Question about taxes....
 

So I just won 10k for first in the party poker 40k. My question is do you guys claim this on your tax return???
I was talking to my brother who is a CPA and he told me they tax like 40% on it. So to anyone who has won a big tourney what do you do for taxes?

Re: Question about taxes....
 

I would say that 40% sounds steep in terms of the tax rate for that win. Of course, I say that without knowing what your income tax situation is. My initial thought is always in the 25-33% range.

Your tournament win is gambling income, just like any other poker winnings that you have for the rest of the year. The only thing that I would add is that with a $10k win, your Party account has more than $10k in it and now you have a foreign account that must be reported. No tax is due for reporting the foreign account, but there are penalties for not reporting and getting caught.

Re: Question about taxes....
 

Report it to who? Report it now or when i do my taxes next year?

Re: Question about taxes....
 

Move to the UK-NO TAX on winnings woohoo

Re: Question about taxes....
 

The foreign account gets reported to thr Treasury and it isn't due until June 15. Most people just do it at the same time as their taxes for the year.

Re: Question about taxes....
 

thanks for the quick reply broiler. much appreciated.

Re: Question about taxes....
 

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thanks for the quick reply broiler. much appreciated.

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Yeah this is something that gets argued about a lot. Personally, I wouldn't report anything until you actually cash it out. What if over the next month you play a bunch of high end tourneys and lose it all? Reporting it as income would just be silly. Reporting what you cash out (and don't cash back in) makes the most sense. I'd also count it as "gambling" the same way as if I went to the casino.

I do *not* believe the account counts the same way as a foriegn bank account, as I'm pretty sure party says in their TOS that money in your account has no actual cash value, and they can take it at any time. If they can take it at any time, it's definatly not a bank account. It's the same way in casinos, the chips have no cash value and the casino can take them at any time. They just usually dont b/c it looks really bad if you go to the media.

Re: Question about taxes....
 

from what i understand you only have to report what you cash out. it goes in some column marked internet gambling ro something.

right now, as longa sthe moneyh is in your account, it's working capitol or something, not income.

Re: Question about taxes....
 

Don't cash out more than 17,000 in a year and you are considered under poverty level and wont get audited by the IRS. Don't move more than $999.99 a week into US bank accounts and it does not get logged by the bank and sent to the IRS. And when transferring to offshore account, use check and not wire transfer. There are all tips I got from a lawyer friend I was talking to about taxes yesterday >< If you do move 10,000 into your bank account however, you are going to be responsible for taxes on that, if it is still in your partypoker account it is NOT YET liable, I think partypoker operates under the government of Gibraltar, and if you read their privacy policy, the money in your account on party actually still belongs to them, and they have the right to not pay you out if you do not meet certain criteria they specified when you made the account (very rare, but wrong information, age, other fraudulent situations, etc)

BOTTOM LINE: Leak it a little at a time.

Re: Question about taxes....
 

There really isn't much argument about tournament winnings and reporting. Gambling income is supposed to be reported by session. There is no correct justification for considering a different tournament on a different day as part of the same session. I would love to say that netting is ok, but the rules just don't work that way.

The foreign reporting rules apply to more than just foreign bank accounts. If you read the rules, it clearly says any account in which you have a financial interest. Party's TOS do not matter, their actions in regards to your account are what matter. You have the ability to withdraw your funds at any time, therefore you own the account.

Finally, chips are cash. The IRS has won this case against gamblers who used to keep their chips in safety deposit boxes at the casino. The gamblers tried to use your cash out theory and lost with full penalties for their efforts.

Re: Question about taxes....
 

I'm pretty sure it's not when you 'cash it out' but when you earn it. Atleast that's what i've read anytime i've looked this stuff up.

--
other general info:

you can file either as a professional (but you'll need lots and lots of records) and then you'll pay like a 15% self employment tax, and can deduct ISP costs and office supplies/books.

or

you can file it as gambling where you add all your winnings into your income, and you can deduct the losses. But you're supposed to winning sessions seperate from losing sections and it's crappy, so even if you were a losing player, as long as you had some winning sessions, you'd be paying taxes on it.

