It should come as no surprise that Uncle Sam has the winning hand when it comes to your gambling jackpot.
He reconfirmed that this week with the release of an IRS revenue procedure reminding poker tournament sponsors, including casinos, of their tax withholding and
information reporting obligations.
Two tournament components come into tax play when someone has a winning hand.
First,
Then, when the winnings of one or more card players is $5,000 more than that entry or buy-in fee, the tourney sponsor is required to withhold taxes from the payout.
The withholding rate on such winnings currently is 25 percent.
The tax money and withheld tax is reported to the IRS and the winner via Form W-2G, Certain
Gambling Winnings. That means if you’re lucky enough to take the big pot, you’ll have to provide your personal information (address, Social Security number, etc.).
If you don’t, it could cost you immediate cash. In these cases, the payer could take as much as 28 percent of your winnings off the top to send to the IRS.
One good thing about the poker pronouncement: The reporting requirements won’t kick in until March 4, 2008.
That doesn’t mean your winnings between now and then are tax-free. It just means that the IRS will rely on all winning poker players to deal from the top of the tax deck and report their full winnings even when the tournament sponsor doesn’t have to.
You can read Rev. Proc. 2007-57, for the official IRS word on the coming poker reporting requirements. This story has more on reporting your gambling winnings.
