US withholding tax.
The US charges a flat 30%
withholding tax on any US
source income. You can only
get back 100% of the taxes on
certain types of gambling income
(bingo, keno, slots).
Poker is not one of them.
If you’re planning on playing in a
big US tournament, you should
apply to the IRS for an Individual
Taxpayer Identification Number
(ITIN) using a W-7 form. This MAY
get your withholding tax reduced
to $0 on the spot, but (most) casinos
aren’t entirely familiar with these
procedures and may still withhold
the full amount. Then again, this
ignorance on their part MAY allow
you to avoid the Withholding Tax
simply by showing this piece of paper.
More likely though, to get your
withholding tax back you will have to
file a U.S. tax return and reduce
your taxable income sufficiently
so that you do not owe any taxes.
Then you will get a tax refund in the
amount of the original withholding.
So keep all your receipts so you can
claim the expenses you incurred
during the fiscal year of your winnings.
So basically you can claim flights, meals,
gas, hotel rooms, tournament buyins, etc
and get back a good chunk of what
was withheld.
withholding tax on any US
source income. You can only
get back 100% of the taxes on
certain types of gambling income
(bingo, keno, slots).
Poker is not one of them.
If you’re planning on playing in a
big US tournament, you should
apply to the IRS for an Individual
Taxpayer Identification Number
(ITIN) using a W-7 form. This MAY
get your withholding tax reduced
to $0 on the spot, but (most) casinos
aren’t entirely familiar with these
procedures and may still withhold
the full amount. Then again, this
ignorance on their part MAY allow
you to avoid the Withholding Tax
simply by showing this piece of paper.
More likely though, to get your
withholding tax back you will have to
file a U.S. tax return and reduce
your taxable income sufficiently
so that you do not owe any taxes.
Then you will get a tax refund in the
amount of the original withholding.
So keep all your receipts so you can
claim the expenses you incurred
during the fiscal year of your winnings.
So basically you can claim flights, meals,
gas, hotel rooms, tournament buyins, etc
and get back a good chunk of what
was withheld.
Comments
The Las Vegas Sun reports today that the American Gaming Association and the IRS reached agreement that for poker tournaments if a casino/cardroom issues W-2Gs, then withholding at 25% will not be required on wins above $5,000.
From the IRS's point of view, poker tournaments have been seen as a part of the "Tax Gap." Players win, but because few W-2Gs are issued, the IRS hasn't been collecting its fair share. The goal in writing Revenue Procedure 2007-57 was to increase reporting.
It is my understanding that for a casino to not have to withhold, they will have to agree to abide by the Binion's closing agreement. (Many years ago, Binion's Horseshoe Casino and the IRS reached an agreement stating that they would issue W-2Gs on all gross wins of $600 or more, and that the IRS agreed not to require withholding except where the win was at least 300 times the buy-in.) However, casinos that do not agree to this rule will have to withhold 25% of payouts on wins of $5,000 or more
I think many LV casinos use their own take on this. I am not a lawyer, I just know what I experienced, which is this:
- In my 06 trip, I FT'd a Flamingo bingoment and we were forced to chop at max. $599 for first.
- In Sept. this year (the taxing restrictions had just been changed and everyone was talking about it), I FT'd the Caesar's 7pm and the 4 of us chopped over 2K each. - We all walked with the full amount.
Great News for Poker Tournaments!
As I reported earlier, the IRS has revisited Revenue Procedure 2007-57, which would have required withholding on all poker tournament payouts of more than $5,000. I had been told by someone at the IRS that the IRS was going to try to put into place the Binion's closing agreement ($600), which would have sent lots of paper to the IRS.
Apparently, the American Gaming Association has some good negotiators. This IRS Press Release states that reporting will be required on, "...tournament winnings of more than $5,000, usually on an IRS Form W-2G."
So instead of more reporting and withholding, there will actually be no change in withholding and less reporting of winnings! Casinos that currently follow the Binion's Closing Agreement will now only have to issue W-2Gs if a poker tournament winner receives more than $5,000 rather than $600.
The only caveat I'll place on all this is that the IRS still must re-release the Revenue Procedure. But it really appears that this is very good news for both poker tournament organizers and for poker players.
News Story: Reuters
This does not effect the 30% witholding we are subject to, nor our ability to claim it back nor the difficulties in doing so...
This only effects US Residents.
The only thing you can do under the U.S./Canada tax treaty is file a U.S. tax return. If you have gambling losses (i.e. tournament buyins), you may use those to offset winnings in a given tax year. I haven't seen anything that allows Canadians to write off any associated expenses, for example, air fare, hotels, etc., though if anyone can point to some case law/legislation that shows that you can, that may turn playing the odd U.S. tourney into a positive EV possibility. Bottom line is if a Canadian plays a single U.S. tourney in a year and wins $100,000, Uncle Sam is going to take $30K, and keep most or all of it.