Mailbag: Declaring Poker Income
by Andrew Brokos | Published: Jan 10, '13
Q: I thought Russ Fox was a cool guest to have on the show! I have played both live and online poker for many years. About 5 months ago I began to read, watch videos, and listen to podcasts related to poker strategy and have quickly become a winning online poker player. I think the information Russ gave about being certain to document wins and losses is valuable. Someone like myself, who plays poker as a serious hobby and only recently became a winning player and thus concerned with taxes and IRS related issues, never really thought to take those steps. However, due to the following scenario, I don’t know if it is necessary or fruitful.
I am a full time Chiropractic student in the US and play 5 days or so a week on Bovada and Carbon…
Say I were to cash out 12k in profit this year and had perfect documentation (which is likely impossible as I do not know where the checks really come from).
What is the situation with the current laws in the US. Does one file the income on their tax returns, or is that synonymous with claiming profit on heroin sales?
I am all for paying my dues as an American, but do not want to turn myself in at the same time. How do my fellow US grinders handle this?
This was probably more appropriate for a forum post, but thought it might apply to a lot of your listeners. I was keeping my fingers crossed Russ would touch on the subject. Perhaps others did too. Thanks for your time.
You guys rock, keep up the good work!
A: Thanks for the question and the kind words. I should say that I am not in any way a tax expert, and future questions like this would be better directed to Russ via his Taxable Talk blog or to a tax professional you’ve hired. That said, I’m pretty confident of the answer to this one, so I’ll go ahead and answer it myself, but all of this carries an “as I understand it in my decidedly non-expert opinion” disclaimer.
Unless you live in Washington state, you are not doing anything illegal by playing online poker from the United States, so you don’t need to worry about getting in trouble for reporting the income. There are laws that could be construed to make the operation of an online poker site illegal, or the facilitation of financial transactions on behalf of such a site, but there are no federal laws suggesting that individual players may not play on these sites, and no one has ever been charged with a crime for doing so.
You would, however, need to worry about getting in trouble for not reporting the income. Not only is it the right thing to do, but there can be serious consequences including high fines and jail time for not reporting it.
As a non-professional, your reporting requirements are different from mine, so I won’t comment on them directly. I will say though that I don’t think knowing exactly where your checks come from is necessary to meet your obligations to the Internal Revenue Service. You should, however, get advice from a professional about what information exactly you should be tracking. The beginning of a new tax year is the perfect time to get your record-keeping in order.
Lastly, I want to add that even income from illegal sources is taxable, as Al Capone found out. So while you have nothing to worry about, if you were an American owner of Bovada or Carbon Poker, you’d probably want to have a long talk with one or more professionals. Or more likely you would have done that already.
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