Do You Have To Pay Taxes On Poker Tournament Winnings
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- Do You Have To Pay Taxes On Poker Tournament Winnings Prizes
First and foremost, all gambling winnings are taxable — no matter the amount. “Just because a taxpayer doesn’t receive a tax form does not make the winnings tax-free,” Rigley said. “Taxpayers still have a responsibility to report their prize on their tax return as ‘other income.’”.
Nearly a year after the launch of real money online poker in Nevada, there’s a new wave of players who must pay taxes on Web poker winnings from 2013.
In the years before regulated online gambling, offshore sites that skirted the law to attract U.S. players may not have cooperated with the Internal Revenue Service. But the legislation passed in Nevada and two other states means that the IRS has the means to easily trace online winnings.
- The thresholds are $1,200 for bingo or slot machine winnings, $1,500 for keno winnings and $5,000 for poker tournament winnings (and the payout doesn't have to be 300 times the wager for these.
- If you are winning a lot playing poker, and you find yourself racking up expenses like these, it’s the best way to reduce your tax liabilities. The downside is that self-employed individuals are liable for Social Security (whereas amateurs are not). So you always have.
Nevada’s first regulated real money site, UltimatePoker.com, launched in April 2013, and WSOP.com followed later in the year. South Point launched a third site, RealGaming.com, this year.
Nevada is the only state that does not have a data-sharing agreement with the IRS, but the federal government can deliver a summons to one of the regulated sites and track down a player’s records, said Russ Fox, a federally licensed tax practitioner in Las Vegas who has specialized in gaming for 15 years.
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“Now if the IRS wants to get the records, they can,” Fox said. “Those companies will be cooperating. They have to.”
Brad Polizzano, a New York tax and gaming attorney, said more gamblers may be truthful about their winnings simply because the money is being tracked in a regulated market.
“We’re still early in the game,” Polizzano said. “The more dollars that go in and out of these sites, the more the authorities are going to look and see if there are players (who) are not particularly honest.
“The IRS is in position to get the message out and make an example of some taxpayers who don’t (pay taxes on Web gaming).”
The gaming sites operating in Nevada so far only offer poker.
For tax purposes, winnings online are treated the same as winnings inside a brick-and-mortar casino, the tax experts said.
In cash games, where players wager with table stakes, players must keep their own records. But tournament winnings are treated differently.
Here’s what must be reported on a W2-G tax form: $600 or more in a “freeroll” tournament, where there is no dollar amount for the buy-in, or a net of at least $5,000 in a tournament. Casinos often automatically withhold 25 percent for the government.
Anyone who falls into one of those categories is automatically emailed a request for tax information, said Seth Palanksy, vice president of corporate communications for Caesars Interactive Entertainment Corp., which operates WSOP.com.
The site keeps the winnings until the player provides the necessary details. Palanksy said the majority of people want the taxes withheld in advance, rather than being burdened with tax implications themselves.
For cash game records from the sites, players can also request documentation that shows their wins and losses on the year, according to Palansky and a spokesman with UltimatePoker.com.
Even Las Vegas visitors may be subject to further tax from their home state. Although Nevada has no state income tax, many states tax residents on income no matter where it is earned, Polizzano said.
The government also distinguishes between the winnings of professional gamblers and recreational players. A professional gambler must pay income and self-employment taxes; a recreational player reports winnings as miscellaneous income.
So far, New Jersey and Delaware also have legalized online gaming. Several other states are considering measures to regulate it.
There also has been a push to legalize online gaming federally, and some of the proposed legislation requires sites report each player’s winnings to the IRS, Polizzano said.
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“When you compare even brick-and-mortar play or offshore sites, it’s not easy for the authorities to obtain documentation of every single wagering transaction that a player enters,” Polizzano said. “That’s completely different in a regulated market. It’s going to be a lot easier for the IRS to prove whether a person playing online in Nevada is declaring all their wins and losses.”
(c) 2014, Stephens Media LLC