IRS: Report Your Poker Winnings, Or Else

The IRS is clarifying the fact that yes, you do have to report your poker winnings as income, because apparently there has been some “confusion.” Ahem.

From the IRS:

In recent years, some casinos and players have been confused over whether poker tournament sponsors who hold the money for participants in a poker tournament are required to report the winnings to the IRS and withhold tax on the winnings.

For tournaments completed during 2007 and before March 4, 2008, casinos and other sponsors of poker tournaments will not be required to report the winnings to the IRS or withhold tax on the winnings. But beginning March 4, 2008, the IRS will require all tournament sponsors to report tournament winnings of more than $5,000, usually on an IRS Form W-2G.

Tournament sponsors who comply with this reporting requirement will not need to withhold federal income tax at the end of a tournament. If any tournament sponsor does not report the tournament winnings, the IRS will enforce the reporting requirement and also require the sponsor to pay any tax that should have been withheld from the winner if the withholding requirement had been asserted. The withholding amount is normally 25 percent of any amounts that should have been reported.

So that tournament sponsors can comply with this requirement, tournament winners must provide their taxpayer identification number, usually a social security number, to the tournament sponsor. If a winner fails to provide this identification number, the tournament sponsor must withhold federal income tax at the rate of 28 percent.

Got that, you card shark, you?

Poker Tournament Winnings Must be Reported to the IRS [IRS]
(Photo:cutiemoo)

Comments

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  1. saltmine says:

    So does that mean I get a tax break on my poker losses?

  2. Uriel says:

    They’ll take what I give them, and if they have a problem with that they can come pick me up at my compound.

  3. Chicago7 says:

    In horse racing, if you win a bet of over 300/1 (winnings more than $600) on a single bet, you have to sign a 1099.

    Why wouldn’t they do that in poker?

  4. Beerad says:

    This is more a compliance issue than a knowledge issue – I highly doubt any casinos (players, maybe) were “confused” by the fact that gambling winnings are considered taxable income. They’ve been requiring such paperwork for large slot payouts for years.

    Of course, if you give your occupation as “professional gambler” you get to write off your losses and travel expenses. But expect an audit if anything seems fishy with your filings.

  5. moorie679 says:

    Well I think they are going to tax air soon after they run out of things to tax. I understand the point behind taxing poker winnings however it seems a little fair considering you cannot write off your poker losses from your taxes.

    So you win -> pay taxes on your income + winnings
    However you lose -> you still pay whatever your income is

    (tried to clear this up…had problems wording this for some reason).

    Unless you can write off your losses, you shouldn’t pay taxes on your winning.

  6. moorie679 says:

    dang it…wrote my post when beerad was writing his…. I honestly did not know you could write off your losses.

    by the way i meant to say unfair not fair…..

  7. supra606 says:

    @moorie679: Good point. A lot of poker players understand the system but the fact is it’s not fair. What business is required to pay taxes on its revenue regardless of what its expenses were?

  8. supra606 says:

    @moorie679: You can write off losses but only if you itemize your deductions (not an option for everyone and a major hassle regardless). Otherwise tough luck according to the IRS rules.

  9. Buran says:

    I am not going to give my SSN to play cards. It is inexcusable that the SSN is being extended to even this. While I’ve never entered a poker tournament before, nor do I really play, I never will if they start demanding information that can be used to steal my identity.

    I thought we were getting away from having to turn over our SSN. Apparently not.

  10. JustAGuy2 says:

    @moorie679:

    You can write off your losses, but only if you itemize, and only to the extent that the losses offset your gains (i.e. win $500 at poker, lose $300 at blackjack, you only have $200 in taxable income).

  11. skittlbrau says:

    @moorie679: The IRS taxes everything, and they mean it.

    It is the IRS’s position that income is taxable, regardless of the legality of the income too. So crack dealers? Report that income.

    If I recall correctly that’s actually how the govt finally got Capone…

  12. warf0x0r says:

    @moorie679: There is a building in Boston that build a smaller base than the rest of the building in order to avoid a land usage tax, so the city made them pay an air tax.

