Taxing Your Poker Winnings
Ever since Chris Moneymaker won $2.5 Million at the World Series of Poker in 2003 after entering a $40 online tournament there has been an enormous boom in tournament poker.
It’s taken the tax authorities a while to catch up with everyone else, but as of March 2008 they finally clarified the responsibilities of the taxpayer with regard to his or her poker winnings.
Prior to March 2008, casinos were under no obligation to report tournament winnings leaving the onus on the player to include this income in his tax filing. Since then, the casino is obliged to report all tournament payouts over $5,000. Furthermore if you don’t supply the casino with the right tax information they must withhold the tax from the winnings right at source.
It gets a lot more complicated for the amateur poker-hobbyist playing online in the comfort of his or her own home. The IRS requires you to declare your gross winnings as income but only allows you to declare your losses as deductibles. In other words, on a break-even year, you may end up owing part of what you won to break even back to the taxman.