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IRS reminder about poker tourney winnings
The Internal Revenue Service issued a press release today stating that starting next year, casinos and other sponsors of poker tournaments will be required to report most winnings both to winners and to the IRS.
The new regulation comes into effect March 4, 2008 and is designed to clear up confusion about the tax reporting rules regarding poker tournament winnings.
"In recent years, some casinos and players have been confused over whether poker tournament sponsors who hold the money for participants in poker tournament are required to report the winnings to the IRS and [to] withhold tax on the winnings," says the IRS statement.
The new regulations require that all tournament sponsors report tournament winnings of more than $5,000, usually on Form W-2G. In order for tournament sponsors to comply, players must be able to provide their Federal Identification number (generally their social security number) to the sponsor.
If the winner can't provide an identification number, then the tournament sponsor will be responsible for withholding federal tax income from the winnings.
The federal income tax on poker tournament winnings is currently 28%.
If a sponsor fails to report the tournament winnings, the IRS will enforce the reporting requirement and also require the sponsor to pay any tax that would have been withheld from the winner had the withholding requirement been asserted.
The IRS also reminded tournament winners that, by law, they must report all their winnings on their federal income tax returns.
"This rule applies regardless of the amount and regardless of whether the winner receives a Form W-2G or any other reporting form," the IRS says in the press release. "This is true for 2007 and earlier years, and will continue to be the case after the new reporting requirement goes into effect."
This new tax law is slightly different than initially planned. Originally, casinos and other tournament sponsors were going to be responsible for automatically withholding the required federal income tax on prizes of more than $5,000.
Instead, casinos will only have to submit the W-2G form if winning players can't provide a tax identification number.
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