Kondler & Associates, CPAs Poker Taxation Issues
Kondler & Associates, CPAs is a full-service accounting and financial consulting firm with locations in Las Vegas, NV and outside Atlantic City, NJ. The firm, led by President and Owner Ray Kondler, CPA, specializes in individual and corporate tax preparation and has developed a thorough understanding of the gaming industry over the past 10 years. This has translated into a practiced understanding of the industry and exposure to diverse gaming taxation scenarios. In an environment of constant change, Kondler & Associates has continually focused on its clients’ needs while remaining knowledgeable in the ever-changing world of gambling taxation.
Professional vs. Amateur Status
One of most frequently asked questions we receive from our clients relates to classifying as a professional or recreational gambler. We have encountered numerous clients who qualify as professional gamblers, but are unaware that they met the criteria in order to file as such and receive the benefits of the classification. These players are costing themselves money by not knowing their tax status. In order to file as a professional gambler a taxpayer must devote a substantial amount of time to gambling and treat it as a business. This means each cash game session or tournament is logged separately in order to display a proper profit and loss statement and the taxpayer spends a significant amount of time spent both playing and studying poker. For instance, attending poker seminars or academies, reading poker books or articles and discussing hand histories all count as time invested into this profession. If you qualify as a professional gambler, additional deductions are available to offset gambling winnings. These deductions include: airfare, lodging, ground transportation, out of town meals and health insurance. We work with our clients to develop a detailed understanding of their gambling career in order to determine the proper classification for tax purposes. Also, if it is determined that you qualify as a professional gambler, but have not been filing as such in the past, we can amend your prior year’s returns to include the additional deductions available.
Non-U.S. Citizen Taxation
Each year, thousands of non-U.S. players enter and cash in tournaments played throughout the U.S. Since these players are not U.S. citizens, the IRS requires 30% of their tournament winnings to be automatically withheld from their payout. In order to reclaim the withheld taxes, the player must file forms in the U.S. to determine the amount of taxes to be returned. If the player does not file, they will not receive any of the withheld taxes. We realize many non-U.S. players have been unable to or have struggled to properly file. If unfamiliar with the process, as many players are, it can be complicated and overwhelming. We work with players to understand each individual situation to ensure the right documentation is presented to the IRS to expedite the refund process. Some players have not filed for a refund and are due withholding from multiple years! The statute of limitations requires players to file for their refund within (3) years, so we encourage players to act before these deadlines expire.
All players have, at one point, decided to exchange or “swap” action with a peer or have sold action to friends or family to compete in a tournament. What happens when you win the tournament? The IRS knows there is a large check in your name and assumes you are liable to be taxed on the full amount. The IRS does not know who invested in you and assumes the tax burden is on you, even though this is not the case. However, if you do not do anything and simply accept the check and pay out the appropriate amounts to your investors, you will still be assessed a large tax bill. We help players transfer the winnings to each investor properly by filing Form 1099. This form notifies the IRS that you are not responsible for a certain percentage of the winnings and allows them to assign the appropriate taxes to other individuals. It is important to think about these consequences before entering large tournaments to prepare for the potential financial scenarios that may ensue.
We also provide ancillary services to our clients to ensure each facet of their tax needs has been met. These services include amending prior year’s returns, foreign bank account reporting issues, IRS reporting issues and wealth consulting.
If you would like to receive more information about our services or schedule a free consultation please contact us at (702) 433-7075 or visit our website www.pokertaxsavings.com.