The 2023 World Series of Poker (WSOP) is less than a week away, and right now players are filled with high hopes. If all goes according to plan, they’ll head out to Las Vegas and make a poker fortune, but if you’re so fortunate, remember big scores come with big responsibilities, primarily taxes!
We asked our friends over at Kondler & Associates, the premier poker tax specialists, for things players may want to remember at the 2023 WSOP. President and Owner Ray Kondler, CPA, offered his expertise below.
If you would like to receive more information about their services or receive a free assessment, please visit our Kondler & Associates hub or call (702) 433-7075. You can also check out their booth at the 2023 WSOP.
Understanding the tax laws of the state in which you reside is of utmost importance when it comes to handling gambling losses. It allows individuals to determine their tax obligations accurately and make informed decisions regarding deductions and reporting requirements. The handling of gambling losses can vary significantly from state to state. Each state has the authority to establish its own laws and regulations regarding gambling and its taxation. Some states fully allow the deduction of gambling losses, meaning that individuals can offset their gambling winnings with losses when calculating their taxable income. This allows them to reduce their overall tax liability.
On the other hand, certain states may have partial allowances for deducting gambling losses. This means that individuals may be able to deduct a portion of their losses, but there may be limitations or restrictions on the amount that can be deducted. The specific rules and limitations can vary, so it is crucial to understand the tax laws of the state in which you reside to ensure compliance and maximize potential deductions.
In contrast, some states do not allow any deduction for gambling losses. In such states, individuals are unable to offset their gambling winnings with losses for tax purposes. As a result, their taxable income remains unaffected by their gambling activities, and they will end up paying tax on the gross amount won.
Professional vs Amateur Tax Classification
The distinction between being an amateur and a professional gambler encompasses several key differences. Amateurs typically engage in gambling activities purely out of personal interest or recreation, without considering it as their main source of income. On the other hand, professional gamblers treat gambling as their primary occupation and often receive regular income from their gambling activities, making it their main source of livelihood.
One significant difference between amateur and professional gamblers lies in their tax obligations. As professional gamblers earn income from gambling, they are subject to self-employment taxes. However, they also have the advantage of being able to write off various expenses related to their gambling activities. These deductible expenses can include travel costs, accommodations, entry fees, and other relevant expenses.
In certain instances, professional gamblers may choose to set up an S corporation (S Corp) to manage their gambling activities and tax liabilities. By establishing an S Corp, they can potentially structure their income and expenses in a more advantageous manner for tax purposes. This alternative can provide additional tax planning opportunities and potentially optimize their overall tax situation.
When gambling, it is important for players to keep track of information to maintain proper tax documentation. Two common methods used for tracking poker activity are Excel ledgers or a dedicated poker tracking app. Regardless of the method chosen, these are details that should be documented:
Date & Time spent playing.
Type of gambling (cash game, tournament, sports bet, etc.)
Buy-in amount and cash-out amount.
Receipts or bank statements of expenses (for professional Gamblers)
In regard to tax forms issued by the Casino (W2Gs’s & 1042s) it is important to pay attention to the tax form to verify that it was issued in the correct year. On many occasions a casino can use a prior year’s tax form and this can be a reason a refund was held for a significant amount of time while the IRS verifies the transfer with the Casino.
International players- Tax Treaty vs Non-Tax Treaty
The distinction between being from a Tax Treaty country and a Non-Tax Treaty country can have significant implications for gamblers when it comes to the taxation of their winnings. Players from Tax Treaty countries have the advantage of being able to provide the casino with their Individual Taxpayer Identification Number (ITIN), allowing the casino to release the entire amount won to them. This means that players from Tax Treaty countries do not have any withholding taxes applied to their winnings.
On the other hand, players from Non-Tax Treaty countries face a different scenario. Regardless of whether they have an ITIN or not, 30% of their gambling winnings are withheld by the casino. However, there is an opportunity for these players to recoup the withheld amount by filing a Tax Return. The refund amount for Non-Tax Treaty countries is based on various factors, including gambling wins, losses, and expenses. By reporting their gambling activity accurately and documenting their losses and expenses, players can potentially reduce their taxable income and increase the amount refunded to them.
For Non-Tax Treaty gamblers, obtaining an Individual Taxpayer Identification Number (ITIN) is important. While it is true that having an ITIN allows Non-tax treaty players to file a US tax return and potentially collect taxes that were withheld from their gambling winnings, it does not exempt them from having money withheld in the first place. Regardless of having an ITIN, Non-tax treaty players will still have a portion (typically 30%) of their gambling winnings withheld by the casino or other payers. Obtaining an ITIN is crucial because it enables Non-tax treaty gamblers to fulfill their tax obligations in the United States. With an ITIN, they can file a US tax return and report their gambling income, losses, and expenses and receive a refund if applicable.
Kondler & Associates, CPAs is a full-service accounting and financial consulting firm with locations in Las Vegas, NV and Atlantic City, NJ. The firm, led by President and Owner Ray Kondler, CPA, specializes in individual and corporate tax preparation and has developed an expertise within the gaming industry over the past 10 years. As a Certified Acceptance Agent, Kondler & Associates has helped hundreds of non-U.S. citizens receive ITINs and tax refunds for excess money withheld.
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.PokerCPA.com
