Paying Taxes on your Online Winnings

[jaeh00d]

Well I know this is a huge offense here in the U.S., but I was wondering how is it you go about paying these taxes. Do these individual online casino's report to IRS when you win big? Or is it completely on you to to file it.

In other words are they aware of your winnings, and going to come after you if you choose not to pay?

[eejit101]

As i live in the UK, i can only state what ive read online on card player or wherever.

I know that the casinos reposit wins that are large, it didnt say what "large" was, but ireckon over $5,000. The IRS would have hell to find out how much every player has won and lost in their life to make them cough up. I dont get why the IRS dont make casinos and poker rooms pay the taxes to start with for us, and "slightly" increase the rake or something. But that idea may suck.

Heres my question - (suppose) I am a losing players for a year, and lose $10,000 (Brian for example ), i then turn it around the next montha nd win a $5,000 tourney first prize. Do i need to pay tax on this win, as the IRS would know about it, or is it deductable from my $10,000 of losses?

Ive always wondered that, just waiting for a logical answer please. I know it doesnt affect me but im a curious guy

[PShabi]

The basic language of the tax law states that the burden of proof is on YOU, not the IRS. No one reports any of your winnings (unless it's 10k+ and in a B&M). The IRS expects the gambler to keep detailed and accurate records of all sessions.

If they audit you and tell you that you owe them $25k, then it's your responsibility to prove that you don't. Failure to keep accurate records or lack of knowledge about the law will not be good enough reason to keep them from raping you in the ass. They state that in the law, but without the ass raping part.

The ass raping part is strictly implied.

[rookette22]

How about Canadians? Does it affect us?

Edit: I guess it's basically the same rules as Pshabi just explained above.

[PShabi]

I play 5 sessions this year. My results are as follows:

+100
+150
-300
+100
-300

According to the IRS, you add the winning sessions ($350) to your regular annual income.

Then you may deduct your losses up to the amount you won. So, of the $600 in losses, $350 may be deducted.

So, even though you are a net loser overall, you have the ability to see a tax increase that you wouldn't see if you hadn't played at all.

This is because the $350 you add to your income carries the possibility of pushing you into a higher tax bracket. That means they'll tax a greater % of your income, even though you technically didn't have a net gain.

Sucks, huh?

[jaeh00d]

there we go pshabi thats the answer i was looking for. thanks dude

[PShabi]

From what others have said, Canada does not tax gambling. So, you make 20k, you keep it and do what you like.

But you're still candian, so that still sucks!

[GeoffM]

Nope, not at all. We claim nothing on our taxes. Further, if we get taxed in the states, there are various options in terms of getting your money back. ustaxrecovery.com comes to mind.

Also, I believe the threshold for winnings is $1,200. Therefore, if you only play penny games online and you live in the States, you don't need to claim anything.

[PShabi]

Not true.

There is no "threshold" for winning. If you gain $5 playing poker, you are expected to report and be taxed.

But then again, I guess this is true if you're mowing your neighbor's grass for $10 a pop. No one would ever report this, but they should by law.

[Robbie Robb]

For the MOST part, it does not affect us. Lottery/gambling winnings are non-taxable here in Canada...unless...(there's ALWAYS an unless)...you declare yourself a professional gambler. That is to say you want to claim losses and other expenses as deductions. Now really, only an absolute dumbass would want to this as far as I can see as there really isn't much benefit in doing so.

If you're someone like JD though that could easily live off your winnings, I would definitely have some type of paper trail/records of winning just in case the taxman do cometh and say, "So Rookette, this is an awfully nice 2.4million dollar condo you have here, and that's a REALLY nice Benz sitting out front, yet according to our records you haven't paid taxes since 2002"

If you can establish that your financial gains were from gambling and not any other source then you should be golden.

As a somewhat off-topic anecdote: Joe Hachem is currently undergoing some scrutiny in Australia. Apparently at issue is whether or not he was considered a 'Professional' player when he won the WSOP. If so, his winnings (all $7.5M of them) would be subject to Australia's professional athlete tax of 41% . Apparently it appears that the decision will fall his way and declare him a weekend player/amateur at the time of his win (if the decision hasn't been made already), but scary none-the-less.

EDIT: Okay, so I headed over to the CRA website and found this document:

Here's the relevant part of it:
According to it, you MAY be responsible for paying taxes if the CRA determines that you are a 'professional' gambler. Were I to win one big tourney (say the WSOP) I could probably be in the clear and say that it was a 'hobby' and I really didn't have an expectation of winning. However, multiple tourney wins, regular appearances at the FT of WPT/WSOP events would probably raise some eyebrows at the CRA.

I also did some further research and found this quesiton posted at a Canadian-based poker forum and, by and large, the general consensus is that gambling winnings in Canada is one GIANT grey area where the gambler is at the whim of the taxman. The forum gives one example where a player, over 3 years, makes more than his 'job' income the first year, about the same the second year, and about half the third year. It would be unlikely that this person would be considered a 'professional' as his expectation of profit would be very hard to prove.

There's also another link to the 2+2 forums which pretty much says the same thing. Here's the link to that thread. (TP, if having this link to the 2+2 thread is a no-no, please delete it. I only include it as it has a TON of good information in it and I figure EVERYONE knows about 2+2):


The whole thing really seems to boil around the "reasonable expectation of profit" phrase...

[Reel Deal]

OMG, you guys actually pay taxes on gambling earnings? I haven't done that in years!! That's the biggest sucker deal going!

Best Regards,

P. Rose

[eejit101]

I am refraining from comment....

[junYUN]

to be honest i'm not going to report my winnings... i'm really not too worried about it.

maybe im just dumb

[GeoffM]

My apologies, I should have been clearer.
In the U.S., casinos only take down information if you win more than $1.2K, so technically you could walk out of a casino with $1,100 in cash and not have any paper trail at all. Not that you should cheat on your taxes, but I find it hard to think most of you guys would go home and write down that triple 7 you hit on the slots as income, when the cash is sitting in your pocket. "It ain't cheating if you don't get caught" is the saying I refer to.

[GeoffM]

[PShabi]

If I was in the same boat as you, I wouldn't be posting about it on a website. The IRS doesn't fuck around.

[Talking Poker]

BTW, every single word shabi wrote in this thread is correct, so rather than retype it all, I'll just say to go reread his posts.

The lawn mowing and ass raping examples and everything - All 100% accurate.

[holdemstewart]

So it really DOES suck being canadian? hmmmm...lol

[Dodoubled]

TP;
This may have been discussed before, and sorry if it has, but:

How did they handle your winnings at the WSOP last year, in terms of taxes? Did they chop a lump off right there, make you fill out a form, or what?

[PShabi]

Basically, your ass is grass and the IRS is the lawnmower!

[GeoffM]

Yes, if you like paying taxes on everything, I suppose this statement is correct.

[PShabi]

Or being really pasty white, cold, drunk..............

[Robbie Robb]

I'm not that pasty...

[GeoffM]

Actually, we have had probably about the warmest winter in years. We are seeing daytime highs of 4-8 celsius (not sure what that means in Farenheit). It hasn't snowed in 3 weeks.

[jaeh00d]

well i think ive worn a sweater/jacket maybe 5-6 times this winter