IRS: Poker tournament winnings now subject to automatic withholding
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If you take home more than a $5,000 profit from a live poker tournament, expect to take home a little less in 2008 than you might have this year. That’s because the IRS is now requiring US casinos to withhold 25% of winnings over $5,000 for anticipated tax payments.
The $5,000 rule applies to your profit, not your win - so if you entered a tournament with a buy in of 10k and cashed for 12k, you’d be fine with a net win of $2,000. Enter for $30 and win $5,030, however, and you’ll be exiting 25% lighter.
The ruling formally goes into effect on March 4th, 2008. The decision stems from a court ruling that poker tournaments should be subject to automatic withholding under Code Sec. 3402(q)(3)(C)(i), which requires that payers withhold 25 percent on proceeds of more than $5,000 from a sweepstakes, wagering pool or lottery (other than a state-conducted lottery, which is covered by another withholding rule).
