so then what is this thread even about. we just declare whatever we want.

I miss Toronto_CFE -- if you're around, plz post here again.

Teddy:

FWIW my accountant advised me that the full time student thing was a valid reason for not having to pay taxes. I graduate this April though so my time to reevaluate is running out...

Neon, how credible is your accountant in this issue? If he is correct, then we can just declare ourselves full-time freelance artists while we play poker as a hobby. As far as the CRA is concerned, there shouldn't be a difference between full-time student and full-time freelance artist. Ship?

He gave you incorrect advice.

What he probably meant was that as long as you keep telling CRA you are a full time student they are less likely to question why you have no declared income. That is very different then actually not legally having an obligation to pay income tax. Being a full time student just facilities your ability to get away with lying.

I think that there is some consideration with regards to his salary and even more so since the game is live and that the there is no way the long run is reach in a year playing a couple hours a week. Otherwise, the CRA would have to honor the deductions of all the degens playing on a regular basis that instead of winning a 100k, lost 50k, which they do not want to do since obviously far more people lose than win. So while I agree that many people that win at poker should be paying taxes, I think that including every winning hobby player might be a bit much.

also, does anyone have a list of countries where we can establish ourselves for tax purposes (ie gambling winnings tax free)?

Well no because degenerate gamblers don't have a reasonable expectation of profit. The hobby vs business distinction was specifically designed to address this. The goal was to remove deductions from individuals who were not really running a legitimate business. For example if you buy a rental unit then rent it out for less than the costs you can't claim this is a money losing business. It is a hobby since there is no reasonable expectation of profit. Most gambling activity is entered into with no reasonable expectation of profit.

The salary is 100% irrelevant. You can make $50M/year working on Bay St if you play poker with a reasonable expectation of profit, are organized, and play with any normal frequency you have to pay tax on your poker winnings. Even if they represent 0.01% of your total yearly income. The only difference is if you have enough other income it is much harder for CRA to notice the impact of the poker income on qualify of life.

I've been away after changing jobs (which left me much more free time but I've used it to play live rather than post much).

I will say that each of your "income" producing activities needs to be looked at separately. Poker earnings may be taxable to you and not to a friend who made more than you and it may not be taxable to you even if it was 100% of your income for the year and taxable to a guy who also made 2 million as a lawyer or flipping houses. The changing treatment for tax of poker winnings is consistent with other sources of income, like stocks or real estate (can be business or capital gains) or hobbies (non deductible if a loss but taxable if you make money at it) - the treatment depends on your situation and intent.

I fee a little differently than I did in the past about this issue.
I remain 100% convinced that poker winnings are taxable for that small group of people that can be considered to be in the business of poker. It is in the spirit of the Income Tax Act and I don't think that is in the least doubt.

How big that group of people is and how you determine whether or not you are in it may be more debatable. The factors that must be considered have been written about. How you balance them one side or the other is where the debate lies since only a court can really tell you how it weighs competing facts and there hasn't been many cases to draw comparisons to.

In looking at the most recent major case to go to the tax court (http://decision.tcc-cci.gc.ca/en/200...006tcc680.html), I see a few different things. One, I think the CRA lost the case because of flawed reasoning and a poor argument (don't read too much into this case for poker - it relates to sports lotteries where the defence was able to orive that there can be no reasonable expectation of profit) . More importantly, I see the judge's reasoning as showing that because the public thinks gaming winnings are non-taxable, it will take a strong case to get the courts to accept its taxation. This can be done in some cases I know, but until one of those comes along, the CRA wil have a tough time getting the courts to agree that gaming winnings are taxable.

This means thats for 99% of people (those who aren't the hardcore verifiable pros) who win at poker, they don't have to worry about being forced to pay tax on it if they choose not to declare it.

I still think that there is no doubt that poker earnings should be taxable for those who treat it as a business and there is no doubt that the CRA agrees with me and will likely keep looking for cases it can test.

Until they find that one slam dunk case though, the people who have any factors that may mitigate taxation will probably not have to worry.

Thanks for the post TorontoCFE. I appreciate you taking the time.

He is certainly not an expert in the area, but I thought it was interesting that some people have said being a full-time student doesn't protect you at all and that's not everbody's opinion. I think its a very strong "mitigating factor" that Toronto mentioned.

The freelance artist idea is actually kinda cool, if probably much less reliable. Right now I can prove that law school takes up most of my time and is what I am focused on. Seems like writing a screenplay wouldn't do this. Also, right now I'm not relying on the poker money to live. My mom was paying my tuition (and still is, thanks to being an only child) and I'm on a career path that can provide me with a livelihood when I'm finished. Despite consistent success over a couple years, the winnings have honestly been a "windfall" to my life plans. If I was a struggling artist who wasn't earning a living at it, as I assume I would be, it would be harder to say that I wasn't counting on the poker money.

I actually do have an interest in writing a screenplay (I've finished about 2 pages in the 5 years since I had the idea) so I've love to hear someone else's take on the freelance artist idea.

