Do any US citizens have extensive experience with investors from non-tax treaty countries? I just received a payment from a Canadian citizen for my WSOP package and I wanted to double check how taxes are handled with non-tax treaty countries and despite an extensive search I found very little useful information. From a staking thread a few years back I found this post:

http://forumserver.twoplustwo.com/sh...3&postcount=67

The important excerpt is the following:

Even this wording is a bit confusing though and I was hoping for clarification:

1) Does this mean that anyone who obtains an EIN I can payout their shares in full and they deal with the IRS themselves or do I still have to withhold 30%? Also I was under the impression that an EIN is for employers and that an ITIN was the number used for individuals so I'm not sure if this was just a typo.

2) Does it mean that I only have to do this if the person's share nets more than $5000 or that the cash itself does? I assume this is the latter unfortunately but I'm not sure.

If anyone knows the answers to these questions with a high degree of certainty please respond, thanks a lot for your help.

I wrote a blog post that deals with this issue.

Thanks Russ that clears up about 99% of my uncertainty. The other 1% lies in how markup ties into this equation. Let's assume in scenario 2 Jon pays a markup of 1.2 for his 50% ($6000), the tax form will not show this extra $1000 expense to him but his actual winnings are now $4000. Would I withhold $1200 or do I still have to send $1500 to the IRS due to the structure of the tax form?

Oh, man, that answers pretty much all my questions as well. You rule.

I have been staring at Form f1042s for 5 minutes now. And I still don't see what part of the it prevents you from declaring his income as $4000 and withholding $1200. Which is what I would do. You obviously would be filing your own winnings as $6000 come tax time.

And now I spend another 5 minutes trying to convey my total ignorance of American tax law in a witty way. Take this as a warning.

Let's hope Russ Fox answers again.

The form 1042-S is not really the concern, it's the W2-G that states the buy-in and net for the tournament.

edit: The W2-G is issued to the player by the casino and copied to the IRS, the player handles the other forms regarding payouts (1042-S, W8-BEN, etc.).

Yeah. But the W2-G only lists the cash and the buyin ($20K and $10K, so $10K income). The investors don't even appear on that form. This is split up as $4K income for the investor and $6K for the player. Sums up nicely; all income is accounted for. And also makes some sense: The player "invested" $4K to play the tournament and receives $10K after splitting up. So he earned $6K.

But taxes don't always make sense.

I agree with you the numbers will add up, the problem is the IRS will see you pulling this number out of a magic hat that they paid for their share resulting in the IRS receiving less money. The IRS does not like receiving less money, when the IRS does not like something there is generally a fuss made about it.

I'm not pulling the numbers out magic had. I'm pulling them out of the assumed staking agreement and the assumed cash.

Investor invests $6K, gets $10K. He earned $4K, so tax is due.The actual amount of tax owed will be determined at years end, when the investor files his taxes. (via. form F1040-NR in this case). But because the investor does not live under US jurisdiction the IRS will hold on to an amount that should cover these taxes. (And filing is not mandatory)

Player invests $4K, gets $10K. He earned $6K, so tax is due. The actual amount of tax owed will be determined at years end, when the player files his taxes. The player is a US citizen so there is no need to withhold anything, the IRS will get him to pay.

The total cut for uncle sam will be dependent on how both parties do over the year. Therefore they shouldn't care too much about the amount they are withholding.

I don't see any way you can get the IRS to withhold $1500 and get it, or part of it, back when you both file for your annual taxes.

But then there is professional gambler vs. non-professional. And tax-treaty vs. different tax-treaty. And I heard the Canadians have a government. Do they want a piece too?

I guess I'm out

You're not getting my point. I'm saying that if this transaction is scrutinized (audited) the average pencil pusher at the IRS isn't going to understand or believe that someone paid $6000 for 50% of a $10k tournament. This creates a lot of potential work for the stakee to show why everything is correct if the IRS decides they are owed more money. The onus is always on the taxpayer to prove they are right if it is determined more is owed.

What you're saying is correct, I'm just concerned about how the IRS will react to it if they decide to dig deeper. I know several people that have been audited, it's extremely time consuming and not a particularly pleasant experience.

That's what can happen, even if you file everything correctly. Sort you documents for speed, brew a can of coffee for pleasantry.

You just need proper documentation:

• a notarized staking agreement is best (I stole this from Russ btw., I'm just to lazy to search for his post.)
• a signed and dated staking agreement should work
• a "50 ball" answer to a "10K at 1.2" tweet would need quite a bit of convincing

I really don't think it would be that difficult to explain markup to somebody who would understand staking at no markup.

There are quite a few people who don't understand staking at all, but then your ****ed either way

Markup is taxable income to the person charging it. Let's say I sell 50% of my action in a $1000 tournament for $600 ($100 of markup). That $100 is income for me regardless of the result in the tournament.

Assume I cash for $4000; my backer is entitled to receive $2000 of it. He would receive tax paperwork noting a net win of $1400.

-- Russ Fox

Russ,

Thanks for the blog post, it's very handy. Presume you don't want this thread turned in an AMA, but could you let me know how I can retrieve my ITIN? Im from Ireland (TT country) and cashed in some WSOP events in 2008 so harrahs/rio gave me one then.

Would I be best calling the IRS and asking them for it, or going in person to a cashier desk in the RIO and gettin it from there. This is presuming that they don't expire - would not have been used since June 2008.

Thanks

Russ, thank you for taking the time to answer questions in this thread.

Call 1-800-829-1040 to recover your ITIN, they will verify your identity by confirming information on the identification document you used to receive your ITIN.

Might be a good idea to have a mod sticky this thread, there is some good information provided by Russ.

Just got it there, thanks!

Was on hold for 45 mins or so before I got thru, but had the number within 5 mins once I talked to someone.

Some great information in this thread. I'm still unsure how easy/safe it is as an investor from a tax-treaty country to make certain not don't pay any tax. It would be great to hear a report from someone, who has either used the ITIN or the Form 1042-S + 1040NR. I imagine this situation comes up quite frequently, so I'm quite surprised that there seems to be little interest in that topic.

Has anyone filled out a 1042-S or had an accountant fill one out for them? I have a few things I'm not clear on, the 1099-MISC is pretty straight forward but the 1042-S is less so.