Question about taxes....

rockythecat99 · #1 09-17-2005, 10:03 AM

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?

broiler · #2 09-17-2005, 10:21 AM

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.

rockythecat99 · #3 09-17-2005, 10:23 AM

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

#4 09-17-2005, 10:29 AM

Move to the UK-NO TAX on winnings woohoo

broiler · #5 09-17-2005, 10:55 AM

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.

rockythecat99 · #6 09-17-2005, 11:47 AM

thanks for the quick reply broiler. much appreciated.

Dave D · #7 09-17-2005, 12:32 PM

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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.

#8 09-17-2005, 01:50 PM

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.

Exitonly · #9 09-17-2005, 03:16 PM

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.

broiler · #10 09-17-2005, 03:25 PM

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.