Do bonuses affect taxes? (US)

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All income is taxable, like someone else said, including drug sales. Remember how they got Capone? He didn't pay income tax on the money he made from his illegal businesses.

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While everything you say here is correct, there is ambiguity in regards to bonuses. A bonus may or may not be considered income. Rebates (i.e. buy a computer for $800 and get $150 via rebates) are not considered income. An argument could be made that rakeback and bonuses are simply rebates against your "fee" for playing. If this argument were to pass muster, bonuses and rakeback would not be taxable.

Unless you get audited, I doubt you will get a clear answer on the proper classification of these items. And even then, each IRS agent could easily interpret them differently. So you have to determine whether you want to play it safe (pay taxes on all rakeback and bonuses) or take a chance.

Acme

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I agree that there could be an argument made in terms of rakeback and your rebate example. The reason a rebate is not income is because they are just giving you part of your money back, it isn't income. I suppose you could use this same argument for rakeback. It doesn't fly with a bonus however. The bonus money was never part of your money in the first place so it cannot be a rebate. If the bonus was "by $100 in chips and if you go broke we'll give you $25 back" then it would be a rebate. The bonus, however, is yours if you win or lose--as long as you meet the WR.

[jrz1972]

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I'm so confused about poker and taxation. So what constitutes a win and loss? Do you just tally up the total net amount gained/won be it profits or losses? Do you add up per month, or per year, per session, or what?

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The IRS requires you to report the total of all your winning sessions as "other income." You can then deduct the total of all your losing sessions as an itemized deduction. You can only deduct your losses up to your winnings, but that's irrelevant for 2+2ers since we're net winners.

I treat each PokerTracker "session" as a "session" for tax purposes. I do that for three reasons:

1. It is absolutely 100% IRS-safe. In the highly unlikely event that I get audited, there is no way the IRS can argue that I've somehow understated my tax liability using this technique.

2. It's easy for record-keeping purposes. Again, if I get audited and the IRS wants to see records of my play to compare against my tax return, it will take me about 5 minutes to document everything thanks to PT. If I adopted some other definition of a session (like the time I log in to the time I log off), this would be more of a pain.

3. The amount of money I'm dealing with is small enough that it just doesn't matter how I deal with it. The method I use generates the largest possible increase in my AGI, but it still isn't enough to have any tax consequences (like losing my Roth eligibility or having my itemized deductions phased out). If I moved up even to 2/4, though, the one table = one session method would probably result in my wife and I both being ineligible to contribute to our respective Roths, which would suck.

[Wake up CALL]

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The *recipient* of a gift is never required to pay any taxes on said gift. Bill Gates could walk up to you and write you a check for $100,000,000 and you would not owe any taxes on the money. The *giver* has to worry about the tax implications

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This is soooooooo wrong.

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Repeating...no, it is not. Unless you take umbridge with the word "never" which is still correct since the recipient is not required to enter into an agreement where they pay the taxes instead of the donor. (Though they might not get the gift if they don't.)

See http://tinyurl.com/9yqsk and note question number 2.

Q: Who pays the gift tax?

The donor is generally responsible for paying the gift tax. Under special arrangements the donee may agree to pay the tax instead. Please visit with your tax professional if you are considering this type of arrangement.

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My guess is that he thought it was wrong since you used an absurd example of Bill Gates handing you $100 million then stating that it is all tax free for you, yet the gift tax only applies to $11,00 per person per year like the rest of your link shows.

Q: How many annual exclusions are available?

The annual exclusion applies to gifts to each donee. In other words, if you give each of your children $11,000 in 2002, 2003 or 2004, the annual exclusion applies to each gift.

This seems like a pretty major oversight on your part to me. Remember if you are going to post a link to show you are correct you should at least read the link in the first place.

[AcmeSalesRep]

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The *recipient* of a gift is never required to pay any taxes on said gift. Bill Gates could walk up to you and write you a check for $100,000,000 and you would not owe any taxes on the money. The *giver* has to worry about the tax implications

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This is soooooooo wrong.

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Repeating...no, it is not. Unless you take umbridge with the word "never" which is still correct since the recipient is not required to enter into an agreement where they pay the taxes instead of the donor. (Though they might not get the gift if they don't.)

See http://tinyurl.com/9yqsk and note question number 2.

Q: Who pays the gift tax?

