Posts Tagged ‘WSOP’

The 2021 Real Winners of the World Series of Poker

Thursday, November 18th, 2021

Last night, the Main Event of the World Series of Poker concluded.  (While there are still a few events to be decided in the WSOP, this is the event that everyone thinks of as the big one.)  Before  I get to the winners (and the tax impacts), I want to give some credit to Caesars Entertainment.  Generally, the WSOP ran without hitches.  There were worries about Covid (especially given the past history of the Rio Hotel and Casino), but until this week that was basically a non-issue.

The Main Event attracted 6,650 entrants, each ponying up $10,000.  The prize pool was $62,011,250 (the difference is the funds kept by Caesars for running the event).  We focus on the final table of nine, but in actuality 1,000 of the 6,650 received winnings from the prize pool; a minimum cash was worth $15,000.  The winner received a cool $8 million…but that’s before taxes.

One important note: I do need to point out that many of the players in the tournament were “backed.” Poker tournaments have a high variance (luck factor). Thus, many tournament players sell portions of their action to investors to lower their risk (and/or “swap” action with other entrants). It is quite likely that most (if not all) of the winners were backed (or had swaps) and will, in the end, only enjoy a portion of their winnings. I ignore backing and swaps in this analysis (because the full details are rarely publicized). Now, on to the winners.

Congratulations to Koray Aldemir, a native of Berlin, Germany who currently resides in Vienna, Austria. On the final hand, Mr. Aldemir flopped top two pair (holding 10-7 in his hand).  George Holmes, who finished in second place, had a King in his hand.  That was disastrous for Mr. Holmes when a King appeared on the turn.  The remaining money went in on the final card (the ‘river’) which didn’t change the result.  Mr. Adlemir, a professional poker player who is a regular on the high stakes circuit, benefits from the US-Austria Tax Treaty (his income is exempt from withholding by the IRS).  And there’s a taxing reason why Mr. Aldemir moved from Germany to Austria: Austria does not tax gambling income of its residents.  It sure beats the 46% tax rate he’d be facing if he was residing in Germany.

Finishing second place and winning $4,300,000 was (as previously noted) George Holmes. Mr. Holmes, a resident of Atlanta, is an amateur gambler who mainly plays cash games though he plays the Main Event every year.  I estimate he’ll owe $1,802,011 in tax to the IRS and Georgia leaving him with just under $2,500,000 of his winnings to enjoy.

In third place was Jack Oliver. The resident of Manchester in the United Kingdom benefits from both the US-United Kingdom Tax Treaty (gambling winnings are exempt from withholding) and UK law on gambling: His winnings are not subject to tax in the UK. He gets to keep all $3 million of his winnings.  It’s always nice when your after-tax income legally equals your before-tax income!

Joshua Remitio of Gilbert, Arizona (suburban Phoenix) finished in fourth place winning $2,300,000.  Mr. Remitio previously had entered poker tournaments with a maximum buy-in of $300; by far, he was the individual who came out of nowhere.  Arizona is luckily not a high-tax state; I estimate he’ll owe $1,004,393 in tax to the IRS & Arizona and be able to keep $1,295,607 of his winnings.

Finishing in fifth place was Ozgur Secilmis, of Istanbul, Turkey.  The US-Turkey tax treaty exempts his winnings from US withholding. Turkey, like the United States, taxes the worldwide income of its residents.  Also like the United States, Turkey has a graduated income tax.  The top tax bracket (40%) begins at 650,000 TRY (Turkish Lira); the Turkish Lira today is worth $0.09.  I estimate Mr. Secilmis will owe 7,773,055 TRY (or $699,575) to the Turkish Revenue Administration.

The sixth place winner, Hye Park of Holmdel, New Jersey, is a professional poker player who normally plays cash games.  But his foray into the Main Event sure paid off: sixth place paid $1,400,000.  Unfortunately, New Jersey is not a low tax state (plus as a professional gambler Mr. Park must pay self-employment tax).  I estimate he’ll owe just over $650,000 in tax and get to keep just $749,709 of his winnings.  Mr. Park owes the highest percentage in tax (an estimated 46.45%) of any of the final table finishers.

