WSOP & the IRS.

[arcticfox]

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Non-US Citizens and those that can't provide sufficient ID will have taxes witheld. Foreigners have taxes witheld because they obviously wouldn't pay the taxes once they left the country.

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Unless they come from a country with a double taxation treaty with the US. If a UK player won the WSOP they would receive all their winnings tax free as there are no taxes on poker winnings in the UK and UK residents don't have to pay tax in the US due to the treaty. I wonder if Australia has the same deal as the UK!

[Masquerade]

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Non-US Citizens and those that can't provide sufficient ID will have taxes witheld. Foreigners have taxes witheld because they obviously wouldn't pay the taxes once they left the country.

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Unless they come from a country with a double taxation treaty with the US. If a UK player won the WSOP they would receive all their winnings tax free as there are no taxes on poker winnings in the UK and UK residents don't have to pay tax in the US due to the treaty. I wonder if Australia has the same deal as the UK!

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Correct.
IRS website

Tax Treaties

Gambling income of residents (as defined by treaty) of the following foreign countries is not taxable by the United States: Austria, Czech Republic, Denmark, Finland, France, Germany, Hungary, Ireland, Italy, Japan, Latvia, Lithuania, Luxembourg, Netherlands, Russian Federation, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Tunisia, Turkey, Ukraine, and the <font color="purple">United Kingdom</font>.

Woo-hoo. Sorry Aussies.

[AcesUp]

I can only speak for myself (American citizen), but here's what happened when I took 2nd in one of the earlier events this year...

The tournament director hands me a partially filled out W2-G (IRS form to declare gambling winnings). I took the form to the cage, where they had me fill it out completely, sign it, and show proof of identity. Five minutes later, they handed me $250K in "chocolate chips" ($5000 chips). That was the full amount of my win, including a side-deal I made with the eventually winner, and no taxes were deducted.

Because they couldn't issue a check at the poker-room cage, I was escorted up to the main cage, where 45 minutes later I was able to get a check for the full amount.

It amazed me that it only took 5 minutes to get my money, but then another hour to turn it into a check...


-Aces

[Russ Fox]

Here's the scoop on what should have happend at the main event at the WSOP for the winners.

Poker tournaments are in a grey area of the tax code. They are considered as "other gambling," and normally not subject to withholding. However, if you win at least $600 and that's at least 300 times the buy-in, the prize is subject to withholding (at 25% of the gross prize). Given that the buy-in was $10,000, the first and second place winners are subject to withholding. Steve Dannenmann, who happens to be a CPA, should have had $1,125,000 withheld of his $4.5 million. His winnings are also subject to tax from his state (I believe he's a resident of Maryland).

The rules for the winner are a bit different since he is not a US citizen. Joseph Hachem is from Australia; there is no tax treaty covering gambling income with Australia. He is subject to 30% withholding of his $7.5 million, or $2.25 million. Depending on the tax law of Australia (I'm not familiar with it), he might be able to claim a credit on his Australian tax return for the taxes he paid in the US.

Finally, the issues for a Canadian are a bit different. Canadians are subject to withholding, but can get a refund of the amounts withheld by filing a 1040-NR at the close of the tax year. I wrote an article about this available at http://www.bigpoker.ca/tax_article.cfm

Russ Fox, EA

[Kevmath]

It seems Harrah's took the 30% away from EVERYONE, including those that would be exempt, like Andrew Black from Ireland.

[Russ Fox]

Well, then Harrah's was wrong.

I know that Ireland &amp; the US have a tax treaty exempting gambling income from withholding (I did some work a couple of years ago for a referral client on this). If Mr. Black presented his passport and the appropriate cite from the tax treaty nothing should have been withheld. Mr. Black probably could still get his money back by complaining through an EA, CPA or tax attorney (to Harrah's).

The withholding rate for non-US citizens is 30% (when required). For US citizens, it's 25% (unless you refuse to show/give your SSN, then it's 28%), when required.

-- Russ Fox

[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.

[jdaddy]

Buy-in would be listed as gambling loss on schedule off setting $10,000 "win".

[entropy]

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Well, then Harrah's was wrong.

I know that Ireland &amp; the US have a tax treaty exempting gambling income from withholding (I did some work a couple of years ago for a referral client on this). If Mr. Black presented his passport and the appropriate cite from the tax treaty nothing should have been withheld. Mr. Black probably could still get his money back by complaining through an EA, CPA or tax attorney (to Harrah's).

The withholding rate for non-US citizens is 30% (when required). For US citizens, it's 25% (unless you refuse to show/give your SSN, then it's 28%), when required.

-- Russ Fox

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i have no doubt you are correct and i much appreciate the last 6 posts --- finally some very intelligent responses.

btw the IRS tax code and the US Patriot Act both suck.

i have the equivalent of USD35m ( gambling winnings ) in cash or kind in another country that is extremely difficult to get into an offshore bank a/c ( or even in the country of origin ).

[Eeegah]

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Well, then Harrah's was wrong.
i have the equivalent of USD35m ( gambling winnings ) in cash or kind in another country that is extremely difficult to get into an offshore bank a/c ( or even in the country of origin ).

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Nigeria by any chance?