The donor is generally responsible for paying the gift tax. Under special arrangements the donee may agree to pay the tax instead. Please visit with your tax professional if you are considering this type of arrangement.

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My guess is that he thought it was wrong since you used an absurd example of Bill Gates handing you $100 million then stating that it is all tax free for you, yet the gift tax only applies to $11,00 per person per year like the rest of your link shows.

Q: How many annual exclusions are available?

The annual exclusion applies to gifts to each donee. In other words, if you give each of your children $11,000 in 2002, 2003 or 2004, the annual exclusion applies to each gift.

This seems like a pretty major oversight on your part to me. Remember if you are going to post a link to show you are correct you should at least read the link in the first place.

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Oh my. Re-read everything in that link. Everything. Now take a few minutes and think through the words you are reading with no pre-conceived notions.

Here is what you will find...

1. The *receiver* is not responsible for taxes on a gift. (Unless the giver and receiver agree to set things up that way ahead of time -- an exception I clearly noted in an earlier post.)

2. The size of the gift does not matter in terms of whether or not the *receiver* is responsible for the taxes.

3. The *donor* has to worry about the taxes.

So, to address your reply: [ QUOTE ]
My guess is that he thought it was wrong since you used an absurd example of Bill Gates handing you $100 million then stating that it is all tax free for you,

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It is tax free to ME. It is taxable for Bill Gates. This is exactly what I have been saying all along. I find it truly amazing that anyone could read the link I provided and come up with your incorrect interpretation...

Remeber, if you are going to be a moran, at least pull your head out of your ass first.

Acme

[Jimbo]

Acme,

Thanks for the link. .

[AcmeSalesRep]

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Acme,

Thanks for the link. .

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No problem. Always glad to be of assistance.

Now if only Bill Gates would open that checkbook up and write me the $100,000,000 check...

Acme

[Ralf]

So, what about rakeback? Those are more like payments for getting someone else to gamble, not gambling winnings, or ARE THEY?

[david050173]

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So, what about rakeback? Those are more like payments for getting someone else to gamble, not gambling winnings, or ARE THEY?

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Doesn't really matter. You owe taxes on just about all income and rake back doesn't fall into any of the exempt cateogories.

[Python49]

A few questions....

1) if you were to consider your bonuses as a "gift" (in reality its just party poker giving you back your rake.. thats why its after a certain # of hands) what the hell does the IRS do then? Tax an off shore poker account?

2) Next question is.... can you deduct rake too? If so that helps alot. For example if someone had gross earnings of 60k from poker, and total losses of 40k (20k profit), but it took them a boat load of hands because they had a low bb/100... and in the time it took them to make that 20k profit they spent 20k in rake (hypothetical) can they then deduct that as losses as well and have no taxable income as far as poker is concerned? Assuming they got no rakeback that is.

3) Next question is... what about the people who are filing their gambling income incorrectly and just reporting profits? What if they were to get audited... are they in the same boat as people who did not file at all?

4) I dont know why but when I was growing up for every job I had my mother told me to write down exempt from taxes and i've never paid taxes on anything. I presume with the amount of money involved with poker i'm not exempt from taxes on it... can someone tell me if my mother claiming me as a dependency has any effect on poker winnings?

Also, when talking to my college professor (accounting teacher/CPA) this is what he said to me...

"if i were you i wouldnt even worry about it, first off the IRS has much bigger fish to fry and it would cost them more money to audit you... second of all nothing is reported to them so theres a less than 1% chance of you being audited, thirdly, in the VERY unlikely event that you were, you would have a very strong case in court... as the poker room is off shore, you're a full time student, you are just transferring money thats already been taxed from one account to another"

Can anyone tell me if he is correct about anything?

[Orpheus]

It would be extremely advisable to keep a copy of your current T&C and other relevant webpages, if you are planning to make the gift argument. T&Cs are generally subject to change without notice, and it would be easy for them to add a line stating that you agree to be responsible for any taxes in your jurisdiction arising from all transactions with them. You would be "agreeing" to this by your continued use of the site, under the infamous "shrinkwrap" precedent.

Sure, the T&C at your favorite site may not say that now, but can you PROVE it? Especially if they change the T&C next August after you have filed, but before you receive a (hypothetical) an IRS audit notice? It's merely prudent to have *some* documentation, even if it is impractical for you to know of, much less document every single unannounced change they may make, however briefly, in the interim.