APCW Perspectives Weekly
Taxing Tournament Poker to Death?

by , Sep 7, 2007 | 4:57 am

Good stuff from J Todd and friends, as is generally the case, to those of us interested in the socio-political-economic waves (and butterfly effects) of the poker biz.

In this week’s episode:

  • New British gambling laws go into effect. The moralists fear “normalisation.”
  • APCW takes on NPR for their gambling-law coverage.
  • New American tax on poker winnings chaps some hides.
  • Brokeback Harbor.

Yeow. The tax thing is pretty big, I think. (It’s gotta be enough to make Eskimo Clark’s heart skip a beat, yo.) From what I can tell, it doesn’t seem to take into account losses. And the 25 percent … perhaps a tax-minded Pokeratizen can clarify for us … is this in addition to standard income tax that all poker players dutifully report on their W-2Gs?

I mean it’s hard enough for low-stakes players to beat the rake. Now high-stakes players face a juice that seems almost impossible to successfully swallow.

UPDATE: Found a little more good information via Lou Krieger. His take makes it seem just that all casinos have to be like Harrah’s now, and automatically withhold the taxes, that’s all. Sucks, sure, but understandable? Unacceptable? Undesirable?

8 Comments to “APCW Perspectives Weekly
Taxing Tournament Poker to Death?

  1. In the ‘Sphere - September 7th « Sphere

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  2. Tom Schneider

    I don’t think this is a big deal, but it might be of huge benefit to some poker players like a forced savings plan. Many players will get a nice refund at the end of the year.

  3. itsoverjonny

    Dan – This isn’t any new “tax”. It is simply a requirement that the payor withhold 25% of the payouts, just like any employer withholds from payroll checks. You taxes due are still determined in the same method as always, and the taxes on gambling winnings are calculated the same way as they were before this new rule. Basically, as Tom alluded to, it means that big tournament winners who manage to blow their winnings won’t find themselves with a huge tax bill with their 1040 form the next year that they cannot afford to pay, and it’s possible that they owe less tax than was withholded, in which case they are entitled to a refund. I’m guessing this is probably a pretty big problem, or this would not have been enacted. Also, keep in mind that other than casinos owned by Harrahs, most that I have encountered do not issue a W-2G at all. For instance, if you win a big prize at Bellagio, standard practice has been for them to give you racks of those beautiful Flags and Cranberries and other casino chips and send you on your way – no paperwork necessary. This practice will also tighten up a lot of winnings that probably go unreported and therefore untaxed.

    If poker players are whining, it’s just because they will now have to be more diligent about their taxes like the rest of the country if they expect to pay the correct amount of tax and get refunds if they are so entitled. For some, it means that they are actually going to have to actually start filing returns and actually paying their taxes.

    Also, to answer your question on the other site, a Form 5750 basically allocates a payment correctly to the various recipients of the payment, eventhough the payor may have reported different amounts on the W-2G’s that it filed with the IRS. For instance, let’s say that you and I are heads up at the final table in a tournament, and the remaining prize pool is $100k for 1st and $50k for second. You and I agree to an even chop ($75k each) and play out the tournament for the bracelet. The casino is going to give one of us a W-2G for $100k and the other one for $50k along with the prize money/chips, and you and I would settle up on the chop. The Form 5750 allows us to report the actual allocation of the payment so that one of us isn’t stuck paying taxes on the extra $25k that the other of us received. So basically, any time there is a chop or other arrangement that varies the payments from those that were scheduled, the 5750 comes into play. It should have always been used, but tournament winners that may have been less-than-diligent about their taxes before now need to be more careful to avoid paying the taxes of others.

    Another common application of a Form 5750 is if a group of people (for instance, an office pool) buy a winning lottery ticket. One person will likely “officially” claim the lottery winnings and have them reported to his SSN, and the Form 5750 is used to correctly report the allocation of the monies to the various winning parties.

  4. DanM

    ***beautiful Flags and Cranberries***

    I think I know what a flag is — $5,000 chip — but what’s a cranberry?

    Everything else you and Tom say makes sense. Doesn’t sound bad at all. Yeah taxes!

  5. itsoverjonny

    Cranberries are Bellagio’s $25,000 chips – named due to their color.

  6. DanM

    So are $25k chips anywhere called cranberries, or only at Bellagio? I saw some $25k chips at Caesar’s, and I believe they were brown in color.

  7. tom schneider

    25k chips at Bellagio are most commonly called pancakes.

  8. Pokerati | Texas hold’em blog » Blog Archive » Chip Nicknames

    […] Itsoverjonny’s comment on the post below has me thinkin’bout nicknames for chips used in cash-game poker and as casino currency. I know they exist, and know most a few three of them, but not all. Perhaps some of you who have played more regularly with the different denominations can help me fill in the blanks? Thanks in advance for your assistance. […]