Alejandro “Papo” Lococo of Buenos Aires, Argentina is an MC and also an ambassador for PokerStars (an online poker site).  Finishing seventh earned Mr. Lococo $1,225,000 but that’s before taxes.  The US and Argentina do not have a tax treaty, so 30% of his winnings are withheld to the IRS.  He’ll be able to take a tax credit on his Argentina tax return for the tax withheld to the IRS; that will lower the tax paid to Argentina to an estimated 5% of his winnings ($61,250) and he overall pays $428,750 in tax. His net winnings are $796,250.

In eighth place was Jareth East of Redhill, England won $1,100,000 for his eighth place finish.  A professional poker player, his winnings are not subject to US tax nor does the United Kingdom currently tax gambling.  Yes, Mr. East gets to keep all $1,100,000 of his winnings.

The ninth place finisher was Chase Bianchi. Mr. Bianchi is a former professional gambler (he is now a software engineer), so he won’t owe self-employment tax.  Still, as a resident of Massachusetts he will pay an estimated 37.56% of his winnings in taxes to the IRS and Massachusetts leaving him estimated after-tax winnings of $624,357.

Here’s a table summarizing the tax bite:

Amount won at Final Table $24,125,000
Tax to IRS $3,676,973
Tax to Turkey Revenue Administration $699,575
Tax to Georgia Department of Revenue $247,250
Tax to New Jersey Division of Taxation $122,671
Tax To Arizona Department of Revenue $102,944
Tax to Administracion Federal de Ingresos Publica (Argentina) $61,250
Tax to Massachusetts Department of Revenue $50.000
Total Tax $4,960,663

That means 20.56% of the winnings at the final table goes toward taxes.

Here’s a second table with the winners sorted by their estimated take-home winnings:

Winner Before-Tax Prize After-Tax Prize
1. Koray Aldemir $8,000,000 $8,000,000
3. Jack Oliver $3,000,000 $3,000,000
2. George Holmes $4,300,000 $2,497,989
4. Joshua Remitio $2,300,000 $1,295,607
5. Ozgur Secilmis $1,800,000 $1,100,425
8. Jareth East $1,100,000 $1,100,000
7. Alejandro Lococo $1,225,000 $796,250
6. Hye Park $1,400,000 $749,709
9. Chase Bianchi $1,000,000 $624,357
Totals $24,125,000 $19,164,337

The players from the United Kingdom did better than their results with Mr. Oliver finishing in second place and Mr. East finishing in 6th place based on after-tax winnings.  Mr. Park fell to eighth place (from sixth) because of taxes.

The Internal Revenue Service did not end up with taxes that exceeded the first place winnings; the agency will have to be content with finishing in third place (based on pre-tax prizes).  With three winners exempt from US taxation, the IRS didn’t rack in its usual haul.  Indeed, the tax agencies ended up exceeding only second place money this year due to those three individuals also being exempt from taxes in their home countries. Still, you can’t say that the IRS didn’t do poorly because the house always wins.

Why Did the WSOP Change the Rules on Lammers?

Tuesday, November 16th, 2021

With the World Series of Poker (WSOP) winding down (the Main Event champion will be crowned Wednesday evening–and, yes, I will have my customary post on the real winners of the WSOP on Thursday), an issue arose late in the series.  Why did the WSOP change the rules on players cashing in lammers?

For those of you not in the poker world, let me explain.  “Lammers” are the nickname for satellite chips.  The World Series includes all sorts of tournaments, from the Main Event (which costs $10,000 to enter), numerous other tournaments costing $500 to $10,000 which award WSOP commemorative bracelets, daily tournaments costing $100 to $500, and satellite tournaments.

Satellite tournaments allow someone to enter a larger buy-in tournament without spending the full price.  Let’s say you have $1,080 and want to enter the Main Event.  You could play a one-table satellite.  This mini-tournament has ten players; $1,000 of the $1,080 entry fee goes to the prize pool with the WSOP keeping $80 per player for running the tournament.  The tournament awards twenty $500 buy-in chips (called “lammers”) that can be used to enter any event at the WSOP.  The WSOP has satellite tournaments costing $100 and up awarding various numbers of lammers.

