IRS Clears Up Poker Winning Reporting

October 20, 2007

The IRS has announced a new requirement that will go in effect May 4, 2008 that will make any casino and/or other sponsors of poker tournaments report players and their winnings to the government agency.

There has been confusion on the part of casinos as well as players as to whether the tournament sponsors are suppose to withhold tax and report the winners to the IRS or not. On Sept. 4^th a guidance was released by the Treasury Department and the IRS. A guidance is issued to clear up any confusion about a tax rule, like in this case, poker tournament winnings.

For any tournament completed in 2007 up to March 4, 2008, the casino or sponsor will not be required to report winnings or withhold any taxes but starting in March, the IRS will begin to require all poker tournament winnings to be reported if they are more than $5,000, most likely with an IRS W-2G form.

Federal income tax will not be required to be withheld if sponsors and/or casinos comply with the rule. If the tournament sponsor fails to report the winnings, the IRS will enforce the requirement as well as make the sponsor pay any tax that should have been withheld. This withholding would normally be 25% of the amount that should have been reported.

All winners must report their total winnings on their federal income tax returns, regardless of the amount and whether the winner receives a Form W-2G or not.

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