It’s quite challenging to get excited about taxes. But for poker players, this week’s podcast has something to be excited about: A clear breakdown of how to pay taxes as a poker player. If you Google for the answer, you’ll get lots of conflicting and jumbled advice from a variety of experts and amateurs. This is a discussion on Paying Taxes on Poker Winnings in USA within the online poker forums, in the General Poker section; I've always wondered how this works, does anyone know? I want to lay out.

1. How To Do Your Taxes
2. Do Poker Pros Pay Taxes 2017
3. How To Pay Federal Taxes
4. Do Poker Pros Pay Taxes Free

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Parts one and two of this series explained that arrogance was the primary cause dying broke, and discussed nine mistakes poker players make along the way. This column will recommend the steps you can take to avoid that grim fate.

Start A Retirement Savings Program Now

Don’t think, “I’ll save money someday.” Regard retirement saving as an expense, just like your rent or car payment. If you start now, relatively small, regular contributions plus compound interest will build the funds you need.

For more than 80 years the federal government has forced and encouraged people to save for retirement. Social Security forces people to save, and many programs encourage saving. Because these programs let you deduct your contributions from your taxable income, the government essentially adds money to your account.

The government increases its subsidy by not taxing your interest, dividends, and other profits until you retire. Since your income tax rate will be much lower then, you’ll pay less tax. You’ll also get the money when you need it much more than you need it now.

These programs usually include severe penalties for early withdrawal. These penalties will discourage you from raiding your program when you run short of cash.

Casino boat near savannah ga. Then it died and they might have two tables going on a Saturday if they are lucky. So I started going to Monticello, it's kind of a dump.

The government wants to give you money. Take it!

Get Professional Financial Planning Advice

Good retirement planning is like good poker planning. “It depends on the situation.” There are many retirement savings programs, and the government constantly modifies them. The right program depends upon your income, net worth, age, family situation, and other factors that only a professional can apply skillfully.

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You also need professional advice to select investments. You couldn’t succeed as a pro if you weren’t very smart. But poker is your game, not investing. Stick to the game you play well.

Don’t Play Other Casino Games

The principle of sticking to the right game applies even more forcefully inside casinos. Even if you make some investment mistakes, saving regularly should build an adequate retirement fund. If you play the wrong casino games, you’ll probably go broke, and you may do it again and again.

Many poker pros lose heavily at craps, sports betting, and other games. They know these games are negative EV, but can’t accept that reality They arrogantly believe they can beat unbeatable games, and their pathological need for action overwhelms their logical brains.

The same craving for action causes some great tournament players to be huge cash game losers. Instead of waiting for the right tournament, they need action now, and it costs them dearly.

Keep good records. Whenever you feel an intense need to play a game you haven’t beaten, don’t lie to yourself and pretend you’ll beat it now. Leave the casino IMMEDIATELY.

Don’t Cheat On Your Taxes

4 pics 1 word baby poker chart. Cheating is tempting, but extremely stupid. You think, “The IRS can’t know how much I win in cash games.”

Wrong!

The IRS knows immeasurably more about how to how to catch cheaters than you can ever know about how to cheat. You can probably get away with cheating, but the risks are so huge that it’s extremely -EV. You may pay massive penalties and fines, and you could spend years in prison.

I don’t like paying taxes any more than you do, and I take every legitimate deduction. But, if I hadn’t paid taxes and Social Security and contributed to tax-sheltered retirement programs, I wouldn’t have a comfortable income from my Social Security and IRA, nor would I be eligible for Medicare.

If you don’t pay Social Security for ten years, you don’t get Medicare. As you get older, your medical costs normally increase enormously. Without Medicare you’re not just risking going broke. You’re gambling with your health and life.

You may believe you won’t get Social Security or Medicare because the programs will go broke. That fear is correct actuarially, but naive politically. If current trends continue the system will go broke, but the politicians won’t let it happen.

Why?

It would be political suicide. Old people are a large and ever-increasing percentage of the population. They and their children would vote against any politician who didn’t protect their pensions and Medicare.

Buy Health Insurance

Medical costs have destroyed the bankrolls of many pros, and these costs aren’t the only reason to buy insurance. Insurance companies and Medicare will help you to stay healthy because it’s much cheaper than treatment.

They will pay for checkups and other actions that you wouldn’t take if you had to pay for them. If you have health insurance, you’ll be healthier, play better, and live longer. Confessions of a casino dealer.

Switch To A Healthier Lifestyle

Many pros neglect their health. They eat too much of the wrong kinds of food and don’t exercise enough. So they have higher medical costs and don’t feel well enough to play their A-game. They win less money and die too soon.

You have absolutely no excuse for an unhealthy lifestyle. There are hundreds of books and articles, and you don’t even need them. You already know what you should do. You just won’t do it.

