[MLSchaff]

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Of course giving the IRS money (without interest) that can be partially returned after filing a tax report is a disadvantage in liquidity.

Shadow

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If a poker player was a tourney specialist I would guess an arguement could be made that he or she would no longer be required to file quarterly payments or be able to severly reduce them, as the majority of their income will now be withheld at the time of earning!

Lets see how the IRS likes that one!

D$D

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The IRS is completely fine with this. Estimated tax payments are required to avoid penalties for those taxpayers who are not subject to witholding. Under this new tax reg, tournament poker players will be subject to withholding. So if you have enough withheld from your tournament winnings to cover the estimated tax you would have to pay for that quarter, than you would not have to pay any additional estimated tax. And since tax payments are cumulative throughout the year, depending on your tax situation a major cash in the first quarter of the year from which 25% was withheld could be enough to cover your estimated taxes for the entire year. The problem is that you don't want to have more withheld than is required, so if you have another major cash you would be giving an interest free loan to the government, and then may get a refund when you file your taxes for the year.

If estimated taxes were not required, it would not be equitable to people on salary who are required to have taxes withheld from their paychecks. If no one had to pay estimates, salaried workers should be allowed to pay all their taxes at the end of the year as well.


The biggest issues I see are satellites and rebuy tournaments. In rebuy tournaments, the buy in amount is unknown for each individual player - so how is the net win for that tournament to be figured? For satellites, I think a reasonable argument could be made that a satellite win and the tournament for which entry is won are a single event. However, when sats are paid out with tournament entry chips that can be sold, you are actually receiving a negotiable instrument for the amount of the entry fee. If casinos were to instead register the player for the main event directly (obviously not possible online - lets stick with B&M here) and that registration was non-transferable, a solid argument could be made for no withholding on that amount based on constructive receipt. The sat winner never actually received his winnings in this case.