[Mok]

Forgive me if this is someplace else, or been asked before.

Since online gabling is not-so-legal in the US, how does everyone handle the taxes come April 15?

Do some of the poker rooms send you a tax sheet at year end for cash-outs? I doubt it, since none of them are located within the US.

So, I'm sure my wimpy $120 free-roll win will not throw up any flags, but what about you folks who cash out quite a bit more than that? How do you work the taxes come the first of the year?

I have yet to break it to my in-laws, that I have this new hobby. Father-in-Law is our tax preparer (CPA) and also a Post-Master for the USPS, so needless to say, might not find out about my $120 this year. (he retires this January after some 35+ years of service).

I'm not concerned about making any more money than that this year, as I've reported in another thread I started about making a commitment to myself not to spend real money on this until 2006. But, I thought it brought up a point that next year, it will be an issue (think positive, think positive, think positive).

So, I just wonder if these rooms "report" any profits you made, and how anyone reports the winnings on their taxes (depending on if the rooms report or not).

Hiding a couple thousand for an individual is easily done, but it seems like there are some folks out there (maybe here? ) who clear that per month.

[cnw400]

I highly doubt you will get a 1099 from any online poker rooms. They are out of the US and if they were in the US their obligation would be to report it to the IRS only if it is greater than $600.

That, however, does not relieve you of the responsibility to report it on your tax return. Winnings are reported as other income on page 1 of form 1040, while losses (only to the extent of wins) are reported as an itemized deduction.

[JM]

No online poker room/casino/sportsbook reports to the IRS or even cares about your tax obligations. Virtually all of them tell you that taxes are your responsibility to deal with. You are supposed to report them, however, if you don't report them, nobody will know.

[Mok]

Like I said, I was pretty sure none of these places would send or report to the IRS any payouts. You never know, but highly doubtful.

But, I personally won't have to worry about it this year, now next year, if I get lucky (and good) it may be something to look into. I'm sure my father-in-law may have some advice, either for or against playing, but we'd have to cross that bridge when we get there.

I was just wondering what folks here do, if anything. If you clear a few thousand a year is quite different than just a few hundred. That all is earned income, even if it is earned by illegal means. Does a person try to hide it, and hope they're not audited, or just report it as income gained from a trip to a real Brick-and-Mortar casino? In which case, if the payouts are big enough, those may get the old 1099, right? (if payed out at once?)

This is all just for curiosity sake, since what we do in online rooms is technically illegal. (by the letter of the law)

[JM]

Technically its not illegal since you are considered to be playing in the country where the servers reside when you are online. Otherwise this business would have been shutdown years ago.

I know people, some very close to me, who have won 4 or even 5 figures online in a year and never reported it and never had any problems. In fact, in all the time I've been playing online (casinos & poker), which goes back to the 90s, I've never heard of anyone with a tax issue in the US.

If you are either using a 3rd party payment solution like neteller, firepay, click2pay, etc., or even paid via western union, its pretty well hidden from view since those 3rd party systems are all offshore as well and WU payments come from some other company that doesn't appear to have anything to do with the online site.

That being said, you should always consult your tax preparer/accountant to see what is right for you.

B&M places not only 1099 you if the $$ are big enough, they'll also withold federal taxes from your win!

[PocketRocket]

Regardless of whether the activity is legal or not, you are still responsible for taxes on the net amount of your proceeds. The common analogy is that while a prostitute's means of earning a living may not be legal, they are responsible for income taxes and they can even put Prostitute in the box for occupation. And for the folks that think that income from illegal activities is not taxable, they may want to think about a guy in history by the name of Alphonsus Capone?

[Ice Drake]

I believe that the pro's report it just like they would report winnings at a brick and morter casino. You are not required to break down where the winnings came from, just to report them. And most tax accounts will tell you that if you offset the winnings with an equal amount of loss, not to report it at all. But be ready to prove the loss. Either through betting slips (horse track / lottery tickets) or a report from your local casino.

[w16227]

EDIT

some how - this double posted. I deleted on.

[w16227]

Originally Posted by Ice Drake

I believe that the pro's report it just like they would report winnings at a brick and morter casino. You are not required to break down where the winnings came from, just to report them. And most tax accounts will tell you that if you offset the winnings with an equal amount of loss, not to report it at all. But be ready to prove the loss. Either through betting slips (horse track / lottery tickets) or a report from your local casino.

Standard disclaimer - I am not a tax accountant nor do I play on on TV.

There is some inverient danger to not reporting your online winnings. When (hopefully soon), online poker is officially legalized/regulated in the US, you may be in trouble. When regulation time hits, the IRS/US govt may require back records be disclosed. Then, the big hitters who thought that they were under the radar get a big old bill.



It gets worse. While your losses can offset winnings, you are expected to set them up in different sections of your tax form. Winnings are handled differently than the deductions.

Easy right?



NOT




You are expected to tally up your winning SESSIONS and enter them in "other items" (or wherever, I do not have a 1040 with me right now).
Then, your losing sessions are put into your itemized deductions.

" But W, I broke even this year. I should not have to put anything in, right?"

WRONG


The way this is set up, YOU STILL MAY OWE ADDITIONAL TAXES.




Lets say that you had a great year to start. Soo good that you bought into the WSOp main event - and busted 2nd. Ouch.

Played well again, and risked it on another tournament.

Yay - lasteld longer than last time. Busted 50th. Too bad the money started at 262.




So, your winnign sessions totaled $30K, the two entries and a bad run at the end left you with 0.

BUT - that $30K kicked you into a higher tax bracket.

oops

now the writeoff may not be enough to offset the additoinal taxes.


Now - this information is taken from a back issue of Cardplayer. I am not entirely sure on how the higher tax bracket thing truly affects what you pay beacuse the itemiazation should simply bring this back down. But the writer seemed to know the tax code better than I do, so I would venture that there is someting to it.

Oh yea - better not try and write off that plane ticket or mileage to vegas either. Unless you are a professional gambler (and if you do not file this way already, you will most likely will not be able to do so this year) you cannot deduct expenses.

Will I try and reconstruct my years sessions to properly file? I doubt it. Will you get busted if you do not claim that $100 freeroll win? Probably not. If you made 10K+ and think that you will fly under the radar forever.



Good Luck




for me - better to claim something and be wrong - then claim nothing. At least the "I did not realize that you had to file it that way" excuse is somewhat legit.

"I did not know that I had to claim my poker winnings?" - just does not fly.

[Ice Drake]

The best answer is to talk to your tax accountant, and see what they say. It's better to do more of the right thing now, rather then worry about it and be in trouble later.