And as far as not paying them, that seems like a bad idea as the governent will probably eventually find out, and interest and penalties will suck dick.

Re: Question about taxes....
 

Your argument for not counting the income is flawed. Party's actions are what matters, not what they say. Party never verifies anything when you try to cash out, therefore the IRS would not agree with your argument. Constructive receipt will be shoved down your throat under audit and you would not win. You alone determine when the cash comes to you, which means that you are in full control of the funds once you leave the table.

Re: Question about taxes....
 

Interesting points, but they do reserve the right to deny your withdrawl request.. I'm going to show my friend this thread later and see if I can get any more insight..

Re: Question about taxes....
 

Your neighborhood bank also reserves the right to refuse your withdrawal request and I'm sure that nobody thinks that interest isn't income until you hit the ATM.

Re: Question about taxes....
 

I took out 6k off my party into neteller but haven't put it into my bank account. I think if i took out 999.99 every week it would be suspicious. I think I am just going to pay the taxes on it as I just started a really good job and don't want to jeopardize it over something stupid.

Re: Question about taxes....
 

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Your argument for not counting the income is flawed. Party's actions are what matters, not what they say. Party never verifies anything when you try to cash out, therefore the IRS would not agree with your argument. Constructive receipt will be shoved down your throat under audit and you would not win. You alone determine when the cash comes to you, which means that you are in full control of the funds once you leave the table.

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Umm, I'm not an accountant or a lawyer, but I do know that this is definatly *not* the case. They've denied cash outs by me before, holding them up for over a week to verify things about my identity (don't ask the specifics, the indians are the indians).

Party has even deducted from my account because of a friend of mine's actions. When talking to the indian on the phone about how my friend's actions are irrelevent to me, his response was quite literally "it's party's money, we do what we want".

Party is *not* a bank account, you do *not* neccessarily control what money is in it. Just because most of the time you do, doesn't mean you always do.

edit: Not to mention that online poker is in a hazy legal territory anyway. As far as I'm concerned, the only way the gov't will ever find out about my winnings is when I cash them out. It's definatly not right for me to be taxed on money I lose later. Just like if I won a tournament in a casino and promptly lost it all at hte limit tables. I think in CT they are forced to report above 5k, and tax you instantly, so sometimes they structure their payouts for tourneys to avoid this (make it just under whatever the limit is). I know because I heard a floor guy talking about it. However, online isn't the same thing.

Re: Question about taxes....
 

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Your neighborhood bank also reserves the right to refuse your withdrawal request and I'm sure that nobody thinks that interest isn't income until you hit the ATM.

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Yeah, but the bank cant confiscate your bank account for literally no reason, party can. Your bank account also has FDIC protections (like insurance), party does not. Though I realize that there are certain countermeasures taken after the Dutch Boyd thing.

Re: Question about taxes....
 

I am a CPA and have dealt with the IRS in this area. They will tell you in no uncertain terms that this is income and no attorney that works in this area will tell you otherwise. Having a transfer held up a week to confirm your identity will not convince the IRS that you do not have full control over the account, especially if you got the money in the end.

I never said that Party was a bank account. I said that Party is an account in which you have a financial interest. The Treasury Department is very clear to include in their examples that it does not mean just bank accounts for reporting.

Re: Question about taxes....
 

If the bank thinks that your funds are related to a crime, which includes money laundering, they have the right to hold the funds until a judge orders it released. I use the money laundering example becuase it is the favorite of the Treasury Dept. when they determine that you have offshore accounts of any kind. They will freeze all of your accounts in these circumstances, regardless of the merit of your claims.

Most of the sites have also included a statement that your funds are separate and secure. Read the Stars security and privacy statements. I will agree that most of these came out after the Dutch incident.

Re: Question about taxes....
 

ok so, for a player who wants to pay taxes. I need to report only what I cashed out during that year? or my total net after buyins etc..

Re: Question about taxes....
 

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I am a CPA and have dealt with the IRS in this area. They will tell you in no uncertain terms that this is income and no attorney that works in this area will tell you otherwise. Having a transfer held up a week to confirm your identity will not convince the IRS that you do not have full control over the account, especially if you got the money in the end.