Stop denying reality about your health. Commit yourself to eating wisely, exercising regularly, and seeing your doctor twice a year, even if you feel great. Routine health screenings have saved countless lives, and they could save yours.

Get A Straight Job

Every well-trained financial planner recommends diversification. And you don’t need that advice. You’ve repeatedly been told, “Don’t put all your eggs in one basket.”

That principle applies to any basket, but it’s especially true for poker. Swings and losing streaks are inevitable. If you depend too much on your poker profits, several bad things will happen:

1. All of your income and assets will always be at risk.
2. You’ll increase your psychological vulnerability. When you’re running bad, you’ll feel much worse than pros with more balanced lives. The worse you feel, the worse you’ll play. You can easily go on tilt and lose everything.
3. You can’t be as selective about where and when you play. If you need money for your expenses, you’ll play when the games too tough or you don’t feel well enough to play your A-game.
4. Your effective bankroll will be smaller. You’ll have to take the risks of playing above your bankroll or reduce your profits by playing in smaller games.

When I suggest taking a straight job, many pros are horrified. They think it’s admitting they don’t play well enough to make it.

Nonsense!

How To Do Your Taxes

Some very successful players have straight jobs, including Bobby Baldwin, Dan Harrington, and three of my friends: Linda Johnson, Jan Fisher, and Roy Cooke. Despite being excellent players, they all recognized the danger of being totally dependent upon poker. They continue to play winning poker, but have solid incomes from other sources.

Conclusion

Stop pretending that you’re so special that you’re not in danger. Too many pros have died broke. Don’t become one of them. Start preparing for a comfortable retirement NOW.

Visit Alan Schoonmaker’s website for access to his 14 books, 200+ articles, videos and podcasts.

Contents

Many poker players in the United States are unaware of the tax laws that cover their winnings. Poker winnings are taxable whether they are from cash games or tournaments. This is true for brick and mortar, as well as online poker rooms. Even if a player lives in a state where online poker is explicitly illegal there is still a responsibility to pay taxes on those winnings.

Online poker taxes in the United States

Many players may think that they can get away with not paying taxes on winnings because it was not won in a traditional casino. This could not further from the truth. Just as the technology for online poker has advanced over the years, so has the technology that helps the US Government monitor banking transactions. This is not just true for money that you deposit into a bank account. It goes well beyond that.

While depositing a check or receiving a wire from an online poker room may draw some scrutiny from the IRS, the government has other ways of tracking your online poker winnings down too.

The Neteller bust in 2007 was the first time it became obvious to online gamblers that the US Government could monitor their transactions. Many players thought that the IRS would never gain access to this information. They were proven wrong. Many players were forced to scramble to pay taxes on their winnings before they got a dreaded tax bill. Many players learned a lesson here, while others did not.

Neteller was just one of many US facing ewallets to fall. The government seized UseMyWallet, QuickTender, eCheckUS, eWalletXpress, PrePaidATM and many fly by night processors that processed US online gambling payments. The Department of Justice even created a bogus processor called Linwood Payment Solutions and received countless information about player payments that passed through their processing center. This gave the feds unlimited access to online poker player’s transactions that were once thought to go under the radar.

Ewallets were not the only companies handing over their player records to the US Government. Busted online poker rooms and other online gambling companies were doing the same thing. PokerStars, Full Tilt Poker, Absolute Poker and Ultimate Bet are just a few of the names that were forced to turn over player records to federal authorities. The lesson learned here is that there is always a chance that the information that you thought was private can fall into the hands of the IRS.

Brick and mortar poker taxes

Brick and mortar wins are a bit it easier to hide, but there is still an obligation to report your winnings. Each cash game session must be logged. The IRS does not define what a session is. Keeping a daily journal of wins and losses should suffice. Tournament players should log each tournament entry. A poker room will be happy to give you a receipt for any tournament entry upon request. Large tournaments will automatically provide one.

A casino will issue a W2G any time that a player nets $5,000 or more in a brick and mortar tournament. A W2G is a tax form that will be submitted to the IRS with the player’s Social Security Number and other personal information. Players can refuse to provide this information. If they do, the casino is required to automatically withhold taxes on the win.

Brick and mortar players should also be aware that a casino is obligated to create a Currency Transaction Report any time a player crosses more than $10,000 through the casino cage in a 24 hour period. Poker players should also know that the casino may report any transaction that they consider to be suspicious as this is required by federal law.

Should you file as professional or recreational gambler?

There are two ways to declare poker winnings. One way is to enter the income under miscellaneous income. This is what most players will do. A player that files as a recreational player will pay their standard tax rate on this money, but will not have to pay Social Security or Medicare taxes on these winning. Most players that have full time jobs will file this way.