[QUOTE=Henry17;1876107]Well no because degenerate gamblers don't have a reasonable expectation of profit. The hobby vs business distinction was specifically designed to address this. The goal was to remove deductions from individuals who were not really running a legitimate business. For example if you buy a rental unit then rent it out for less than the costs you can't claim this is a money losing business. It is a hobby since there is no reasonable expectation of profit. Most gambling activity is entered into with no reasonable expectation of profit. QUOTE]

I actually believe the potential of opening a Pandora's box of people claiming losses as deductions is a big part of what holds the CRA back. Plenty of people make some money and then go busto when they move up. People could say they read the poker books and had an expectation of profit but just ran bad. People can be very organized and take poker seriously and still lose. To say that anybody who wins has a reasonable expectation of profit and anyone who loses doesn't is a pretty self-serving argument that would likely be met with some skepticism.

Toronto CFE,

What about affiliate earnings with regards to promoting poker?

If this is full time, it is simply self-employment income right?

Under what employment category would this best fall into?

Thanks!

So has the CRA actually ever won a case against a professional gambler? It has been a while since I've read this whole thread but I remember there were a few other cases summarized in here. It seems that the CRA has lost most of them. I wonder if the CRA will be hesitant to keep going after pro gamblers if they are having trouble winning the cases.

How much would it cost to get a lawyer to fight one of these CRA cases? Maybe that would end up costing as much as the actual taxes even if I won.

Also if anyone has any recommendations for gambling tax lawyers and/or accountants in Ontario then I'd love to hear them via PM or in this thead.

Affliate earnings are definitely business income, either self employment or business income. You can't get away with it not being an adventure in trade.

The CRA has never won a case in court against a pro poker player (0 for 1)but has won against pro pool players and it is the most comparable occupation to poker. Other cases were settled with pro poker players before reaching court. They have lost against all other types of gamblers.

They don't really care too much about recreational players trying to deduct losses- you would see losses denied everywhere and they would make you prove you are a winning player.

It is only worth the CRA's efforts to go after the biggest winners. It would cost them maybe $100,000 to go all the way to court and they need to justify where they spend their time. I can see them trying in the future if the payoff is there.

To take a case to the tax court, it would likely cost you any where from 10 to 50k depending on whether the formal or informal procedure is used and if there are appeals.

I don't think you will find any lawyers or accountants with much experience with gaming taxation - most don't even have a good understanding of the issues and there are onyla few cases for them to study. You'll be looking at 200-300/hour.
While it isn't my purpose to find clients, I am in Ontario and can give advice in this area if desired. My rates are at the low end of the range.

So to pay or not to pay that is the question

I think it is a pretty easy decision to make. Unless you are very risk adverse or have a moral issue with not paying taxes or breaking the law.

Mind you I'm also motivated by ideological considerations. If it ever became necessary to pay income tax in Canada I'd move.

^^
What?

Not sure which line you needed clarification on.

1. I think not paying taxes is the correct choice by a mile if you do a risk/reward assessment. The only reason to pay them is if you have a moral issue with not paying them.

2. I don't believe in the legitimacy of many social programs. I rather leave Canada then have my money do towards paying for those programs.

Hi, quick question and sorry if this was mentioned before.

If we decide to pay taxes on our online poker earnings, do we only need to do this on any funds we withdraw from the poker site?

It doesn't seem to make sense to pay taxes on money stored still on a poker site that could eventually be lost.

You pay taxes on your winnings not on your cash outs. So yes you'd have to pay taxes on money that is won but not cashed out.

According to the law, yes. But how would the CRA be able to determine your winnings if you haven't cashed them out? I guess they can request that info from the poker sites and e-wallets if you get audited? But then how do they determine when you won it if you've been playing for several years?

Not 100% sure about this, but even if poker sites / Moneybookers / Neteller aren't required to co-operate with the IRS or CRA (and I don't think they are, although you may find that they'll do so anyway), the auditors can easily ask YOU for that info, and (here is where I'm not positive), I'm pretty sure it's criminal to lie to the CRA if you get audited.

The audit might look something like this:
CRA: "Your bank gave us your financial records for the past 3 years, where are these EFT / bank wires coming from?"
You: "Oh, an e-Wallet called Moneybookers / Oh, an online poker site named XYZ."
CRA: "Can you please provide us with your Moneybookers / XYZ statements then?"

I admit I'm a bit out of my element with this scenario, but the take home point is that any tax audit argument that begins with the premise of "But how would they be able to find out whether..." is pretty certain to be a losing one. (And as far as determining just when money was won, just remember that CRA auditors get paid to go through your financial records with a fine-tooth comb. They'll be able to put together a pretty accurate estimate of when money was won, even if they don't have access to a line-by-line record of your daily ending balance.)

Oh, OK. The source of my confusion, Henry, was that it seemed like all of your previous posts in this thread were taking the position that poker winnings are nearly always taxable, so it seemed like something of an about-face to then see you suggest that, from a risk/reward perspective, NOT paying those taxes was an easy decision.

This is what confuses me though... how do you define "winnings"?

If I have a profit of 10k at the end of this year, for example, but left it on say Full Tilt - I'm supposed to be paying taxes on this, even though I have not withdrawn it?

Now let's say, on the first day of the following year, I proceed to lose all 10k. So not only do I lose this 10k, I was supposed to have paid taxes on it?

This doesn't make sense to me...