I do not know how the players being taxed even made it in this discussion. That will not change. The tax regulation will bring is on the profits of the poker site.

The govt will be the ones raking it in. I could see the rake going up online so the rooms still keep their profits up. We already pay high rake live so if we go this route, it will certainly go up online.

Why doesn't the government make a US only online poker site and then they can just rake it instead of taxing anyone. That way, nobody could possibly commit tax fraud on poker money, players have one less thing to have to keep track of, and everyone in the US would just play the on the government owned sites because they games would be accessible as hell and probably softer than anything since the old days of party.

I definitely want to play and if taxing/regulation is whats going to allow this then so be it. I don't think I am too concerned with how profitable it is, I just play micro stakes for some extra cash but I was really directing this towards to guys who play mid/high stakes for a living.

When I said the Gov't was a scam, I meant that they got you coming and going with the taxes.

legalization will lower rake and spur competition, it's somewhat like legal vs illegal drugs or alcohol during prohibition. Poker will get easier because the scared fish that thought it was illegal to play online poker after 2006 will make the games wayyyy softer.
p.s look out for zynga if they start real money play when poker is legalized, IMO they are in a great place to clean up.

yeah taxes will rape the game
Isn't france 7% out of every pot before the site even takes a cent of rake...sounds like fun

The easiest thing to do would be to tax your winnings(cash outs)...Every time you cash out the government takes a certain percentage(just like a paycheck from any other job)before you receive your money...

The sites themselves would be responsible(just like your employer)for keeping track of how much you grossed, paid in state and federal taxes...

They then mail you a W2 and all you have to do is file a 1040...

The sites would love to do that if it meant they were getting their US customers back...

yea in france (i m french) I can tell you it s ****ed ...u play more for the government than for u

so in the end u pay more taxes than anyone else... u take more risks than anyone else ...and u don't get social assurance or any other french rights back ....

so yea playin poker on a french site is just stupid (or french) "same word"

It would be profit for the tax year. For example, if you deposite $1000 over the year and withdrew $1100, you would be taxed that $100 profit. This is what professional Poker players should already be doing (though a lot arn't and that is part of the reason why the U.S. gov is going after Poker so hard, so yes, pro players who cheat their taxes deserve some of the blame of this whole mess).

I think the US government will take the reasonable option and use the same structure for tax on gambling as they do in most countries in Europe;

- You as a gambler actually pay tax in the rake and then the poker site pays a certain amount of tax. In other words - you will NOT be taxed when you withdraw winnings.

- This structure works well because it makes everything very easy to handle. The taxman doesn't have to go after specific players or rely on winning players being honest.

- And in contrast to popular belief this is a good thing for the poker sites as well. Poker sites want to operate in a regulated environment if possible. All poker sites in Europe enjoy the transparency of being a well documented company where information regarding the finances, ownership, balance sheets etc etc are largely public. All this makes the poker site reliable in the eyes of the gambler and therefore the shadiness of playing poker diminishes quickly.

- In practice it works like this; the PokerSite takes 5% in rake and after costs are deducted he pays a certain amount in tax. This varies between different countries but most often its between 15 and 30 %. The governement rejoices because they get tax money instead of ity being shipped abroad to some small isalnd in the Caribbean. The PokerSite rejoices because they conduct their business in an open and transparent environment and do niot have to spend millions on legal questions. Everybody is happy except the fish.

I think this crackdown on FT, PS & other poker sites means that the government is preparing a legislation which will enable poker playing online in the US. They do NOT want the "illegals" (FT, PS et al) to benefit for going against the government for five years but want to benefit those who respected the US governments laws (if those laws suck or not is besides the point). PartyPoker will probably be one of the first ones to get a licence once the legislation gets going.

Thats my 2 cents and excuse my english as I am one of those Swedish fish who never does learn to play AQ the right way.

/GL all.

Question is, do brick and mortar casinos (MGM, Bellagio, etc.) send you a W2 when you win big or do they just automatically hold the taxed amount from the winnings?

If neither of those, I doubt online casinos would be sending you a W2. Easiest solution would be to just give a certain percentage of rake to the state that the online casino is running in. If rake is 5%, then give the state 1%.

Online casinos should be happy to get 4% still in order to run legally.

This isn't entirely accurate (unless you assume that you withdraw 100% at the end of the year).