I never said that Party was a bank account. I said that Party is an account in which you have a financial interest. The Treasury Department is very clear to include in their examples that it does not mean just bank accounts for reporting.

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I mean I'm not saying it's not income per se, and he should definatly report it. What I'm curious to know the answer to is basically when do you report it? Do you report whatever the balence of your party account is the day before the next fiscal year? Seems like anything else penalizes you when you could actually lose money during the year.

Re: Question about taxes....
 

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I am a CPA and have dealt with the IRS in this area. They will tell you in no uncertain terms that this is income and no attorney that works in this area will tell you otherwise. Having a transfer held up a week to confirm your identity will not convince the IRS that you do not have full control over the account, especially if you got the money in the end.

I never said that Party was a bank account. I said that Party is an account in which you have a financial interest. The Treasury Department is very clear to include in their examples that it does not mean just bank accounts for reporting.

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I am a lawyer, but not a tax lawyer. I have read a ton of case law in this area though, because it comes up a lot on 2+2. The bottom line is that it is income; income that may be hard for the IRS to audit, but income nonetheless.

There is a bit of precedent in the other direction, so if you're willing to litigate an expensive case with the IRS, you can take a shot at it. But the bottom line is that if it didn't count as income until you withdrew it, it would be way, way too easy to use this as a method of shifting income from one year to the next. There is no chance the IRS would condone something that could be abused this easily by so many people.

Re: Question about taxes....
 

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I am a CPA and have dealt with the IRS in this area. They will tell you in no uncertain terms that this is income and no attorney that works in this area will tell you otherwise. Having a transfer held up a week to confirm your identity will not convince the IRS that you do not have full control over the account, especially if you got the money in the end.

I never said that Party was a bank account. I said that Party is an account in which you have a financial interest. The Treasury Department is very clear to include in their examples that it does not mean just bank accounts for reporting.

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I am a lawyer, but not a tax lawyer. I have read a ton of case law in this area though, because it comes up a lot on 2+2. The bottom line is that it is income; income that may be hard for the IRS to audit, but income nonetheless.

There is a bit of precedent in the other direction, so if you're willing to litigate an expensive case with the IRS, you can take a shot at it. But the bottom line is that if it didn't count as income until you withdrew it, it would be way, way too easy to use this as a method of shifting income from one year to the next. There is no chance the IRS would condone something that could be abused this easily by so many people.

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so if its in my account its income and i need to report it?

Re: Question about taxes....
 

My brother is a CPA I will ask him more about it and post info as I get it as I see many of use here don't really know what we have to claim and not.

Re: Question about taxes....
 

The Treasury Department form is very simple for reporting a foreign account. All you have to do is report where the funds are and the maximum value of the account during the calendar year. The maximum value question just asks you to check a box for the maximum range and the ranges are very wide. The Treasury form is separate from income taxes.

Income is supposed to be based upon sessions. There is no good definition of session, but if you use from sit down on a day until stopping, you won't be too far off. I know there is more to it than that, but I wanted to keep it easy to get the concept.

Re: Question about taxes....
 

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I am a CPA and have dealt with the IRS in this area. They will tell you in no uncertain terms that this is income and no attorney that works in this area will tell you otherwise. Having a transfer held up a week to confirm your identity will not convince the IRS that you do not have full control over the account, especially if you got the money in the end.

I never said that Party was a bank account. I said that Party is an account in which you have a financial interest. The Treasury Department is very clear to include in their examples that it does not mean just bank accounts for reporting.

[/ QUOTE ]

I am a lawyer, but not a tax lawyer. I have read a ton of case law in this area though, because it comes up a lot on 2+2. The bottom line is that it is income; income that may be hard for the IRS to audit, but income nonetheless.

There is a bit of precedent in the other direction, so if you're willing to litigate an expensive case with the IRS, you can take a shot at it. But the bottom line is that if it didn't count as income until you withdrew it, it would be way, way too easy to use this as a method of shifting income from one year to the next. There is no chance the IRS would condone something that could be abused this easily by so many people.

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so if its in my account its income and i need to report it?

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If it's in your account because you won it, it's income. If it's in your account because you deposited it there, obviously it's not income.

