I feel sorry for the Americans!

[Mark S.]

There's an interesting thread going on RGP at the moment about should US citizens inform the tax man of their 'poker winnings' from on-line sites!

My argument is that as online poker is probably illegal in most parts of the USA then why declare income on an illegal activity?

They say its better to declare the income as 'other earned income' and pay the taxes then not to do so at all and be prepared if the IRS catch up with them!

So what do you guys think?

[AdamM]

are poker losses deductable?

[Mark S.]

Only if you declare to the IRS that you're a 'professional'!

[AdamM]

then same must apply to winnings.

if that was the case there's be far fewer people claiming to be "poker pro's"

[AndrewT]

Could it not be argued that, as a poker professional, every penny you ever put into a pot is a legitimate business expense (money spent in order to make your profit), and is therefore tax-deductable?

[AdamM]

"I raise.  Can I get a reciept for that?"

[Mark S.]

Apparently because Joe Hachem (winner of the 2005 WSOP) declared himself to be a professional poker player the IRS immediately $2.5M off him as a witholding tax.

The Australian authorities now want their cut!

He might be lucky enough to get 3M out of it!! 

[Bongo]

How can the Americans and the Aussies take a cut?

[Harry Demetriou]

I think you will find that as a US citizen you have to pay tax on your global income and as such it is your responsibility to report all income regardless of whether it was made legally or illegally. (Not a lot of people know this but the same applies in the UK - your global income is taxable - although current legislation exempts your gambling winnings if they are not your sole income)

In other words it is not the source of the income that matters merely the income itself.

You also need to declare "large" amounts of money that you keep on deposit globally and there is a strong case to argue that you need to also declare that you keep $50k in Ultimate Bet and $40k in Poker Stars (say). Transfers between players (allowed by some sites when your account is verified and sanctioned to do so) are breaking money laundering laws and imho will lead to their long term downfall if permitted to continue as they represent a weak area which the US governernment can use to attack them).

If the IRS should find out about your income from any source that you have not declared you are liable to prosecution and very likely to get a heavy fine and even go to jail - it's considered very serious offence. On a side note if the law feels you have benefited financially from an illegal activity they can also seize your assets including homes, cars and anything else of value.

Even prostitutes in areas where their trade is deemed illegal have to declare their income for tax purposes (cf with failed attempts by prostitutes in the UK attempting to avoid paying tax by claiming the government is making money from immoral earnings - an offence in its own right - and you should all get the idea that once again it is the income itself and not the source that counts.

Bottom line - where governments feel they should get their cut you would do well to let them have it as in the long run it can cost you far more and especially so if you are American.

[Harry Demetriou]

Apparently because Joe Hachem (winner of the 2005 WSOP) declared himself to be a professional poker player the IRS immediately $2.5M off him as a witholding tax.

The Australian authorities now want their cut!

He might be lucky enough to get 3M out of it!! 

Joseph Hachem is Australian and as there is no tax treaty between the USA and Australia means he must have the mandatory amount deducted from his winnings. He can claim the tax back if he shows sufficient losses in gambling (eg losing sports tkts) along with expenses that he can use to offset his tax liability.

For UK Citizens (British Passport Holders) there is a tax treaty in place. You complete a W-8BEN (also need an Individual Tax Identification Number ITIN) and they will not deduct anything as you are expected to pay the tax in your home country so as not to pay it twice. Fortunately gambling winnings are currently not taxable in the UK and you end up keeping the whole of your winnings.

One of my gripes this year with The WSOP was their unhelpfulness towards non deduction of tax from British winners and the fact they changed their views on the interpretation of the tax rules half way through. The Bellagio applies and gets the ITIN for you and it's easy to get and free of charge and they store it on computer for future use - The WSOP/Rio decided to try and get people to call an independant US tax attorney who would charge you $10k for getting an ITIN for you. No doubt tif they had removed their heads from their arses they could have been more helpful to the overseas players.

[TightEnd]

that answer your question UKPoker?

lol

thx harry

[RED-DOG]

'Fortunately gambling winnings are currently not taxable in the UK '

Do they still have to be declared?

[TightEnd]

if they are your sole income do you not have to declare them?

if you have a job and you win on the side, no

[byronkincaid]

Have the UK tax laws changed overnight? Gambling winnings are not taxable. Doesn't matter if you have another job or not.

[RED-DOG]

if you have a job and you win on the side, no

If this is the case, what constitutes a 'job' does a £5pw paper round count for instance?