For example, if you deposit $1000 and turn it into $10,000 and only withdraw $1100...you still owe taxes on $9000. In other words, you are taxed on your winnings regardless of whether you transfer it to a bank.

Exactly, taxes are technically owed on when the income is earned, not when it's moved into your bank account. Which is the basis for adding a tax directly the the rake. Rake is actually taken after the pot is "earned" thus by adding a additional "X%" to the rake, the government would collect/record the proper taxes on each pot right after it became "earned income" (i.e. before it got shipped to your stack).

I'm unsure on how tax write offs on gambling losses would be factored in here however (or even if these losses could be wrote off if the US was working under the assumption that poker is a skill game and not "gambling" thus making it legal in this hypothetical future).

I can't really see how taxing the rake makes sense. As far as taxing the players goes, how would the site know each players marginal tax bracket? In a PLO8 pot split three ways, Player A might make a million dollars/year on poker, player B might make $30K/year on poker, Player C might make a million dollars a year in business, but lose money at poker. How does pulling X% out help? Wouldn't it make more sense at the end of the year to send a statement with net gain/loss?

As far as taxing the site goes, well, the site should only pay taxes on profits. If the rake is taxed, the site isn't able to subtract the cost of doing business (i.e. marketing, software updates, etc.).

As has been discussed to death on tax threads, this is not how the tax laws work. All gamblers need to add up their winning sessions and their losing sessions. Full-time pros whose occupation is professional gambler can deduct losing sessions on their Schedule C. The rest of us have a much more complicated treatment that even tripped up a Federal judge living in Las Vegas some years back... and factoring in state income taxes (which Nevada doesn't have) adds even more complexity.

There is no measurable probability that the USA would adopt a European-style treatment where only the house pays taxes... that isn't how things work here. Some of the EU countries hide their government-sanctioned gambling monopolies behind such laws; the European Commission doesn't care for that and strikes those laws down when competitors blocked by them appeal to it.

your PROFIT is lowered... but if you are profiting you are profiting , weather or not u lose 30% of it

Reps. will rake the heck out of the game and say the Dems. made them to do. The Dems will rake the heck out of the game and say Bush made them do it.

The totally idiotic Reps. position would be several levels smarter than the Dems. position.

I hope you're right but I think the crackdown was the result of right wing Christians saying that poker players are child abusers.

Yep, that is what i meant. didn't want to get into that much detail,m thought it was obvious.

I'm not saying this is the optimal way to do it, just explaining that the basis behind adding a tax to the rake is bc this is the easiest way for the gov to ensure they collect the taxes they are "owed" in that under this model it is impossible to evade or not claim earned income. The sites themselves are going to pay taxes based upon their EOY profits (basically [normal rake - OH exp]), but the tax would be in addition to the rake% of the site. Don't think of it as a tax on the rake, but rather as an additional tax rake on the pot in addition to the normal rake. This added % just goes to the gov instead of the site.

An end of the year statement may certainly be ideal, but there are all sorts of other factors that arise (i.e. transfers, staking profits, etc). My main point was that it doesn't matter when the income is cashed out, but rather the taxes you owe are based upon the time you earn it (i.e. when you win the pot, and technically before the site's rake is taken out tbo).

Since they regulated in France, the Government takes 2% rake for every pot, since PS still want their 5% the rake is now 7%. I assume it would be a similar thing in the USA?

Might sound ******ed, but OP's scenario would be pretty awesome

Very similar to waiters, they are taxed extra on their hourly wage (usually minimum wage) and keep all their tips tax free; really simplifies it.

Pro poker players are taxed "x" of deposits and don't file yearly taxes as a result. Saves the government a lot of headaches. Or maybe taxing "x" of withdrawals???

Obviously speculation, but I have received a W2-G for a tournament win in Las Vegas. Not an expert so don't know the threshold that triggers it.

Hopefully online, they wouldn't do this on individual tournaments, but I definitely won't be surprised if part of any "new deal" of legal online poker includes player profits getting reported to the IRS. It's obviously much easier to track this online than at Brick and Mortar.

MDM

Once online poker is legal in the US, the player pool will be much higher, so it will be more easier to give bonuses / rakeback.

Rakes need to be lowered at some point, and hopefully they will tax on deposits