Online Poker Legality

Actually, online poker is legal. For example, in the UK. Though you think online poker is illegal there is no law that prohibits gambling, but there is a law that prohibits electronic transmission across state lines of information for sports betting. Also, as you know no states grant online poker licenses. And if one doesn’t have this license, then owning online gaming operation is illegal for him.

Gambling and the Federal Tax Code

Usually articles like this start off with some stale joke about death, taxes, and the inevitability of both. Taxes, though, are a reality in the world of gambling. If it isn’t reported correctly you can find yourself suffocated by red tape. I guess death and taxes to go together.

U.S. citizens must include all income, including gambling on their tax returns. Gambling winnings may seem like found money, but the United States government insists you pay tax on it. This stretches beyond gambling income accumulated within the borders of the USA. Taxes must be paid on all winnings whether you took a pot in Vegas, Toronto, London, or Kiev. This rule applies to those of us in the United States only. The United Kingdom along with many other countries does not tax gambling income.

Losses in any year may be claimed, but only up to the amount of winnings. For example, if you won ten thousand in 2005, but lost thirty thousand, not only should you reconsider gambling as a profession but you can only claim ten thousand dollars of the thirty grand you lost. Losses can only be claimed if the taxpayer elects to itemize deductions rather than taking the standard deduction.

The taxpayer is responsible for determining winnings and losses separately. You’re not going to get a lot of help from the IRS on this one. The Internal Revenue Code and supporting IRS precedent do not provide any specific guideline on when a gambling activity begins and ends. From the gamblers perspective, a clear cut beginning and end of a session is necessary in order to determine whether the particular activity resulted in a win or a loss. So exactly what constitutes a session?

Remember, an audit works the complete opposite of the legal system. The IRS considers you guilty until proven innocent. If you are audited the burden of proof is on you. Good records are the only way to keep you safe in this situation.

Leave a Reply

Your email address will not be published. Required fields are marked *