IRS and tournament winnings clarification
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I. Nelson Rose over at Poker Player has written an article called My Bad: No Withholding Taxes on Tourneys that ought to clear up the confusion that’s been drifting in and out of the poker community regarding the IRS and 5k+ tournament winnings.
I hate laws like this.
What apparently happened was that when word got out that the IRS was going to devastate poker tournaments, casinos lobbied for a compromise. This is exactly what lobbyists are supposed to do, assuming they cannot get the regulator to completely drop the idea. The result is better for players. As one example: If withholding were required, anyone who won a $10,000 buy-in to the WSOP would actually collect only $7,500. Now, the player wins the seat, but is reported on a Form W-2G to the IRS.
Of course, this is still bad news for winners. A W-2G is practically an invitation to be audited.
