Poker Tournament Winnings Must be Reported to the IRS

Starting next year, casinos and other sponsors of poker tournaments will have to report winning to the internal Revenue Service.

The new requirement, which goes into effect on March 4, 2008 was designed to clear up confusion about the tax reporting rules that apply to poker tournaments.

In the past, some casinos and players have not fully understood whether poker tournament sponsors were suppose to report the winnings to the IRS and withhold tax from the winnings.

Evidently, this was not done to the IRS's satisfaction and the IRS decided that these people needed special attention, which usually means a new tax code. There are only so many people that can dummy down before the IRS will devise a new tax law.

Once a new tax law (code) is implemented, then it becomes the responsibility of the taxpayer to "know" the law. What this usually means is; It is up to the large tax software companies to let people know what the new laws are.

So, beginning March 4, 2008, the IRS will require all tournament sponsors to report tournament winnings of more than $5,000, on an IRS Form W-2G.

If any tournament sponsor does not report the tournament winnings, the IRS will enforce the reporting requirement and also require the sponsor to pay any tax that should have been withheld from the winner if there is a withholding requirement. The withholding amount is normally 25 percent of any amounts that should have been reported.

So that tournament sponsors can comply with this requirement, tournament winners must provide their taxpayer identification number, usually a social security number, to the tournament sponsor. If a winner fails to provide this identification number, the tournament sponsor must withhold federal income tax at the rate of 28 percent.

The IRS also went on to remind tournament winners and tax payers 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 not.