These lammers have printed on them, “No Cash Value.”  The problem with that is obvious: there is value with the lammers.  If you have 20 lammers, you can buy into the Main Event, so each lammer really has a value of $500.  An individual lammer cannot be turned into cash from the WSOP (the Rio Hotel, where the WSOP is being held, will not buy your ‘excess’ lammers).  However, every year there is a brisk trade in lammers.  Many players just play satellite tournaments, collecting lammers and selling them to other players.  The players buying the lammers simply go to the cashier and use the lammers to buy into whatever event they wish.

Until November 8th the WSOP didn’t do a thing about this.  Then Shane Schleger, a professional poker player, noted:

There was lots of speculation about why this happened.  Most of the speculation called it greed by the WSOP (unused lammers are completely worthless once the WSOP is over); I believe that’s almost certainly wrong.  This has nothing to do with greed by the WSOP.  Instead, it has everything to do with tax law.  Indeed, there are two separate issues in play.

For years the WSOP has played “wink-wink” in regards to the active market in lammers.  Unless the individuals running the WSOP were blind (and they’re not), they knew about the active marketplace in lammers.  This benefited the WSOP greatly because more individuals played satellites leading to more entrants in all their tournaments.  If the WSOP could, they would want the lammer marketplace expanded. 

Unfortunately, we have to juxtapose the way poker players want the poker world to work with how the IRS and the Financial Crimes Enforcement Network (FINCEN) demand it work.  We have to go into two areas to understand this: the rules regarding issuance of W-2Gs and FINCEN rules regarding cash and cash equivalents.

The WSOP is required to issue W-2Gs (or Form 1042-S for a non-American) if someone wins a prize in a poker tournament of more than $5,000 in cash (or cash equivalent) net of the buy-in.  Assume those lammers have cash value; that means the WSOP would be required to issue a W-2G if someone wins a one-table satellite awarding $10,000 in lammers.  It takes time and costs money for the issuance of a W-2G.  Indeed, the reason why the minimum prize for the WSOP main event is $15,000 relates to the IRS rule on issuing W-2Gs.  That’s a $5,000 net profit and a W-2G is not required (where it would be at $15,001).

Unfortunately, the IRS, FINCEN, the Nevada Gaming Control Board, or Caesars internal auditing likely noticed the wink-wink.  (Caesars Entertainment owns the WSOP.)  Gambling is heavily regulated, and the amount of paperwork required for a casino is staggering.  (That’s a subject for another day, but whatever you think it is, the correct answer is almost certainly to double or triple what you think.)  Paperwork has to be completed exactly right, too.  If there’s an active marketplace in satellites that the WSOP condones, then paperwork must be issued.  Thus, the order came from ‘higher up’ to put an end to the wink-wink.  If lammers can only be used to buy into another tournament, they truly have no cash value because they cannot be sold and turned into cash.

Second, casinos are financial institutions under the Bank Secrecy Act and are regulated by FINCEN.  Casinos must issue Currency Transaction Reports (for casinos, CTRCs) and Suspicious Activity Reports just like banks.  Indeed, the Bicycle Casino in Bell Gardens, California was just fined $500,000 for not complying with money laundering laws.  If lammers are being used as cash (which they were), then they fall under BSA reporting.  That would be a near impossible task for the WSOP to deal with.  Thus, one of FINCEN, the Nevada Gaming Control Board, or Caesars internal auditing had a second reason to put a stop to the trade in lammers.

If greed had won out, the wink-wink would have continued forever.  Instead, the real world intruded.

 

The WSOP and Taxes (2021 Update)

Sunday, September 26th, 2021

The World Series of Poker will begin here in Las Vegas on September 30th.  While attendance is likely to be less than in previous years (it’s still difficult to travel internationally to the United States), thousands of poker players will be heading to the Rio Hotel with the hopes of winning a bracelet.  The biggest news isn’t tax-related; rather, all participants (and spectators) most be fully vaccinated against Covid.  From a tax standpoint, nothing has changed from this update I wrote in 2018.

For those of you attending, good luck!

