Contents
- Poker is a globally famous and glamorous game which is known for changing a person’s fortune overnight. The name was originally derived from the French name ‘Poque’. Poker has the American roots and the whole journey started in 1800 in New Orleans. The 52-cards magical game was limited to 20 cards before 1834.
- Amazon's Choice for receipt poker. WAF Desk Straight Rod Paper Holder Spike Stick Bill Fork, 130mm Long. 4.7 out of 5 stars 68. Get it as soon as Wed.
927.9k Followers, 280 Following, 6,791 Posts - See Instagram photos and videos from OKLM (@oklm).
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?
Rescrit Fiscal Poker Chips
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.
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.
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.
Rescrit Fiscal Pokerstars
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.
Image credit: Mark Van Scyoc / Shutterstock.com
The first thing that any beginner-level poker player needs to understand is the different actions of a poker game. The basic actions in a poker game include folding, checking and calling, betting, raising, re-raising, and check-raising, and a skilled poker player will use all of these different actions countless times throughout the course of a game, as knowing how to use each of the actions allows a player variability and lets him or her change up the pace and keep opponents on their toes.
While the actions may seem simple enough, mastering them isn't. Many players who have played for years still don't fold often enough or check when they should raise. You can miss out on the chance for larger winnings if you raise right off the bat instead of holding out for a check-raise, and if you raise too often from certain positions, players will soon start to call your bluff. The best thing that you can do for yourself as a poker player is to learn how and when to employ each poker action-- and the best way to do that (after reading our strategy guides, of course) is to practice, practice, practice.
Folding
For some reason, many novice players consider folding a sign of weakness, which is likely part of the reason why they don't fold nearly often enough. Folding is a natural part of any poker game-- if you try to play all the cards that you're dealt, you'll end up losing your money pretty quickly. Instead, you want to focus on your good hands and not waste money on the bad, so if you have a hand or a position that isn't good, you're going to want to fold. If the stakes get too high and you're quite far from having the nut hand, you should fold before you get trapped. Folding just means that you're choosing to bow out of the action for the rest of the hand by tossing your cards in. When you fold, you don't show your cards (as it would give an advantage to anyone who has position on you).
Getting to a point where you can choose whether to fold or play your cards is essential-- in most online games, you only have about 10 seconds to choose. If you're sure that your opponent has a better hand than you do, you should probably fold. No matter how good your hand is, if you know that your opponent's hand will beat yours, fold and get out while you can.
Checking
When you check, you basically pass when other players haven't bid. This can happen either while you're the big blind, when you've already put in the minimum bid and everyone else has done the same or folded, or when you're playing another round and the other players have all checked. Checking is considered a pretty weak move, and some schools of poker thought will tell you that if you have a decent enough hand, you should consider raising instead, as it offers you some protection (by getting less-confident players to fold). This is completely dependent on the situation, however-- raising on a hand where everyone else has checked can leave you vulnerable to a check-raise and leave you pot committed with someone else holding the better hand. Likewise, you can use a check when you have a very strong hand and you're afraid of scaring off other players if you come out raising-- this is a tactic called the check-raise. The main reason that people check is so that they can see the next card for free-- especially if they're on a draw hand, where the value of their hand is dependent on whether or not the right card hits (e.g., missing a card for a straight or flush).
Calling
Calling is a lot like checking in that you're basically passing on an opportunity to bet, but the difference is that you check when no one has bet and you call when someone has. Like checking, calling generally represents weakness or, at the very least, that you're not completely sure of your hand. If an opponent raises and you're sure that you have a better hand, it's better to re-raise (even just a little) to get your opponent to commit more chips. If you re-raise and your opponent calls, then you make more money, and if your opponent folds, then you get the same amount that you would have if you'd just called (but if your opponent is pot-committed, he or she will probably not fold). If your opponent raises and you're not sure about your hand, it's better to fold. Calling is often used like checking-- to get a chance to see the next cards so that you can potentially make a draw or strengthen your hand.
Raising
Rescrit Fiscal Poker Table
There are two forms of betting in a game of poker (well, there are a lot of different kinds of bets, but they all come down to variations on these): raising and re-raising.
Something that a lot of novice players overlook is the amount of the bet, and a lot of online poker rooms and casinos only make it easier to miss the mark in this regard. There's a minimum amount that you can bet in any poker game, and this is often set as the default in poker rooms, but betting the minimum doesn't really do much: it doesn't offer a lot of protection (especially with smaller stakes), because other players are generally willing to call a small amount, and it doesn't make for a particularly powerful bluff, as it doesn't convey a lot of confidence. If you're trying to slowly draw money out of other players, this can be useful (if you have the nut hand and want to get as many players pot-committed as possible to increase your win, for instance), and raising the same small amount during every betting phase can confuse your opponents, but you just might cost yourself a potentially bigger win by being conservative.
There's a huge amount of literature devoted to the subject of well-executed raises, and there's a lot of debate about how much you should raise. A common consensus in Texas Hold'em seems to be that when you want to raise before the flop, raise 3-4 times the big blind if there are no callers before you.
Rescrit Fiscal Poker Games
Re-raising
When someone places a bet and you then place a higher bet, you've re-raised, a move that indicates that you either have a strong hand or that you're bluffing. Either way, it indicates to opponents that you want them to believe that you have a strong hand. If you think that your opponent is bluffing when he or she raises, and that you have the stronger hand, then a re-raise is in order-- either your opponent will bow out, letting you take the pot, or you can gain the pot through having the stronger hand. Either way, you win.
Just as raising presents a conundrum in terms of how much to bet, re-raising is challenging in the same way. Many sources agree that you should re-raise about three times the previous bet, plus any callers. If someone before you bets 300 and there are no callers, you would bet 900. If there was one caller, you would bet 1200 (900 + 300), if there were two callers, you'd bet 1500 (900 + 300 + 300), and so on.
Check-raising
Check-raising is an incredibly useful tactic that is employed in poker games all the time (especially games with heavy betting, like Texas Hold'em, Stud, and Omaha). When you check-raise, you check on a good hand (one that you could have safely raised on) and hope that someone who comes after you raises. Obviously, this only works if you have an early position. By checking, you imply that you have a weak hand, and other players are more confident about their own hands, which will often lead them to bid when they shouldn't. Once the other player has raised, you re-raise, which forces your opponent either to fold, which they probably won't, since they're already pot committed, or call with a hand that is probably weaker than yours. The check-raise offers players in early position the ability to slow play strong hands, which helps to even out the disadvantages of being in poor position.