winnings are not readily accessible to you after you win a tourney or leave a ring game.

Since most US tax payers file their taxes on a cash basis (taxed when the money is actually received), I would argue that you should not be taxed until you receive a withdrawal.

If anyone knows otherwise, I would like to see your source.

You owe taxes when the income is realized. That means when you can easily withdraw it, it's income and you can be taxed on it. If you have a 9-to-5 can you just not cash any of your paychecks and not pay any income tax because you haven't cashed the checks yet?

Zachvac I meant deposits into your bank account.

Ah ok makes sense now, thanks for clarifying.

 

[bonflizubi]

I have never been taxed on my winnings. And I have with drawn more than 1000 dollars at a time from bodog. Was I suppose to claim that on my taxes?

Yes. BUt as zavh said, it's not related to what you withdraw. It's what you win. Even if never do yo ubring the money back to the states you nee to report wins and l;oses as they happen.

 

[bonflizubi]

So when zachvac is going to play something like a million hands in 2009, he'll win about 100000 of those and lose money in 150000 of them, he needs to report all individual wins and losses ?????

Note that grouping those hands per session doesn't make any more sense as when you play ring games, it's really all one big session from beginning to end.

FOr cash, you track wins/losses by the session.

For instance, if you 4 tabled cash for 4 hours and even switched tables as you went, the net you made in the period is 1 session. That Win/loss is what you report.

For MTT or SNG, each one is it's own win loss. Your buyin is a loss. ANy winnings are income. You cannot ccall teh winnings minus buyin as teh income. (ie $10 buyin, 900 cash = 890 income is incorrect. It's 900 income, 10 loss)

Also, everything zach and rogue have said is 100% right

 

[bonflizubi]

JDVB, If you are a US citizen, yes.

I have not found the information from the IRS that determines when you are taxed for on-line winnings. Unlike a real casino, your winnings are not readily accessible to you after you win a tourney or leave a ring game.

Since most US tax payers file their taxes on a cash basis (taxed when the money is actually received), I would argue that you should not be taxed until you receive a withdrawal.

If anyone knows otherwise, I would like to see your source.

I think someone else alrady covered this but you are completely wrong sorry to say. You won the money, the fact you didn't request cashout immediately has nothing to do with it. You do have the cash, it's just in an offshore account basically (the internet casino)

And I have this in great detail from an expert. Ann-Margeret Johnston is a CPA who basically just does poker tax returns. http://www.pokerdeductions.com/ is her website.

As I have to file some really detailed returns this year I picked her brain clean on all the ugly details, and this is one of the simplest and most clear-cut.