 

Location, Location, Location: The Real Winners of the 2019 World Series of Poker

Wednesday, July 17th, 2019

This year was the 50th anniversary of the World Series of Poker (WSOP). And by all accounts, this year’s series of tournaments was highly successful. Attendance was up across the board. The Main Event, which concluded early this morning, was no exception. 8,569 entrants paid $10,000 each for their chance to win $10 million, the second-most entrants all time.

One important note: I do need to point out that many of the players in the tournament were “backed.” Poker tournaments have a high variance (luck factor). Thus, many tournament players sell portions of their action to investors to lower their risk (and/or “swap” action with other entrants). It is quite likely that most (if not all) of the winners were backed (or had swaps) and will, in the end, only enjoy a portion of their winnings. I ignore backing and swaps in this analysis (because the full details are rarely publicized). Now, on to the winners.

Congratulations to Hossein Ensan of Munster, Germany. Mr. Ensan beat second place winner Dario Sammartino when Mr. Sammartino’s two-way draw (he had both a flush and straight draw) did not catch up to Mr. Ensan’s pocket kings. Mr. Ensan’s German Wikipedia page notes that he emigrated from Iran in 1990 and is listed as a professional poker player. Whether he’s a professional or an amateur makes a huge difference for taxes. In 2017, the Federal Fiscal Court (Germany’s highest court dealing with tax issues) ruled that professional gamblers must pay income tax on their net gambling winnings (less expenses); amateur gamblers do not have to pay income tax on gambling winnings. The US-Germany Tax Treaty exempts his winnings from US taxation.

This is a huge issue for Mr. Ensan; the classification is the difference between earning $10 million and earning $5,393,531. Assuming Mr. Ensan is subject to income tax, he’ll lose $4,606,469 to the Bundeszentralamt für Steuern (BZSt). That’s a reason why many German professional poker players reside in the United Kingdom: They avoid the high German taxes.

Finishing in second place and winning $6,000,000 was the aforementioned Dario Sammartino. The native of Naples, Italy now resides in Florence, Italy after a stay in Slovenia. Italy does tax gambling winnings: Mr. Sammartino will owe an estimated $2,572,350 to Italy’s Agenzia delle Entrate (42.87%)

In third place was Alex Livingston. The resident of Halifax, Nova Scotia, Canada benefits from Canadian law on gambling: His winnings will not be subject to tax in Canada. However, he will lose a flat 30% of his $4,000,000 ($1,200,000) to the IRS per the US-Canada Tax Treaty. (He can file a Form 1040NR return for the 2019 tax year to recover a portion of his tax based on any taxes US gambling losses he had during the year.)

Garry Gates of nearby Henderson ended in fourth place. Mr. Gates, who has worked in the poker industry for years, earned $3,000,000 for his finish. An amateur gambler, he avoids self-employment tax. As a Nevada resident, he also avoids state income tax. I estimate he will owe $1,050,813 (35.03%) of his income to tax.

Another amateur gambler, Kevin Maahs of Chicago, finished in fifth place. Mr. Maahs won $2,200,000 before taxes for his finish. He owes both federal and Illinois income taxes on his winnings; he’ll likely lose $870,729 (39.58%) to tax.

Finishing in sixth place was Zhen Cai. Mr. Cai, a professional gambler residing in Lake Worth, Florida earned $1,850,000 for his efforts. One of two American professional gamblers at the final table, he must pay self-employment tax and federal income tax (as a Floridian, he avoids state income tax). I estimate he will lose $706,679 (38.20%) to tax.

Nick Marchington from London, England finished in seventh place for $1,525,000. Mr. Marchington, a professional gambler, gets to keep all of his winnings. The US-UK Tax Treaty exempts gambling winnings of UK residents from tax. And the United Kingdom doesn’t tax gambling winnings. As my mother says, location, location, location.

In eighth place was Timothy Su of Boston. Mr. Su, a software engineer, does avoid self-employment tax. He does have to pay federal and Massachusetts income taxes. There’s a slight bit of good news for Mr. Su: Massachusetts’s income tax rate dropped for 2019 from 5.15% to 5.05%. That’s not a huge change, but when you win $1,250,000 and will have to pay an estimated $491,150 in tax, saving $1,250 is still better than nothing.

