Tax-related question regarding online tournament winnings

[MikeyPipes86]

I realize this may seem to be a redundant question, so I apologize in advance.

I recently earned a seat in a $75,000 multi-table tournament on PP via a $10 qualifying tournament. With approximately 500 entrants, I simply hoped to make it in the money (top 50). Needless to say, I played the best poker of my life and found myself 5 hours later sitting at the final table. I ended up finishing 3rd and won nearly $6,700. I am a casual player who generally plays small tournaments and no larger than $2/4 games. Therefore, I have never had any large winnings more than a couple hundred bucks prior to this tournament.

I have looked at various message boards online about taxes on this $6700. I do know that this is taxable income. However, a PP representative told me via the phone that PP does not report to the IRS, does not provide W2-G forms, and the entire $6700 can be withdrawn and sent to me in check form.

Here is the sticky part. I played this tournament on my roommate's screenname, thus the money was credited to his account. Unfortunately, he is now part of this mess as far as tax purposes go. While he has acknowledged that the money is indeed "mine" it is difficult for him because PP limits the amount of inter-account transfers, meaning he cannot simply transfer all the money to my account. I have been given various tips as to how to receive the money, such has having him take it out in $500 increments and signing the checks over to me, to having the entire amount withdrawn from the acount and taking it to a check cashing locale.

All this being said, I was wondering if others have won a similar amount (Several thousand) and what they did as far as withdrawal and tax reporting. Also, any advice as to how to resolve the account/screenname snafu with my roommate would be helpful as well. Thanks a ton.

[CORed]

The smartest thing to do is to report it to the IRS and pay your taxes. If you are determined not to report this income, I would advise against doing anything to try to hide it. It won't be reported to the IRS, and, in the unlikely event that you are audited, you can just claim ignorance. You will still have to pay the tax, plus penalty and interest, but it's extremely unlikely that they would go after you on any criminal charges. If you do stuff like break it up into small pieces and try to take it out in cash, then it's pretty obvious that you were trying to hide it. I don't know if the IRS would pursue criminal charges for this small an amount, but if you were clearly trying to hide the income, it is much more likely.

Any way you get this money will leave an audit trail. If the IRS looks for it, they will find it. Most likely they will not look for it, but if they do, it will look a lot worse if you clearly were trying to hide it.

[LaggyLou]

1. Friend cashes out the 6,700 and either writes you a check for it or gives it to you in cash.
2. You report 6,700 in income.

What's the problem?

[Niediam]

Because of the IRS somehow founds out about this check they are going to wonder why friend didn't pay taxes on the $6,700 that he apparently won?

[Niediam]

Perhaps you should both open Neteller accouts. Then have your friend withdraw his balance to his new account and transfer the money over to you that way.

[Jaquen H'gar]

[ QUOTE ]
Because of the IRS somehow founds out about this check they are going to wonder why friend didn't pay taxes on the $6,700 that he apparently won?

[/ QUOTE ]

That's why the account holder should write a check to the actual player, and then the player declare the winnings. If the account holder gets dinged, he simply shows the IRS the check he wrote and explains it to them. "Giving away" $6700 is clear evidence that the account holder didn't win it. Besides, the IRS will collect the taxes from the player.

[kutuz_off]

Something I never understood is the problem with the transfers. Set up a heads-up NL game. Raise-raise-fold. Raise-raise-fold. All preflop, so that there's no rake. Money transferred. What am I missing?

[lorinda]

Money transferred. What am I missing?

If you are serious, you should read the last 2000 posts on this forum before going near an internet poker site.

Lori

[dlk9s]

[ QUOTE ]
Because of the IRS somehow founds out about this check they are going to wonder why friend didn't pay taxes on the $6,700 that he apparently won?

[/ QUOTE ]

I suppose (although this would be a pain in the ass for the friend), the friend could declare the $6,700 on his taxes and the OP could pay him back the tax. If he uses tax software, it would be easy to figure out the difference - should take a few seconds.

Then again, I don't know about all the tax issues surrounding this stuff, so just ignore me.

[tripledouble]

ROFL.

my friend and I thought the EXACT same thing.

/fu pokerhost.

--i wouldn't ever advise anyone to do that btw.