Tuesday, November 20, 2007

Nothing is Certain but Pokerstars and Taxes: Guide to Gambling Taxes in the U.S.

Unfortunately, yes you must (according to the IRS) pay taxes on all "worldly income" and this includes gambling winnings as income. We won't try to talk about any state laws at this time...they are simply to varied. A tax professional in your state would be your best bet at these questions. Along the same lines, don't take any of this post as tax advice, but only a collection of the "rules" as I know them.

It is a big misconception that rakeback isn't considered income by the IRS. Unfortunately, since you've included the rake paid out as a loss, any return of that money must be considered income. This includes bonuses, or any other comps you have received. Be careful on this one. Lots of us have rakeback payments coming right into our checking accounts for large amounts of money. Declare this as income...it's worth being able to sleep at night.

Another big mistake is assuming you can report only the net difference of your wins and losses. Ie, that you can win $100k, lose $97k and report to the IRS that you had a gambling income of $3k for the year. This will get you an IRS red flag in a hurry. You must report ALL winnings as income as well as all losses. I won't get into it here, but suffice to say that the tax implications are significant. When you begin to make more money as a poker pro, the need (and means) to consult with a tax professional versed in gambling income will be apparent. Depending on your state, your gambling income, and other factors; you may find it beneficial to declare yourself as a professional gambler. This requires a lot more paperwork and itemized deductions, but again...when you reach that level, you'll know it.

To declare as a pro, you must:
  • Be able to show profit and that you support yourself with this income
  • Operate as a business (Itemized expenses, paperwork, etc)
  • Show profit for 3 of the last 5 years.

All in all, as much as it hurts, do not trivialize the IRS and their cravings for your money. Use their rules against them for any advantage you can find, but don't step outside the lines.

WSOP Voted One of America's Top Competitions

All the Winholdem bots, Ultimate Bet Scandals, and Absolute hacking incidents can't put a damper on poker's continuing move to the mainstream as this news release shows.

Sunday, November 18, 2007

World Poker Tour Host, Vince Van Patten Interview