Taxes on US Online Poker Winnings

April 8, 2014

Now that tax season is in full swing, many online poker players in states with regulated online poker are faced with paying taxes on their online poker winnings. Of the three states where one form or another of online gambling is legal and regulated, Nevada, whose online poker market is  now one year old, is the only one that hasn’t forged an agreement with the IRS for data-sharing. However, federally licensed tax accountant in Las Vegas, Russ Fox, says that doesn’t matter.

Whereas in an unregulated market US players could have avoided paying US taxes on online winnings, legislation passed in all three states (Delaware, New Jersey, and Nevada) gives the IRS permission to trace the online winnings of any player. The federal government can deliver at any time a summons to any regulated site, requesting a report of a player’s earnings.

With 15 years experience in gaming tax matters, Fox says, “Now if the IRS wants to get the records, they can,” Fox said. “Those companies will be cooperating. They have to,” referring to the three Nevada online poker sites,,, and

New York gaming and tax attorney Brad Polizzano, believes that the tracking of their winnings by the IRS will cause players to be more honest about their winnings.

Polizzano says, “We’re still early in the game. The more dollars that go in and out of these sites, the more the authorities are going to look and see if there are players (who) are not particularly honest.”

He adds, “The IRS is in position to get the message out and make an example of some taxpayers who don’t (pay taxes on Web gaming).”

Tax experts say that online winnings are being treated like land-based casino winnings, where in cash games, players must keep their own records and tournaments are handled differently.

The law states that if more than $600 in won in a “freeroll” tournament (that has no dollar amount buy-in) or if more than $5,000 is won in a tournament, these winnings must be reported on a W2-G tax form. Seth Palanksy, VP of Caesars Interactive corporate communications, over, says that players are automatically sent an email when they fall into one of these two categories.

Palansky says that the casino withholds 25% for taxes up front, and most players prefer this, so that they do not have to deal with it.

It is also understood that players can request a report of their wins/losses for the year to keep up with cash game taxes owed.

Furthermore, if a player is considered a professional, he or she must pay self-employment taxes and income taxes in addition to what recreational players pay on this “miscellaneous income.”

And because the main goal of states in regulating online poker is to bump tax revenue, which they earn from the sites, as well as the players. Polizzano says that federal legislation that would legalize online poker across the country will require that each site report to the IRS every player’s winnings, should it pass on Capitol Hill.

He adds, “When you compare even brick-and-mortar play or offshore sites, it’s not easy for the authorities to obtain documentation of every single wagering transaction that a player enters. That’s completely different in a regulated market. It’s going to be a lot easier for the IRS to prove whether a person playing online in Nevada is declaring all their wins and losses.”


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