Do You Pay Taxes On Poker Tournament Winnings
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! If Ensan does have to pay taxes on his winnings, the total collected from all of the players adds up to $11,972,653 taken out of the $30,825,000 in prizes for the top nine finishes. $600 or more in gambling winnings (except winnings from bingo, keno, slot machines and poker tournaments) and the payout is at least 300 times the amount of the wager Any other gambling winnings.
Today marks the day that casinos and cardrooms are required by law collect information about their players who win $5,000 or more playing tournament poker. This will affect players who weren’t reporting wins to the IRS, as required, and will put more responsibility on tournament sponsors to make sure taxes are getting paid.
Starting today, the IRS will know just how much a player who won more than $5,000 actually won and will demand the player pay taxes on the winnings of 25 percent. If a player refuses to give the casino his tax information, then the casino must take 28 percent of the winnings for taxes.
According to Don Shelton, a CPA who has written for Card Player about tax issues in the past, the IRS will require all tournament sponsors to report tournament winnings of more than $5,000, usually on Form W-2G, Certain Gambling Winnings.
Sheldon wrote that tournament sponsors who comply with this reporting requirement will not need to withhold federal income tax at the end of a tournament. If any tournament sponsor doesn't report the tournament winnings, the IRS will enforce the reporting requirement and also require the sponsor to pay any tax that should have been withheld from the winner if the withholding requirement had been asserted. The withholding amount is normally 25 percent of any amounts that should have been reported.
For tournament sponsors to comply with these requirements, winners must provide their taxpayer identification number (usually their Social Security number) to the tournament sponsor. If a winner fails to provide this identification number, the tournament sponsor must withhold federal income tax at the rate of 28 percent.
For tournaments completed during 2007 and before March 4, 2008, casinos and other sponsors of poker tournaments aren't required to report the winnings to IRS or withhold taxes on the winnings.
IRS also reminds tournament winners that, by law, they must report all of their winnings on their federal income tax returns — regardless of the amount or whether they receive a Form W-2G or other form. IRS notes that this requirement applies for 2007, that it applied for earlier years, and that it will continue to apply even with the new law.