In what is being hailed as a victory for both sides, the Internal Revenue Service (IRS) and the casino industry has reached an agreement on the taxation of poker tournament winners.
Last month, the IRS had initially told casinos that they were responsible for withholding 25% of poker tournament winnings over $5,000, a move many industry insiders feared would drive poker players to play only at offshore internet poker rooms. After negotiations with the casino lobby, the IRS will now require casinos to report winnings on a W-2G form, while players will be responsible for registering their winnings at tax time as of March 4.
The American Gaming Association, which represents thousands of bettors and industry members, has applauded the compromise, while lobbyist Wally Chambers said the IRS “was appreciative of our efforts to ensure the flow of these tournaments,” adding, “We’re very happy with this procedure.”
While the World Series of Poker, the world’s premier poker tournament, reports winnings to the IRS, many casinos neglect to fill out the W-2Gs, and the players who would be taxed rarely, if ever, insist upon it. With the new agreement then, the IRS is able to create a “paper trail” of poker gambling winnings. If a casino does not withhold tax, the IRS can simply hold that casino liable.
Many poker players are slow to report winnings come tax time, however with the corresponding forms from the casinos, if they forget this time around they will be caught.
For Anthony Curtis, the publisher for the gambler-aimed Las Vegas Advisor, this will probably make more poker players aware of their responsibilities, “[players] do everything off the books. They’re walking around with big wads of cash like you wouldn’t believe. They don’t have records and wouldn’t know what to do to report taxes. They just know that they’ve got to get to the next game.”
By not changing the withholding rules, tax-paying players get the benefit of not having their cash bankrolls impacted.
Although some critics see this move by the IRS as another piecemeal solution by basically treating each particular game with different tax solutions, instead of an industry-wide taxing legislation, the gaming association sees it as an important step for the still-growing industry.
At least 1.8 million of the estimated 134 million tax returns filed in 2005 reported some form of gambling earnings, with an overall total of roughly $24.9 billion – or 413,800 per person.
