Theoretically, if you have 5k in your PokerStars account, you dont have to file an FBAR. Now suppose you have 3 million FPPs. Do you have to pay tax on those frequent player points and file an FBAR because the points can be converted to cash?

What if you earn the points in 2009 but get cash bonuses in 2010? What year do you owe taxes on that money/points?

What if you spend the points on like 50 TVs? or a Porsche? If PokerStars buys you a car do you have to pay any federal income taxes?

I don't believe FPPs would trigger the FBAR, I think that form just relates to cash balances. I may be wrong and I am no professional or tax expert.


I don't think there's a definitive answer for when taxable gains are realized with FPPs...

I, as I assume most players do, account for FPPs on a "cash method" basis, in that I just buy the cash bonuses or Concierge continuously and record the cash I receive at the times I clear the bonuses. This is a reasonable, common-sense approach that should not be seen as a problem by the IRS. I might end up carrying a few hundred dollars worth of FPPs over from year-to-year, but I'm not deliberately structuring my play or FPP purchases for tax advantages. However, there certainly is room for tax abuse if high-volume players were to deliberately carry over large amounts of FPPs across years.

Some players account for FPPs (and/or rakeback) continuously by allocating their value to each of their sessions. i.e. if they play 1,000,000 hands and get 100,000 FPPs for the year which they get $1500 total for, they increase their session wins for the year by $0.0015 * the number of hands in each session. When accounting for it this way, as long as the value per FPP remains constant, there would be no potential accounting issues across years.


You definitely owe tax on merchandise you buy with FPPs. One question that hasn't been exhaustively settled is whether or not taxes are paid on market value or at MSRP... we're trying to figure this out in another thread.

I would expect any items to be treated in a similar manner as gifts, or gift certificates.

For the Pokerstars car? I'm almost 100% that you'd be taxed on this, as you would any other gift.

But, as repulse isn't, IANALoTP

so if some hick wins a 100k car in a casino, they owe like 40k in taxes? What if they dont have the money? they have to sell the car?


translation please?

Yeah, that's generally how it works from what I've always understood, at least when someone wins a car on a game show. I think this would work the same in a gambling promotion. And I think I heard that lots of the people who got free cars from Oprah that one time had to sell them because they couldn't afford the tax on it.

I think it's "I am not a lawyer or tax professional"

how bout all the other times people get free cars from casinos or gameshows? did they all sell them too?

If they couldn't pay the taxes on them, yes.

"Free", as I'm sure you've learned in this country, rarely if ever is actually free.

i hate that you are correct.

Not that that's been exhaustively settled either, but isn't this simply a matter of constructive receipt?

I don't know how the IRS would look at FPP's. There's also a problem IMO of proper valuation because depending on what you use them for in the store you receive a different $ value per FPP.

Personally I've reported income when I converted the FPP's to cash or other items and reported the amount of cash (or would report $ value of item I guess but I've never actually done anything other than convert it to cash).

Disclaimer, I am not a lawyer, yet, so please don't take this post as legal advice. Please consult a lawyer or tax professional ASAP as time could be of the essence.

This is a very interesting question that I wondered myself. One interesting aspect of this is whether or not the FPPs count as "gambling" income, which of course is taxed at a higher rate. One could argue that it is NOT gambling income because you don't earn FPPs by winning/losing a bet. They are awarded to you simply for playing a hand regardless of the result of the hand. This has large ramifications. If FPPs are treated as ordinary income rather than gambling income then this could result in huge amounts of tax savings.

I would argue that the players that add it to their cash sessions as gambling income are losing money by not treating it as ordinary income. This is not the same as winning a car from a casino, which would be gambling income, IMO of course, because earning an FPP is not conditioned on the OUTCOME of a game.

Winning a car from a casino is not gambling income (usually), but rather reportable as a sweepstakes prize. I don't think FPPs could be treated the same way as their receipt by the player depends upon the player making a bet, not a random drawing.

Gambling income is not taxed at a higher rate than earned income.

Anyhow, FPPs being ordinary income could be quite bad for the losing player (aka almost everybody).

If we count converting FPPs to cash in whatever way as gambling income then your amature losing player will have something like this on their taxes:

10k in winning sessions (let's say 5k of this from FPPs) which are income. He also has 15k in losing sessions of which he can deduct 10k of it. This generally doesn't create any extra tax owed unless they were not planning on itemizing their deductions.

But now let's see what happens when those FPPs are not gambling income:

5k in winning sessions which are income. He also has 15k in losing sessions of which he can deduct 5k of it. Then he still owes taxes on the 5k worth of FPPs which he earned. Not good.

Would this argument also apply to rakeback? The rakeback you receive for a hand is also independent of whether or not you win or lose the hand. The general consensus is that rakeback definitely is gambling income.

The traditional, practical view of rakeback accounting is that it's like a refund of rake, which means it augments gambling winnings and is treated as gambling winnings. For tax purposes, 27% rakeback ends up working out approximately the same as if the rake charged were 27% less. Shouldn't FPPs also be treated the same way? If not, what's the difference between FPPs and rakeback?

Just as a guide, and not to be taken as individualized tax advice, here is the general method I use for my internet poker clients:

1: Both rakeback and player points (FPPs etc.) are taxable income from wagering, i.e. they are available for offset by wagering losses per playing session.

2. Poker points (FPPs etc.) are valued at fair market value (FMV) using whatever reasonable cash equivalent is available. If points are convertible to cash, use that rate to determine the FMV. For Pokerstars (for example), I use 1.6c per FPP.

3. Points are allocated, as far as possible, to the sessions played, e.g. if you play a cash session on Pokerstars and win $100 and receive 200FPPs during that session, your total income for the session is $100 + (200 * 1.6c) = $103.20.

4. Although I have not yet encountered this issue in practice, to be conservative, I *would* use point balances in determining whether the FBAR is to be filed based on IRS guidelines regarding non-monetary assets. See §4.26.16.3.6(4) here