Tax Implications of U.S. Full Tilt Poker Refunds
If you’re in the United States, then you may have submitted a petition for remission for your Full Tilt Poker account balance. Likely during the first quarter of 2014, payments will be made to players. Now that you’ve gotten your Full Tilt balance back, what are the tax implications? PocketFives sat down with Kondler & Associates, CPAsPresident and Owner Ray Kondler (pictured) to get the inside scoop. You might have noticed Kondler’s booth at the WSOP in Las Vegas this year. You can give them a call at 702-433-7075 with any questions!
PocketFives: Talk about the tax implications of US-facing Full Tilt Poker remissions. Will players be required to pay taxes based on the amount they got back?
Ray Kondler: The money received from Full Tilt is an interesting tax reporting issue. Per IRS guidelines, the income from all sources has to be reported in the year of occurrence, so players playing on the various sites should have reported the income or loss on their tax return for that year. In that case, the return of monies is a non-taxable event, in my opinion.
In the event this playing activity was not reported in the years of playing, in my opinion, the net income or loss would be reported when monies are received from the sites. The IRS could have an issue, though, with not reporting the activity in the year of occurrence.
PocketFives: Does the Government have any idea what a player deposited onto Full Tilt?
Ray Kondler: They’re going to rely on players for that information. If you get audited and you’re a professional poker player and you go by buy-in, the Government will go off your logbook. They could go back to your ATM statements or bank statements to see if you took money out, but I don’t see them going to the sites for information about what they put in. I have never seen the Government go to the vendor for something like that.
PocketFives: Given the Government knows the names of everyone receiving Full Tilt Poker refunds, are audits coming for them?
Ray Kondler: It’ll put a lot more people on the radar, but that doesn’t mean they’ll be audited. The IRS has players’ names and Social Security numbers. The chance of a person being audited is probably 2% to 3% depending on income. I think if you show a normal income and expenses and they are reasonable, I don’t see an increased chance of an audit.
If you do get audited, you go could back and recreate a logbook. You’d have to give the Government some amount of information in an audit. It’s always up to the taxpayer to present their case to the IRS. If you show a $100 profit, you have to show how you got to that $100.
Depending on the amount, you’re going to get a 1099 with your name on it when you have income. Because of the extra reporting requirements from the IRS, any time more than $600 is given to someone, there has to be a 1099 corresponding to it. If you get a 1099 for $1,000 and don’t file a return for that year, the IRS is going to send you a bill at some point.
I tell my clients to always file and always show your income and expenses. A lot of people came to me during the WSOP saying, “I play cash games. What do I do?” I told them to report their income, but a lot of people don’t do that. Now with Full Tilt, there will be more people in the poker world filing taxes and receiving 1099s.
PocketFives: What do you tell people who said they haven’t filed a tax return or reported income for the last five or ten years?
Ray Kondler: I tell them to file. You have to report your income. If it’s a total guess, that’s fine. It’s not just the Federal taxes either – it’s state taxes as well where those exist.
PocketFives: What year should you report your Full Tilt earnings in?
Ray Kondler: It’s when you receive the money. From a common sense standpoint, though, say you really earned or lost the money in 2008. If you did everything correctly, you should have filed it in 2008. The event that got you the money happened five years ago. Are you required to go back and file those returns to show that? I think it’d be a reporting nightmare that the IRS wouldn’t want to go through, but I can imagine that the number of people who didn’t report that money in the first place is about 75%.
PocketFives: Tell us about Kondler & Associates, CPAs. Where are you located and how did you venture into poker taxes?
Ray Kondler: I play poker on the side and our main office is in Las Vegas. We started a couple of years ago and I would always play in WSOP preliminary events. We’d walk through the halls thinking that everyone here would need tax help eventually. There isn’t, other than Ann-Margaret Johnston, an expert on poker player taxes out there. We do tax returns for other gamblers too and started focusing on poker.
The experience at our booth at the WSOP was amazing. We got a lot of US players and foreign players alike. We gave away over 2,500 poker chips and business cards to interested players. A lot of people took the information and contacted us later. I was amazed that there’s a lack of understanding of what you need to do as a player tax-wise. I thought players would know more about what they have to do, but a lot of them are young kids making a lot of money and have no idea what the process is. We had bracelet winners come by saying, “I just won $750,000. What do I do now?”
Kondler & Associates, CPAs is a full-service accounting and financial consulting firm with locations in Las Vegas, Nevada and Atlantic City, New Jersey. The firm, led by President and Owner Ray Kondler, CPA, specializes in individual and corporate tax preparation and has developed an expertise within the gaming industry over the past 10 years. This has translated into a practiced understanding of the industry and exposure to diverse gaming taxation scenarios. Visit PokerTaxSavings.com for more details or call 702-433-7075.
