I've been playing on/off for a while now. Pretty much just jerking around at micros. I plan to play a bit more seriously in the future but I'm wondering if I have to deal with any tax forms if I don't bother to touch the money in my account?

I searched and found 1 thread about this subject but it was fairly old. Maybe the law(s) changed since then.

So, let's say I run up a $500 roll to $5000 or something but continue to leave the money in my account to use as a bankroll, do I need to bother with anything or am I ok until I decide to cash out some?

It does not matter when you cash out...

It doesn't matter whether the money is sitting in your account on line or you withdrew it to your bank, its the same. You cashed out the moment the money was deposited to your account from the poker site. So if you ran the 500 up to 5000 on July 2nd playing cash games, then when you left the table and they deposited the money to your poker sites account is when you cashed out

Ok, so I guess nothing changed. Thanks.

I understand what the law is on this, however...

1) There's always a chance you won't get paid from an offshore site.

2) If you worked a 9-5 job and your employer held back wages (assume you're responsible for your own tax payments), that income isn't taxable until he makes good on it and the check clears in your bank. Or...

3) You own your own business and a client owes you money for a job. When he pays you, it becomes income, not before. Or...

4) You win money in a Teddy KGB type place and they stiff you when you go to cash out your chips.

How is this situation different than #2 and #3 and #4?

EDIT: if someone tells me you still owe income tax for #4, I might flip out.

2,3 and 4 are different. That would be like saying you won the Sunday big one for 150 K and the poker site refuses to deposit it in your account.

So for 2/3 (I'll omit #4 for now ) you don't have to pay taxes but for online poker winnings sitting on Stars/FTP/etc you do?

That seems pretty messed up, especially since in 2/3 there's going to be paperwork and/or a contract which I guess legally proves the money absolutely belongs to you.

Has anyone ever heard of a case where someone payed taxes on let's say $20,000 (which never left their poker account and was 100% legit) and the site never sent them the money?

The legal test of when income is earned is when you have "dominion and control" over the money. That's definitely going to be interpreted as when the money hits your account, not when you cash out. If somehow you were to pay taxes on money in an account and then were not able to get a payout from that account, you probably would be able to get a refund for the taxes you paid. Every type of account (other than an FDIC-insured account) has some degree of risk of not getting paid out.

How about a curveball here then....

Since the DOJ is chasing down as many of our cash out options as possible, would it be a viable legal arguement that I do not reasonably have "dominion and control" over the money UNTIL it is cashed out due to the current environment and availability of payment processors?

If that arguement held, one could then argue that the DOJ's actions are costing the IRS interest income on taxes that are delayed due to the fact that they were only due upon cashout, not at the time earned.

^^ No one is going to have any sympathy for that position IMO.

And keep in mind, separate and apart from declaration of income, you have an obligation to declare your foreign accounts to the IRS if they had more than $10K in them at any point during the year.

So for the most part it's not worth worrying about until you break 5 figures?

many of you are sadly misinformed

try this:
http://archives1.twoplustwo.com/show...=1#Post4712394

It is your discretion whether to cash out or not, therefore it is your money. If later the offshore goes bust that is a new transaction. You could make your same arguement for virtually any income.

Bogus arguement example:

My client paid me in a check for $10,000 and I put it in a bank account I control and I haven't spent it yet. However my bank may go under because of the mortgage crisis therefore its not income to me yet --- right?

Why wouldn't they have sympathy, besides that they might be a FoF friendly judge or jury? Look at the current situation at FTP. There are many players who have no available cashout method except bank wires where there is a $20K minimum. So even though I have no way to cash out my money, I am viewed as having "reasonable control or dominion" over it? I personally have a decent roll on that site, with a decent amount of winnings for the year, yet have no withdrawal options at the current time. A judge considers me as having "control or dominion" over money that there is no way to withdraw, therefore I should pay taxes on it now instead of when its withdrawn, or REALLY in my control?

What about the frequency with which these smaller sites go under/disappear with the players money in their accounts?

What if I declare my winnings, pay the tax, then the site goes under, can't get a withdrawal method, and/or site pulls out of the US market without a valid US payment processor at the time? Can I get that credit back without winnings to offset it? As far as I know, I can't take a credit for gambling losses without an offsetting gambling gain, so in these scenarios, without being able to play again, I paid taxes on money I never had control over, and have no way of getting that credit back.

Seems to me that there would be plenty of reason for sympathy and/or reasonable expectation of certain events. It just hasn't been challenged in court.

I don't believe it is that same at all due to this simple fact:

Gambling losses can only be offset by gambling winnings, in that same year. Other losses can offset any type of income and be carried forward to future years under certain circumstances. The new transaction theory may not be available to a player whose site goes busto, with his entire roll on it, due to the fact that he effectively has lost his means for gambling, or offsetting that new transaction with gambling winnings

As I stated in my above post, it is not always at your discretion as to when you cash out, and there are many examples of this all over this board, especially for FTP players. Try to telling a Full Tilt Player right now that its at their discretion as to when they cash out. You'd get flamed faster than a Democrat knocking on Jimbo's front door.