The ninth place finisher was Milos Skrbtic. Mr. Skrbtic, a professional gambler, was born and raised in Serbia, but currently resides in San Diego. Had he remained in Serbia he would lose 50% of the $1,000,000 he won to tax. The US and Serbia don’t have a Tax Treaty, so 30% would be withheld by the IRS. Serbia does give a tax credit on their income tax, but only for taxes paid to a country which Serbia has an income tax treaty for. Since the US and Serbia do not have such a treaty, he would have been liable for Serbia’s 20% tax on gambling winnings. Unfortunately, Mr. Skrbtic lives in California; the Golden State is anything but a low tax environment. I estimate he faces the highest tax burden of any of the final table participants: He will owe an estimated $474,463 in tax (47.45%).

Here’s a table summarizing the tax bite:

Amount won at Final Table $30,825,000
Tax to BZSt (Germany) $4,606,469
Tax to IRS $3,313,395
Tax to Agenzia delle Entrate (Italy) $2,572,350
Tax to Illinois Department of Revenue $108,900
Tax To Franchise Tax Board (California) $108,414
Tax to Massachusetts Dept. of Revenue $63,125
Total Tax $11,972,653

That means 38.84% of the winnings at the final table goes toward taxes.

Here’s a second table with the winners sorted by their estimated take-home winnings:

Winner Before-Tax Prize After-Tax Prize
1. Hossein Ensan $10,000,000 $5,393,531
2. Dario Sammartino $6,000,000 $3,427,650
3. Alex Livingston $4,000,000 $2,800,000
4. Garry Gates $3,000,000 $1,949,187
7. Nick Marchington $1,525,000 $1,525,000
5. Kevin Maahs $2,200,000 $1,329,271
6. Zhen Cai $1,850,000 $1,143,321
8. Timothy Su $1,250,000 $758,850
9. Milos Skrbtic $1,000,000 $525,537
Totals $30,825,000 $18,852,347

Mr. Marchington finished in seventh place but ended up in fifth based on after-tax income. As my mother says, it’s location, location, location.

The Internal Revenue Service didn’t end up as the biggest winner at the final table this year. Thanks to two of the top three winners being exempt from US taxation, the IRS had to be content with earning just a bit more than fourth place money. The German Tax Agency, Bundeszentralamt für Steuern, is the biggest winner among tax agencies. As usual, the house–the tax agencies–ended up with more than first place money. The house always wins.

WSOP and Taxes: 2019 Non-Update

Tuesday, May 28th, 2019

The 50th World Series of Poker begins today at the Rio Hotel and Casino here in Las Vegas. Good luck to all those who are participating this year.

Regarding taxes and the WSOP, nothing has changed from 2018. Thus, you can look at this post from last year to see how taxes will impact you.

Last week, I watched an excellent presentation from CNBC on commercial backing of poker tournament players. If you’re considering backing or being backed, I strongly suggest you watch the presentation. If you use one of the two current major commercial companies that back (YouStake and StakeKings), I would make sure you and them are aware of who is responsible for sending out tax paperwork and withholding from winnings if you are lucky enough to cash. As my mother likes to say, an ounce of prevention is a worth a pound of cure.

The Real Winners of the 2018 World Series of Poker

Sunday, July 15th, 2018

Over the past two weeks 7,874 competitors (myself included) paid $10,000 to enter the main event of the World Series of Poker. Who would win the money? And how much of the winnings would they actually get to keep?

One important note: I do need to point out that many of the players in the tournament were “backed.” Poker tournaments have a high variance (luck factor). Thus, many tournament players sell portions of their action to investors to lower their risk. It is quite likely that most (if not all) of the winners were backed and will, in the end, only enjoy a portion of their winnings. I ignore backing in this analysis (because the full details are rarely publicized). Now, on to the winners.

Congratulations to John Cynn of Evanston, Illinois for winning the 2018 WSOP Main Event and a cool $8,800,000. After a mammoth 10-hour heads-up battle against Tony Miles (where the chip lead went back and forth), Mr. Cynn finally prevailed when his king-jack flopped trips and all Mr. Miles could muster was queen-high. Mr. Cynn will pay federal income tax, self-employment tax (all nine of the final players are professional gamblers), and Illinois income tax. Of his winnings he’ll lose an estimated $3,860,183 to tax (keeping $4,939,817), a tax burden of 43.87%. Mr. Cynn definitely benefits from tax reform; had he had the same winnings in 2017 he would have owed $4,094,676 so he saves $234,493. Another way of looking at this is his tax burden last year would have been 46.53%. Mr. Cynn has the second highest tax burden of the final nine.