Players that have demonstrated a pattern of winning can claim their winnings as a professional gambler, regardless of whether the player has a full time job or not. A pattern of winning is not defined by the IRS, but many believe it means the player has gambling wins in two of the last three or three of the last five years. This is where it gets complicated, as this type of filing requires a Schedule C tax form. This is the same tax form used by self-employed business owners. There are many advantages to filing this way and one large drawback.

The drawback is that a player that files as a professional player must pay the self-employment tax on that money. When someone has a standard job they pay 6.2% of their income for Social Security and their employer matches this. This means that since you are filing as self-employed, you pay both sides of this tax because there is no employer to pay the other half. The percentage for the employee side was 4.2% in 2012, but it went back up to the traditional level of 6.2% for the 2013 tax year. There is also a 2.9% Medicare tax. This means that you will pay 15.3% in taxes placing poker income under a Schedule C, where adding it on a 1040 as Other Income will not trigger this tax. The total percentage in 2012 was 13.3% due to the Social Security tax reduction during the recession. Schedule C filers will be able to deduct 6.2% of the tax as a business expense. This adds some tax relief.

Do Poker Pros Pay Taxes 2017

Professional poker player tax deductions

The good news is that professional players that file a Schedule C may deduct all expenses that are related to their poker business. Travel expenses tend to be the largest for professional poker players. The mileage expense for 2012 was 55.5 cents per mile. That number will be 56.5 cents in 2013. This includes miles driven to and from any casino or other gambling establishment in your personal vehicle as long as your intention was to win money. Players that think they may file this way should keep a log of how many miles that are driven to and from any poker game, even if the game was not in a traditional casino. You will need this information to decide which way to file at the end of the year.

Other travel expenses may be deducted as well. This includes airfare, hotel and rental car expenses when you take a trip where your primary purpose is to win money playing poker or some other gambling game that requires skill.

How To Pay Federal Taxes

Online poker players may also have other expenses related to their work. Computers are deductible as a business expense. If you bought a computer with the sole purpose of using it for your poker business, then it qualifies as a tax deduction. So does that monitor setup needed to 24-table.

There are also some expenses that get overlooked. Your internet connection may be deductible up to the percentage of its use that is used for online poker. If you bought a computer desk, chair, floor mat or anything else office related, then that is deductible too.

You can even take the home office exemption, although this may start to push the limit. A business owner can deduct a percentage of their rent that is based on the percentage of their apartment or home devoted entirely to their business. This can be risky though. First, this has been known to send a red flag to the IRS. Second, people that do not rent may find problems down the road when they sell their home. It may create a taxable event when the home is sold if the home is considered to be a primary residence.

State income taxes

Many states tax gambling winnings. Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming have no state income tax. Players in other states should expect to pay taxes to their state beyond what is paid to the IRS.

How should a poker player tax plan?

If a player has a net cash win of $5,000 in a poker tournament in a brick and mortar casino they will receive a W2G. A player will also receive a W2G for a $1,200 gross slot win. A player has the option of having an amount withheld from their win of up to 39.6% to cover taxes in 2013. If you are the type of player that has bankroll management problems, then having the casino withhold a percentage of your win is probably a good idea. This will prevent a nasty surprise when tax time comes in 2014. There is nothing worse than owing the government money that you do not have. Do not let yourself get into that situation.

One exception to asking for a tax withholding is if you are a net losing or break even player. Even then, there is still a disadvantage to receiving a W2G.

A player can write off their gambling losses up to the amount that they won. Gambling losses are an itemized deduction though. A player that typically takes the standard deduction will not be able to write off all of their losses. Most people that do not have a home mortgage interest deduction or donate a lot of money to charity will take the standard deduction. The standard deduction for 2013 is $6,100 for single filers and $12,200 for married couples filing jointly. If you do not itemized deductions normally then you will end up getting taxed on the applicable amount, even after itemizing gambling losses, because you could already deduct the standard deduction amount.

Tax planning for 2013

It is too late to plan for 2012, but it is not too late to plan for 2013. There are several phone apps that track sessions. These include Poker Journal and Poker Income Pro. Keeping an old fashioned paper notebook with poker sessions works too, especially for people that are prone to losing phones. Make sure to back up sessions entered into the app in case your phone should break or get lost. These apps may be used for online and brick and mortar poker sessions.

Poker players should also keep a mileage log for their car. A trip requiring long distance transportation should also be tracked. It may seem like a waste now, but it will not be if a big tournament win should come later in the year. You will then be prepared to demonstrate the expenses incurred to get you to that big win.

Disclaimer

This article is meant as an informational tool to help poker players. This article does not take the place of professional tax help. There are many tax attorneys that handle gambling winnings, especially in Las Vegas. Consult one of these tax specialists before filing your taxes if you have gambling winnings to make sure that your deductions are proper and you are filing your taxes correctly.

Do Poker Pros Pay Taxes Free

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