Canadian Tax Laws

[resnick]

What are they for online poker profits?

Does it matter if u win 5k, 50k or 500k?
Does it matter if its your primary source of income or on the side?

[PantsOnFire]

I have discussed this numerous times with various people although I haven't yet recieved an "official" stance. I believe such a stance would have to come from Revenue Canada and perhaps nobody is willing to contact them for fear of being looked into.

Anyways, the general concensus is that you will need to pay tax on poker winnings if they are your primary source of income. Having said that, a guy who has a regular job but wins a million dollar tournament still should not have to pay taxes on that win. It's very similar to the lottery in this case.

However, a guy who is collecting welfare and is making more at poker over the course of the year could very well be a target for an audit.

I'm not entirely sure about banking laws and the like, but when money starts appearing in your bank account that has no obvious source, red flags are raised. This is how we catch mob members and drug dealers and why these guys launder money. The same could be true for big ticket items like luxury cars or a home.

If you buy a house, most people don't have cash for the entire amount so they need to buy a mortgage which requires proving how much your income is. If someone can buy a house for cash and then it is discovered his income tax return showed no net income or a modest one, does this look funny or what?

Wow, what a ramble, that's all folks.

[resnick]

Thanks for the reply. I have come to about the same conclusion that no one knows for sure....some people say its tax free, some say that if you intend to show a profit then it is not. My problem is that I am in between, I have a main full time job, but it may be possible for me to make more than my main job playing poker part time. So while I am definitely doing it intending to show a profit, it is still on the side.

Anyone one else have any thougts/experience/expertise/actually contacted revenue canada?

I think I may end up contacting them anyways, because if it is illegal, I think I would rather claim it anyways and not get in trouble...is this stupid? Like the replier said, eventually I will have to use up the money and its gonna be spotted.

One more thing, does anyone know the consequences of not claiming? Lets say that you run a business that showed profit but didn't claim anything. What kind of fines are you faced with? At what point in time/money does it get extreme (ie jail)?

[PantsOnFire]

[ QUOTE ]
Thanks for the reply. I have come to about the same conclusion that no one knows for sure....some people say its tax free, some say that if you intend to show a profit then it is not. My problem is that I am in between, I have a main full time job, but it may be possible for me to make more than my main job playing poker part time. So while I am definitely doing it intending to show a profit, it is still on the side.

Anyone one else have any thougts/experience/expertise/actually contacted revenue canada?

I think I may end up contacting them anyways, because if it is illegal, I think I would rather claim it anyways and not get in trouble...is this stupid? Like the replier said, eventually I will have to use up the money and its gonna be spotted.

One more thing, does anyone know the consequences of not claiming? Lets say that you run a business that showed profit but didn't claim anything. What kind of fines are you faced with? At what point in time/money does it get extreme (ie jail)?

[/ QUOTE ]
I realize you will want other opinions but I do have some stuff to add.

If you have a regular job and have filed taxes for several year (like me), I don't think the extra cash from poker should be a concern. It may depend on how much we are talking here but if you buy a new house, get a new car or put 100K in your RRSP, I don't think that would raise an eyebrow.

I am going to guess, but I think the consequences would be in the nature of a fine. I mean just think of all the under the table work that goes on. Do you think your electrician neighbor is going to go the jail because he's doing landscaping on the weekends for $200 but not claiming it as income?

If you do contact Revenue Canada please post back any info you get.

[Blixx]

This is probably the most comprehensive thread on Canadian taxes & poker The 2+2 Forums: Canadian Online Poker Tax Thread

In general poker winnings are not taxable and are considered as lottery winnings. But, if it is your primary source of income then its more of a grey area and you should probably consult an accountant.

[zycon]

From P. Hogg, J. Magee and J. Li. 2005. Principles of Canadian Income Tax Law 5th ed.

"Gambling may be characterized as a hobby or commercial activity. The line between the two are drawn on the basis of objective factors. On the one end of the spectrum is bookmaking or operating a betting shop, which is obviously constitutes a business activity. It makes no difference to the Act if the business is illegal: the profits froman illegal business are taxable on the same basis as those from a legal business. At the other end of the spectrum is the causual gambler whose activity is a hobby or recreation and whose winnings are therefore treated as windfalls (and whose losses are treated as consumptive expenses).

When an individual devotes a great deal of time and effort to gambling it is often difficult to determine whether the activity falls into the hobby category or the business catagory."

It seems to boil down to whether or not gambling is your primary source of income or not.

[resnick]

Thanks for the help guys, that other thread has some great info in it and I will continue to post in that thread should I have any more questions.