The aforementioned Tony Miles finished in second place. A resident of Jacksonville, Florida, Mr. Miles benefits from Florida’s lack of a personal income tax. Mr. Miles, like all of the Americans at the final table, will owe federal income tax and self-employment tax; he’ll owe an estimated $1,939,341 (38.79%) of his winnings.

Finishing in third place and winning $3,750,000 was Michael Dyer of Houston. Mr. Dyer had the chip lead for the first part of the final table but ran into a full house of held by Mr. Miles. The Texan avoids state income tax but will still lose an estimated $1,449,275 to federal tax (38.65%). Mr. Dyer has the lowest tax burden of the six Americans at the final table (and the second-lowest tax burden overall).

Nicolas Manion of Muskegon, Michigan started the final nine with the chip lead but couldn’t make it through; he ended up in fourth place for $2,825,000. Mr. Manion is the only individual who will end up paying three taxes: federal, state, and city. Michigan has a flat income tax of 4.25% and Muskegon has a city income tax of 0.5%. Still, Mr. Manion is better off in 2018 than if he had won this in 2017; he’ll lose only an estimated $1,217,323 to tax (43.09%).

Joe Cada finished fifth for $2,150,000. If that name sounds familiar, it should: Mr. Cada won the Main Event in 2009. This time around Mr. Cada’s pocket tens lost a classic race against Mr. Miles’s ace-king. Thanks to tax reform, Mr. Cada loses only 40.59% of his winnings to tax ($872,635) compared to 42% back in 2009. Mr. Cada, a resident of Shelby Township, Michigan, owes federal and Michigan tax.

Aram Zobian of Cranston, Rhode Island, ended up in sixth place for $1,800,000. A professional poker player, Mr. Zobian will owe federal and Rhode Island tax. Rhode Island has marginal tax rates up to 5.99%, so it’s in the middle of the pack for states. Overall, Mr. Zobian will owe an estimated $721,821 in tax (40.10%).

Alex Lynskey of Melbourne, Australia finished in seventh place. While the US and Australia have a tax treaty, it does not cover gambling. Thus, of Mr. Lynskey’s $1,500,000 of winnings, he loses 30% off the top to the IRS ($450,000). Australia does not tax gambling winnings for amateur gamblers but it does tax gambling winnings of professional gamblers. The Australian tax system somewhat mirrors ours in that are marginal rates; however, Australia’s top rate is 45% compared to our 37%. The US-Australia Tax Treaty does specify that a foreign tax credit can be taken for taxes paid to the other country. Mr. Lynskey would have paid an estimated $666,296 to the Australian Taxation Office; given the US tax he’s paid that number is reduced to $216,296 (or $292,000 Australian).

In eighth place was Artem Metalidi of Kiev, Ukraine. Mr. Metalidi will pay the least tax of any of the final nine, both in dollars and by percentage. Ukraine has a flat tax rate of 18% plus a 1.5% military tax (a total of 19.5%). Mr. Metalidi will lose only an estimated $243,750 of his $1,250,000 to tax. None of that is going to the IRS: The tax treaty between the Ukraine and the United States exempts gambling winnings from taxation.

Antoine Labat, a professional poker player from Vincenna, France, finished in ninth place. He earned an even $1 million, but that’s before taxes. The United States and France have a tax treaty exempting gambling winnings, so he lost nothing to Uncle Sam. However, France is anything but a low-tax environment. While 2018 French tax rates have not been announced (they’re not announced until late in the year), based on 2017 rates Mr. Labat will lose $432,574 (€369,721) of his $1 million (€854,701) winnings to taxes.

