Long gone are the days where you could play online poker and not worry about the tax consequences. Even until just a few years ago, many of the offshore websites hosting online poker were able to get around US tax law. But the IRS has caught up with technology and if you have big winnings this year, you should expect to pay a portion to the government in taxes.
Times Have Changed, Be Ready to Pay Up!
He did not report any gambling winnings or losses for 2013. Based on three Forms W-2G reporting total winnings of $5,060, the IRS issued a notice of deficiency. The taxpayer had no quarrel with the reported gambling winnings. But he argued that the amounts should be reduced by the amounts of bets placed to produce the $5,060 winnings.
With an increase in tax regulations around online gambling, things have taken a turn. The IRS now has access to records of individuals participating on websites affiliated with the US, like newly created and popular UltimatePoker.com, RealGaming.com and WSOP.com. So, if you play poker on one of these sites, just like in a real casino, the IRS can access your information. This means they also know whether your winnings were above the $600 threshold (that should be reported on a W2-G tax form).
How Is This Monitored?
You may wonder how these websites track all of the individual winners. Here’s how it works…if you win $600 or more in a freeroll tournament or a net of $5,000 in a tournament, you will be emailed a request from the website and your winnings will be withheld by the company until you provide the requested information. Often, individuals prefer to have taxes taken out before they receive their winnings so that they do not have to worry about it later. You often have this choice.
One additional thing to note – the IRS makes a distinction between professional gamblers and recreational gamblers. Professional gamblers have to actually pay income tax and self-employment taxes to the IRS, while recreational gamblers report their earnings as miscellaneous income.
What Stays in Vegas?!?
So, whether you go to Las Vegas and play the casinos or you hop online and try your hand playing poker on your own computer, the IRS sees it all as the same. The IRS has caught up with the online gambling market and will only likely get more serious about enforcing the payment of taxes on poker and other gambling winnings. Our advice is to get ahead of this and pay what you owe, so that the IRS does not have to come looking for you.
How To Report Illegal Gambling
If you have questions about tax law and how to manage your online gambling winnings, you can also seek help to make sure you are paying the IRS the correct amount – not too much, but not too little.
Online Poker Gambling
Success Tax Relief is a full service tax firm that has worked with thousands of clients all over the country on a wide variety of tax issues, including tax rules and regulations surrounding online gambling. This is an issue that continues to evolve so make sure that you are current and know how this may impact your taxes this year. Contact Success Tax Relief today!