Re: Question about taxes....
 

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The Treasury Department form is very simple for reporting a foreign account. All you have to do is report where the funds are and the maximum value of the account during the calendar year. The maximum value question just asks you to check a box for the maximum range and the ranges are very wide. The Treasury form is separate from income taxes.

Income is supposed to be based upon sessions. There is no good definition of session, but if you use from sit down on a day until stopping, you won't be too far off. I know there is more to it than that, but I wanted to keep it easy to get the concept.

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So here's a question I have as far as the theory. If your online poker account is supposed to be treated as an investment, shouldn't the rules be the same as when you invest in the stock market? If that's the case, I thought you only pay taxes on capital gains, ie only when you sell a stock and realize a gain. Similarly, if you sell for a loss, I'm pretty sure you get to deduct this from income right?

Can you tell me why the gov't would look at the two accounts differently?

Re: Question about taxes....
 

What about just getting a neteller debit card and never reporting a thing? Sounds pretty sweet to me. Any downside here?

Re: Question about taxes....
 

i will never understand why anyone encourages tax evasion.

Re: Question about taxes....
 

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What about just getting a neteller debit card and never reporting a thing? Sounds pretty sweet to me. Any downside here?

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Yes. unless you keep the cash in a shoebox, as soon as you deposit it into a bank account or other financial vehicle, govt will probably find out, and you get audited.

Additionally, the govt can audit you when you start buying lots of bling bling.

Re: Question about taxes....
 

Well let's assume you only put $30 a month into the bank(for AOL service), let's further assume you only cashout ~2k a month from poker winnings and do not buy nice things for yourself(or have any credit whatsoever) but only try to build a BR.

Re: Question about taxes....
 

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Well let's assume you only put $30 a month into the bank(for AOL service), let's further assume you only cashout ~2k a month from poker winnings and do not buy nice things for yourself(or have any credit whatsoever) but only try to build a BR.

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Cashout how? to a bank account, or by check. I think someone else mentioned that as soon as you pass 17k a year it shows up on the gov't radar.

Re: Question about taxes....
 

Cashout=move money onto neteller card and withdraw from ATMs around here. Never ever pay by check, always money orders.

Re: Question about taxes....
 

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Cashout=move money onto neteller card and withdraw from ATMs around here. Never ever pay by check, always money orders.

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Doubt it then. But just keep in mind that whenever you try to do anything with it, big brother will find out.

Re: Question about taxes....
 

lots of good info here

Re: Question about taxes....
 

"..if you have a foreign bank account(s), and at any time during the year you have $10,000 in the account, you must report the account."
"The IRS hasn't pressed the point, but if they want to, they could classify all online casinos as financial institutions. There is no doubt, though, that Neteller, FirePay, and similar services are foreign bank accounts and must be reported (if you meet the $10,000 threshold)."
"The quickest and surest way that I know of to have your return audited by the IRS is to declare a foreign bank account on Schedule B and/or Form TD F 90-22.1"


What I am getting is best bet is to keep under 10,000 in firepay, and under 10,000 in multiple accounts otherwise, including on poker sites.

Re: Question about taxes....
 

Move to Canada. No taxes on gambling.

Side Question
 

Anyone gotten in trouble for breaking the rules in this area? How much do you need to make before you should start reporting it?

Re: Question about taxes....
 

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from what i understand you only have to report what you cash out. it goes in some column marked internet gambling ro something.

right now, as longa sthe moneyh is in your account, it's working capitol or something, not income.

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Not entirely true. You are allowed to count losses against earnings (to a limited degree, and in a complicated fashion which is beyond the scope of this thread), but once the calendar year ends, you're technically required to report your profits even if you haven't cashed out.

My best advice is to keep careful track of all of your play, wins and losses, and just hand your records over to a good gambler's accountant. There are guys out there who specialize in doing taxes for Poker players, and the $250 they'll charge you to do your return will be well worth it if you have even one big score.

Re: Question about taxes....
 

Nobody has ever said that an online poker account is like an investment in stock. An online poker account is effectively cash that is located offshore. An online poker account has no relation to buying and holding shares in say Microsoft.