Here’s a table summarizing the tax bite:

Amount won at Final Table $28,075,000
Tax to IRS $9,811,437
Tax to Illinois Department of Revenue $435,600
Tax to France Tax Administration $432,574
Tax To State Fiscal Service (Ukraine) $243,750
Tax to Australia Tax Agency $216,296
Tax to Michigan Department of Treasury $211,438
Tax to Rhode Island Division of Taxation $37,978
Tax to City of Muskegon Treasurer Department $14,125
Total Tax $10,953,198

That means 39.01% of the winnings of the final nine will go to taxes. That’s up from 2017 because last year four of the final nine faced no taxation (they were all residents of the United Kingdom which does not tax gambling winnings).

Here’s a second table with the winners sorted by their estimated take-home winnings:

Winner Before-Tax Prize After-Tax Prize
1. John Cynn $8,800,000 $4,939,817
2. Tony Miles $5,000,000 $3,060,659
3. Michael Dyer $3,750,000 $2,300,725
4. Nicolas Manion $2,825,000 $1,607,677
5. Joe Cada $2,150,000 $1,277,365
6. Aram Zobian $1,800,000 $1,078,179
8. Artem Metalidi $1,250,000 $1,006,250
7. Alex Lynskey $1,500,000 $833,704
9. Antoine Labat $1,000,000 $567,426
Totals $28,075,000 $16,871,802

Mr. Metalidi finished in eighth place but based on after-tax winnings he finished in seventh place. The Ukraine’s low flat-rate income tax gives him a benefit over the relatively high taxes in Australia.

But the true winner this year was the Internal Revenue Service. The IRS’s take of $9,811,437 exceeds the combined after-tax winnings of the first and second place winners ($8,000,476) and nearly exceeds the top three! Taxes may be what we pay for a civilized society, but we sure pay a lot of them. One truism this year (as usual) is that the house (the IRS) always wins.

WSOP and Taxes: 2018 Update

Wednesday, May 30th, 2018

The 2018 World Series of Poker (WSOP) begins today here in Las Vegas. There are also several other tournament series that have either begun or will soon begin at the Venetian, Wynn/Encore, Aria, Planet Hollywood, Binion’s, Golden Nugget, and Orleans hotels. Very little has changed from 2017, but I am updating the post I did last year with some new information.

The WSOP has made one change that could impact some Americans: If you use a passport for identification, you must bring a second piece of identification (such as a state ID card). From the WSOP FAQs:

What Photo ID’s are acceptable?
The following forms of ID are acceptable:
US Passport [and Passport Card] (A second form, an unexpired governmental ID verifying physical address such as a valid Driver’s License will also be required with this first form of ID).

(A driver’s license or state ID by itself is sufficient.)

Good luck to those participating in this year’s WSOP! And now on to the meat of the post:

The tax environment has changed, so I’ve decided to do a thorough update of the tax situation for those attending the WSOP (and other summer poker tournament series here in Las Vegas). 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.

WSOP and Taxes: 2017 Update

Monday, May 22nd, 2017

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.

Can a Non-Tax Treaty Country Resident Obtain a Refund of Gambling Withholding from the IRS?

Sunday, July 10th, 2016

Every year during the World Series of Poker (WSOP) I receive several inquiries like the following:

I’m a resident of Brazil and I cashed in an event at the WSOP and won $100,000 (net). The Rio withheld 30% of that for your Internal [Revenue] Service. Can I get any of that back?

The good news is that a tax benefit is available. However, it’s not what you might think. Let’s look at the four methods of obtaining a tax benefit:

1. Tax Treaty. The US and Brazil don’t have a Tax Treaty, so there’s no way of getting the money back by claiming a Tax Treaty benefit.

2. Conducting a Business in the US. An individual conducting a business in the US must file a US tax return, and will owe tax based on the net income of the business. A poker player conducting a business in the US who has $100,000 of winnings and $100,000 of losses will have an income of $0 and not owe tax. Thus, that individual would be able to obtain a refund.

There’s a problem here, though: Is this individual conducting a business in the US? To be conducting a business in the US requires regularity: A business isn’t playing in one poker tournament or one event in one poker tournament. So is it possible for a non-American to be conducting a business in the US? Absolutely.

Consider a professional golfer from (say) Brazil playing on the PGA tour. That individual would almost certainly be conducting a business in the US, and be able to deduct losses and business expenses. (Indeed, that individual might even be considered a resident of the United States based on days in the US and have to file a Form 1040 rather than a Form 1040NR.)

