WSOP and Taxes: 2017 Update

The poker world is about to descend on Las Vegas for the World Series of Poker (WSOP) and a score of other tournament series. The tax environment has changed, so I’ve decided to do a thorough update of the tax situation. I’ll cover the basics of the tax situation, backing, foreign (non-US) backing, and non-American winners and what they will face with taxes. This post will be somewhat long, so I’m going to break this into sections that you can click on to open. The focus is on tournaments where tax paperwork is issued.

The Tax Basics

Backing by Americans of Americans

Backing: Non-Americans

Non-Americans and ITINs

[Note 1]: I recently became aware of a lawsuit in the Midwest where Caesars’ policy is being challenged. The lawsuit is scheduled for trial in late January 2018.

[Note 2]: It is likely the IRS would reject a Form 1040NR filed by Jon noting his extra withholding. The IRS won’t understand the issue given that there is no tax treaty issue (say, Jon is from Australia) and say, “Take it up with Caesars.” It’s a classic Catch-22.

[Note 3]: In prior years the WSOP has allowed winners to leave their money with the WSOP and obtain their winnings later. Anyone choosing this option should confirm with the WSOP that this can be done.

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9 Responses to “WSOP and Taxes: 2017 Update”

  1. Philippe says:

    Hi Russ,

    Great text, as usual.

    About ITINs to non-Americans.

    The Certified Acceptance Agent program was reinstated by the IRS on April 17th 2017. The termination letter was rescinded and past agreements remain valid.

    • Philippe says:

      I therefore believe all casinos will be able to emit ITINs to non-americans with a tax treaty exempting them from taxation, just like it was the case these past summers.

      Best regards,

      Philippe

  2. Dave C says:

    I have never played a single hand of “real poker” in my life, but I have played NLHE using various online and gaming software programs and watch poker players sometimes on twitch.

    Is it true that poker gains and losses are taxed by the IRS per SITTING or per tournament and not over the entire year for Non-professional/recreational poker players? And if true what are the chances that tax law will be updated to match the same tax treatment of gains and losses for non-professional stock traders/investors?

    Thanks in advance,

    Dave C.

    P.S. Correct me if I am wrong: the IRS defines professional poker players and stock traders as those that file schedule C to report gains and losses.

  3. Philippe says:

    Hi again Russ,

    I’m wondering if you ever had a situation with the IRS where the Agency wouldn’t accept the logic of tournament poker backing. In other words, the IRS wouldn’t consider the revenues of the backers (either reported on 1099-MISC or 1042-S) as gambling income, but as partnership/business income. It happened to me once and I feel this remains a huge gray area.

    Under this situation, the IRS refused that the backer could offset these revenues with gambling losses. They however suggested that the backer could declare the expenses in relation to this partnership (which could include lodging, traveling, etc) to absorb part of this taxable revenue.

    What do you think of this?

    Thanks

  4. Philippe says:

    Sorry for this bulk of questions, but I find this topic very interesting.

    What about the scenario: Non Tax-Treaty Player Backed by a Non Tax-Treaty Player?

    The taxes are already withheld by the casino, so I don’t believe the winner becomes the withholding agent, like it would be the case for an American backed by a non Tax-Treaty Player.

    Would the main winner still be able to split the win by issuing 1042-S to his backers? How would he proceed to report this to the IRS?

    • Josy says:

      I’m having the same question.

      I had 10% of a 120k ish win from a Canadian at the 2016 WSOP. I’m also Canadian. The winner gave me 10% of the amount he received (70%), but didn’t provide any paperwork. I have losses in 2016 and would like to recover the taxes I paid on this backing. Does the main winner have to provide a form? He doesn’t know what to do and I feel I’ll have to take care of this myself if I want to see my money back.

      • Russ says:

        There’s no way for you to get back the money withheld from the IRS. It’s another Catch-22 situation. You will have to work with the individual you backed to figure out a means of settling this. The IRS doesn’t care about you (you weren’t involved in the gambling transaction).

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