  13. RandomHookup says:

    I am amazed this was ever an issue. You think they don’t tax Tiger Woods when he wins a big tourney? What makes these yahoos any different? Of course, your picture in the paper winning a big poker stake makes it hard to hide from the IRS.

  14. hn333 says:

    There is no law that states Americans have to pay federal tax.

  15. Hambriq says:

    @hn333:

    I’m no lawyer, but this seems pretty cut and dry:

    The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.

    As per Amendment 16 of the Constitution.

  16. TravisL says:

    As an an amateur poker player who’s had some fairly good years in 2005 and 2006, and as an attorney who actually understood most of what was taught about taxes in law school, I find the tax advice given by others around the poker table to be pretty amusing.

    Income is taxable, from whatever source it’s derived. Found a wallet with $500 in it and kept it? That’s $500 in taxable income. Won $200 in a poker tourney? That’s taxable income. I’m anal enough that I log every day’s wins and losses in a spreadsheet, so yes, I’m reporting days where I win $1. Heck, I’ve even got a few days where I won 5 cents playing online, and that goes into my total for the year. Why? First, it’s because the IRS says you have to, but more significantly, if I get into a losing streak for a long time (like my -$400 trip to Vegas), I want to be able to offset those losses against documented winnings.

    There are people who say you don’t have to report any gambling winnings that the casino doesn’t give you a tax form for. They’re wrong. There are people who say that you can use receipts from the ATM at the casino to prove your losses. They’re wrong. And there are people who say that the IRS won’t catch you if you don’t report a $100 win. They’re probably right, but I don’t want to take chances when it comes to the IRS, or my bar membership.

    I log my sessions daily (e.g., “October 19: lost $100 in $3/$6 hold ‘em and blackjack at Binions”), in spite of the fact that the IRS would like sessions to be per table (e.g., “October 19: lost $50 at hold ‘em table 7, lost $25 at blackjack table 2, lost $25 at blackjack table 3″). The IRS would also like documentation like the name of the dealer and pit boss, but I think that’s an unreasonable level of detail.

  17. kc2gvx says:

    I use my comp cards every time I play video poker. I hit for $1250 in July and got a W2-G. My losses for the year will be much, much, more than that. Can I get my win/loss statements from the casinos and submit that to avoid paying tax on the $1250?

  18. Crazytree says:

    sounds like more of a job than a hobby.

  19. Beerad says:

    @TravisL: For someone who’s so scrupulous about his taxes, I’m surprised you just admitted to participating in illegal online gambling. :P

    You’re totally right, of course, but I’ll take my chances that when I’m audited I’ll be forced to pay the tax on the one time I actually walk away from the table a hundred bucks richer.

  20. 44 in a Row says:

    I use my comp cards every time I play video poker. I hit for $1250 in July and got a W2-G. My losses for the year will be much, much, more than that. Can I get my win/loss statements from the casinos and submit that to avoid paying tax on the $1250?

    Not being a lawyer or an accountant or anyone qualified to give professional advice, it’s my understanding that the win/loss record from the casino could be used, if you’re itemizing already.

  21. ironchef says:

    @hn333:

    there’s a whole section on the IRS website that will educate you and others who try to claim that as a defense. You might as well read it now because you sound so smug in your certainty.

    [www.irs.gov]

  22. mac-phisto says:

    a bird once told me that casinos might not take taxes out of a large jackpot if you request to have the winnings converted straight to chips “so you can continue to gamble”. said chips could then be redeemed for cash over time during repeated trips to the casino.

    as long as the funds are in chips, they are not money & are therefore not income.

    YMMV, but that’s how the bird kept from having a portion of her winnings withheld…

  23. doormat says:

    @Beerad:

    You dont have to be a professional gambler to write off your gambling losses. My parents both gamble and they are part of the players clubs at a few casinos. At the end of the year, they request the casino to send them a record of how much money they put into the machines and how much they won, if they’re in the negative (which they usually are, but not by much) they can list it in their itemized deductions.