Let’s go back to our Brazilian poker player. The IRS would almost certainly reject such a return at audit unless the person could demonstrate the regularity of a business. Playing in one tournament or one tournament series does not mean you’re conducting a business in the US. This means that for most non-Americans the conducting a business in the US method is not available.

3. Claim Gambling Losses on Form 1040NR. There’s a problem here: Only residents of Canada can claim gambling losses on a Form 1040NR. The IRS used to have a problem with this. However, the IRS redesigned Form 1040NR and put on the form that gambling losses can be taken only by residents of Canada and no longer issues incorrect refunds. This method will not work.

4. Claim a Foreign Tax Credit on a Brazil Tax Return. Almost every country has the ability on their tax returns to claim a foreign tax credit to avoid double taxation. It is likely that this method is available for a Brazilian poker player. It won’t be a refund from the IRS, but it will give you a tax benefit such that you will pay the higher of the two countries’ marginal tax rates. This is the only method that is available for most in this situation.

Yesterday I happen to be at the Rio and overheard someone saying that anyone can apply for a refund of the withholding. That is simply incorrect. The reality is that most individuals subject to withholding on their gambling winnings will not be able to obtain a refund of their withholding.

Taxes and the WSOP: 2016 Update

Monday, May 16th, 2016

I’ll be heading to the Rio Hotel and Casino tomorrow for three days of continuing education. In a little over two weeks, the poker world will be descending on the Rio for the annual World Series of Poker. (I’m probably one of the few individuals who is in both groups.) The 2016 WSOP consists of 68 “bracelet” events culminating in the championship event that begins on July 9th. There are also daily tournaments, satellite events, and cash games at the Rio. Other Las Vegas hotels run poker tournaments, so there are tournaments for almost any size of buy-in available.

I’ve been writing about the tax impacts of the WSOP for years. The first post, back in 2007, noted that the Rio refuses to follow the rules regarding issuing W-2Gs when a poker player presents a correctly completed Form 5754. In 2011 I looked at staking and the WSOP. I presented “updates” in 2014 and 2015 (though essentially nothing has changed).

And that’s still the case today. The Rio won’t issue multiple W-2Gs (though they’re getting closer to admitting the real reason: cost) and the IRS hasn’t come after them (yet). The onus remains on the player to issue required paperwork and withhold taxes when required when the player has backers. (See the 2011 and 2015 updates.)

I have received several inquiries from non-Americans who plan on playing at the WSOP regarding withholding of US taxes and if there’s any means of avoiding this. As noted in IRS Publication 515, withholding is required on gambling winnings (for poker tournaments, of $5,000 or more net) except for residents of these countries:

Tax treaties. Gambling income of residents (as defined by treaty) of the following foreign countries is not taxable by the United States: Austria, Belgium, Bulgaria, Czech Republic, Denmark, Finland, France, Germany, Hungary, Iceland, Ireland, Italy, Japan, Latvia, Lithuania, Luxembourg, Netherlands, Russia, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Tunisia, Turkey, Ukraine, and the United Kingdom.

Gambling income of residents of Malta is taxed at 10%.

If you’re from one of these countries, you should not have tax withheld from your winnings. My understanding is the Rio is authorized to issue Individual Taxpayer Identification Numbers (ITINs) to winners. (If you already have an ITIN, make sure you bring that number with you.) You may still owe tax to your home country for those gambling winnings; be aware that the IRS does share information with other countries’ tax agencies.

But what if you’re from a country that does not have a tax treaty with the US? Suppose you’re from Portugal, and you play in a WSOP event and are lucky enough to cash. Let’s say your net win is $100,000. Will you get the full $100,000 or not?

The Rio is required to withhold 30% of your net win, so you will receive $70,000 in my hypothetical. You will also receive paperwork showing the withholding (IRS Form 1042-S). If you owe income tax to Portugal on your gambling winnings, you should be able to claim a tax credit for the double taxation.


I’ve been writing about this for nearly a decade and almost nothing has changed. Eventually the WSOP will be called out by the IRS for their violation of the rules on issuance of W-2Gs (and 1042-S’s). It doesn’t look like that will happen in 2016, though.