IRS Withholding on US Tournament Winnings Starts in 2008

Tuff_Fish · #1 09-01-2007, 11:38 PM

[ QUOTE ]
So If I play 1k tourney today won 6k pay tax on those 5K.
Then tomorrow I play 5k tourney and lose.
Next day I play 2k tourney and won 7k pay tax those 5k (which is 1k) again.
Then next next day I play 5k and lose.
I suppose to break even on those 4 Tourney but now I'm -2k?

[/ QUOTE ]

I don't follow your math.

I am assuming 20% withholding like a waitress or something.

You win 5k, you carry 4k out the door. next day you lose early, you carry nothing out the door and pay no taxes.

At the end of the year, you total up your losses and buyins, subtract from your total winnings and pay taxes on the difference.

What am I missing? Is this even an issue? If you go onto "Who Wants to be a Millionaire" and win $250,000, I can assure you you do not pocket the whole $250,000. Uncle gets his take right up front.

A lot of folks that are not on a regular salary get withholding taken out.

[img]/images/graemlins/confused.gif[/img]

Tuff

1p0kerboy · #2 09-02-2007, 09:47 AM

[ QUOTE ]
What am I missing? Is this even an issue? If you go onto "Who Wants to be a Millionaire" and win $250,000, I can assure you you do not pocket the whole $250,000. Uncle gets his take right up front.

A lot of folks that are not on a regular salary get withholding taken out.

[/ QUOTE ]

The problem is that for professional poker player, when they hit a 'big score like $250,000' it's not all winnings.

Most of it has to cover the entries of tournaments where they didn't win anything. But if the IRS is keeping a big chunk of the bankroll, it's difficult to do so.

oldbookguy · #3 09-02-2007, 10:05 AM

Posted in the "Was This To Be Expected" Thread as well with additions highlighted.

<Addition>
This is also in keeping with the online method used by all the ‘skill’ gaming sites.

On those, you deposit and with draw, redeposit and so on. If you hit big and the withdraw reached $600.00 BEFORE you can withdraw more, you must fill out the W2G form and taxes are withheld then on amounts above the $600.00 level.
<End Addition>

I have watched and read posts on this subject for sometime now.

The reality for business is the same for pro poker players.

Small business pays taxes by the quarter. If, when I was running mine I had a great quarter, I paid taxes on it. Later, if the next two were bad, I paid less.
At the year-end, taxes are then refigured on the total year, if I paid too much for that great quarter, I got it back.

Same in poker. Taxes are figured and paid per tournament / quarter.
At the year-end they are recalculated for the ENTIRE year, any over payment is refunded.

As a note, if a business ends up in the negative that is NOT carried over to the next year you start all over again at zero.

The ONLY difference is say I had OTHER income from stocks / bonds / rentals or whatever. IF my business lost money I could apply that loss to my other income.

With Poker / Gambling you cannot. Fair, no; the small business model is used by many to ‘lose’ some money to offset other income.

With that in mind, let me tell you, there are many ways to ‘lose’ money while actually making money.

obg

Tuff_Fish · #4 09-02-2007, 12:54 PM

[ QUOTE ]

.
.
But if the IRS is keeping a big chunk of the bankroll, it's difficult to do so.

[/ QUOTE ]

I was under the impression they kept 20%. Does the amount vary? Anybody know?

Tuff

yahboohoo · #5 09-02-2007, 01:13 PM

The PPA needs to pick its fights carefully. If they spread themselves out on too many issues, they won't be effective. And if the PPA is to survive (so that it can fight these kinds of tax issues), the first thing it needs to accomplish is the legalization of online poker. Nothing is more important, and anything else is just a distraction.

TripleNet · #6 09-02-2007, 02:03 PM

Does anybody know how this would effect satellites?

Lets say you enter a $250 super satellite to the WSOP main event and win a $10,000 seat. Is there going to be withholding from that "tournament" to the tune of $2,500 leaving you only $7500 or enter the main event?

DeadMoneyDad · #7 09-02-2007, 03:20 PM

[ QUOTE ]
Does anybody know how this would effect satellites?

Lets say you enter a $250 super satellite to the WSOP main event and win a $10,000 seat. Is there going to be withholding from that "tournament" to the tune of $2,500 leaving you only $7500 or enter the main event?

[/ QUOTE ]

Best question I've seen yet!

D$D

oldbookguy · #8 09-02-2007, 03:26 PM

My guess, since that would be a 'prize' not unlike winning a car worth 10K, you would receive a 1099 form for 10K.

obg

TheEngineer · #9 09-02-2007, 03:58 PM

[ QUOTE ]
The PPA needs to pick its fights carefully. If they spread themselves out on too many issues, they won't be effective. And if the PPA is to survive (so that it can fight these kinds of tax issues), the first thing it needs to accomplish is the legalization of online poker. Nothing is more important, and anything else is just a distraction.

[/ QUOTE ]

Part of that is establishing that poker is a game of skill, not luck. I think we have a need to be here getting poker seen as skillful by the IRS. If we win this argument, we'll be far better off.

jogsxyz · #10 09-02-2007, 04:08 PM

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Part of that is establishing that poker is a game of skill, not luck. I think we have a need to be here getting poker seen as skillful by the IRS. If we win this argument, we'll be far better off.

[/ QUOTE ]

That argument can't be won. No amount of proof will be
acceptable to the IRS.