    What is really a rip is that if you take the standard deduction, the IRS gets to tax you on your winnings, but you don’t get to write off your losses.

    @mac-phisto:
    Technically, once you leave the casino property with the chip, they are no longer valid and the casino doesn’t have to honor them.

    @kc2gvx:
    Yes, you can. Like I said above, my parents do this every year.

  24. Baz says:

    Isn’t the IRS great?!

    Best thing to happen to this country that has nothing to do with the constitution!

  25. mconfoy says:

    @Hambriq: @ironchef: do not feed the trolls!

  26. BigNutty says:

    This subject hit home with me. I have been gambling for many years and have now decided to always carry a fake I.D. and Social Security card when I gamble.

    In 2003 I won over $140,000.00 at an Indian casino over a period of 6 months, always getting the dreaded form to report my winnings to the IRS.

    When the IRS hit me with a $52,000.00 tax bill (I happened to ignore reporting my winnings on my tax return) I of course pleaded that my losses were greater than my winnings. They of course wanted proof. I always use cash, no player cards, no records, no bank statements.

    Long story short, I obtained a free mediator from the IRS to help me and claimed that since the Indian casino didn’t have to pay any federal taxes I thought any winnings there were not covered by federal taxes.

    Can you believe I got away with that story? I was warned that I could never get away with such nonsense ever again.

    I now play a lot online and love that the government is so stupid to make it illegal so nobody has to pay any taxes on their winnings.

    Thanks to Bush and all the other conservatives, by trying to tell me online gambling is taboo even though online lotteries and horse betting is legal, I now get to play tax free!

    What an idiot. Throwing away billions in tax revenue.

  27. doctor_cos wants you to remain calm says:

    @Hambriq: Amendment 16 to the Constitution was never ratified.

  28. STrRedWolf says:

    What I want to know is, will the casinos offer to withhold the taxes if you give them your SSN, so you won’t get socked with a bill come April 15th?

    If so, I’ll be more than happy to part with a quarter of my winnings should I be the last man standing in a poker tournament.

  29. MyCokesBiggerThanYours says:

    If poker winnings are income, are poker losses a business expense? I sure hope so!

  30. Trai_Dep says:

    Okay, but how does this impact strip poker?

  31. 5cents says:

    hahahahah. You have to send panties in of course.

  32. JustAGuy2 says:

    @hn333:

    This just isn’t true. The Constitutional authorization is cited above, and the law that implements that authorization is just as clear.

    [evans-legal.com]

  33. rochec says:

    So what are the official rules for playing poker online? I’ve been wondering that as I’ve been winning more, playing in the million dollar tourney last night and beginning to wonder if I need to worry.

    Does anyone know what exactly I should be keeping track of for online play, if anything?

  34. savvy9999 says:

    @BigNutty: Fake ID and SSN card?

    Not judging, you can do whatever you want (and apparently do), but it sounds to me like you’re trading a larger crime (felony fraud? possible identity theft?) for smaller one (tax evasion). Just doesn’t make sense to me.

  35. hapless says:

    @moorie679:

    @MyCokesBiggerThanYours:

    Actually, your gambling losses are deductible. It’s only fair that they expect you to pay taxes on your winnings.

  36. ihateauditions says:

    MAC-PHISTO: the ‘no withholding if you aren’t paid cash’, that story doesn’t fly. I’ve been paid reasonably large wins in chips before, and while they don’t withhold, they report on a W-2G, so it doesn’t really matter.

    HAPLESS: Here’s an example that demonstrates the problem: You and I both receive Christmas Bonus checks that equal $25k after tax. We decide to flip a coin for $25k. We do no other gambling for the year.

    The winner will receive about $16k. The loser will lose $25k.

    I don’t see a problem taxing casinos, or professional gamblers, but taxing recreational players is ludicrous. The only reason it’s permitted by the public is because it’s so rarely enforced, outside of tournaments.

  37. ihateauditions says:

    STRREDWOLF: If you win a truly large amount of money, then yes, the casinos withhold 27%. They won’t do so for your run of the mill $20k win, though.