[Aceten1]

There are a lot of different anecdotes here that may be causing some confusion. While I'm not a tax expert, I have filed as a professional Blackjack player for many years - including several in which I was audited - so perhaps my experiences will help.

If you win an amount that generates either a 1099G or W-2G form (usually $1200 or more, but can be as low as $600), the casino involved is supposed to give you the choice to use "back-up" withholding, which is typically 28-30%. So, if you were to win, say, $2000 in a tournament or at a slot machine, etc., you could have the casino pay you $1400 and send $600 to the IRS, just as your employer does with your pay check. When you file your tax return, the $600 would be a credit towards any tax you owe; if you owe less, you'll get a refund.

Many people, including casino employees believe that 30% is the maximum you owe, but they're wrong. You must add the gross winnings (in this example, $2000) to your regular income and then calculate your tax liability, subtract any payments made, either through withholding or quarterly estimated payments and pay the difference or receive a refund, whichever is appropriate.

The alternative is to not have the casino withhold 30%; in fact, many will not as a matter of course, although I believe they are required to do so if you request it. Anyway, if they do not withhold any $$$ you'll obviously receive the entire amount of the "prize", but that doesn't change your tax liability in any way - you still must add the prize to your regular income and will owe the total taxes due, except in this way you'll likely have to send a check along with your return because you had nothing withheld.

Many people also believe that only the winnings that generate a 1099G or W-2G are taxable, but they're wrong about that, too. All winnings are taxable and you're supposed to declare them even if you don't get a piece of paper.

The average "gambler" cannot subtract the expenses involved with winning a prize - someone here mentioned travel expenses, etc. The IRS basically says gambling is a hobby and the expenses thereof are not deductible unless you can prove differently. To do that, you must file a Schedule C which declares your gambling activity is a business. Then, you may deduct travel expenses and so on. Of course, this form is a red flag to the IRS and your interpretation that you are a "professional" is subject to their opinion, which may or may not agree with you.

That's what led to my first audit. I declared income as a professional Blackjack player on a Schedule C, paid the taxes due and eventually heard from them in the form of an audit. It's a long story and I ultimately won my case at no additional cost to me, but it wasn't easy. If you file as a business, you must show a profit in time or it's just a hobby. Can poker tournament play be a business? I certainly think it can. Can it be a part-time business? Sure, why not - if you had a regular job and fixed cars on the side, the IRS expects you to declare the net income from that. So, if you play poker tournaments on the side, why can't that be a part-time business, which allows you to deduct your travel expenses? The IRS may or may not agree with you, which is why you should talk to a tax pro if you play in a lot of tournaments at brick-and-mortar casinos.

Remember, you are expected to pay all of the taxes you owe, but are not required to pay any more than that.