WSOP & the IRS.

[reecelights]

From cardplayer.com:

"All of the money finishers will head over to the payout table located near the cashier. There they will meet Dixie Callasen, who has been paying out players throughout the entire World Series of Poker. At Dixie's table, they will have to show a proper photo ID and fill out some forms before they receive a receipt in the amount of their winnings, minus taxes . They then take that receipt to the cashier to receive their money."

[detroitplayer]

[ QUOTE ]
From cardplayer.com:

"All of the money finishers will head over to the payout table located near the cashier. There they will meet Dixie Callasen, who has been paying out players throughout the entire World Series of Poker. At Dixie's table, they will have to show a proper photo ID and fill out some forms before they receive a receipt in the amount of their winnings, minus taxes . They then take that receipt to the cashier to receive their money."

[/ QUOTE ]

Hmmm. I'm far from an expert, but that just doesn't sound right. I can see that being true for foriegn players, but not for US players. I would expect US players to collect the full amount and pay their own taxes. If filing as a pro gambler, they would be able to deduct expenses and pay less tax than whatever the WSOP is calculating without knowing their expenses. I guess it would depened on whether or not winnings are classified as income, or something similar to the lottery.

[RedManPlus]

It all depends on the tax treaty your country has with US.

Canadians would be subject to ZERO to 30%...
Depending on type of income.
Poker winnings would likely be around 30%.

But this does not affect your EV at the table.

Just later at the end of the fiscal year...
You pay taxes on your NET income (less expenses).

A poker pro whould be able to write off travel, hotels, rental cars, etc.

Does an free rental car raise your EV?
Does a free meal at the casino buffet raise your EV?

rm+

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[David]

Last year at the Orleans Open I cashed $18k and just over $2k in 2 separate tournaments and received the full amount after filling out the forms and showing my DL. I did make a quarterly payment in September to cover the taxes, but they did not withhold anything aat payout. I have never had taxes held out as a matter of fact, as long as I showed my DL and signed the tax forms.

[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 & 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

[entropy]

[ QUOTE ]
Well, then Harrah's was wrong.

I know that Ireland & 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

[/ QUOTE ]

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]

[ QUOTE ]
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 ).

[/ QUOTE ]

Nigeria by any chance?

[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.