The 2015 WSOP is set to begin in 3 weeks in Las Vegas. Many participants in WSOP events receive investment money to play tournaments and the WSOP refuses to follow federal tax law and accept form 5754 from players. Form 5754 is submitted to the casino by a player to transfer a portion of the tax liability to an investor(s) for cashes that exceed the $5,000 profit reporting threshold.

Please take a moment to retweet a post I made on Twitter this morning with a response from the IRS that disagrees with Caesar's stance that form 5754 does not apply to poker.

https://twitter.com/hoodskier/status/596022452968235009

Thank you.

I'm not really familiar with the U.S. Tax system but isn't it kind of understandable though why they wouldn't allow it?

Because it's more work for them? I don't understand what you mean. I understand why a company wants to do less paperwork but you can't just pick and choose which tax laws you want to follow and ignore the ones that are inconvenient for you.

Because the line would be out of the door if they had to itemize every tournament fish's 17 backers at 13 different prices of markup every time they mincashed a $1,500 event.

This is not true. The player brings a completed form 5754 and they receive a W2-G for their portion of the winnings, Caesar's mails a W2-G to the investors on the form provided by the player. If done correctly there would be no effect on the length of time it would take to process a payout.

I believe form 5754 is between the player and the IRS, so the player can declare that even though he received full payout from WSOP, he is really only receiving a portion of the payout and the named "investors" are receiving the rest.

WSOP has no obligation to change payouts or W-2G's just because you give them a list of "investors" names on a From 5754 (can you see why this would be a problem?), that information is between you and the IRS.

I believe there may have been widespread fraud over these forms at the WSOP in the past. From reading Dutch Boyd's book, it sounds like there were guys approaching every one with a significany cash in a tournament and volunteering to take the hit on the tax forms in exchange for a percentage of the winnings.

You're wrong. Form 5754 is to be provided to the payor and the payor (in this case Caesars) is to complete and file Form W-2Gs based on the Form 5754. And they do have an obligation to change W-2Gs based on Form 5754. That is the whole point of Form 5754.




EDIT:

Form 5754 is actually never sent to the IRS. I suppose if there was an audit, then you would want to have it as the IRS may ask for it in this situation, so you should retain it for your records, but other than that it is never sent to the IRS.

That would be stupid for the player to agree to and would never happen exactly that way. Taxes are less than 100%. Why would the player give away $X to avoid taxes in an amount equal to $X * Y% where Y% is less than 100%?

There is not one single thing that you wrote in this post that is even close to true.

For the reasons Lego listed this makes no sense whatsoever, also the WSOP has never accepted form 5754.

People were approaching winners and saying "You pay me X dollars and I will let you report that I was a backer and you paid me my share which was X+Y (which was an amount that resulted in tax savings that far exceeded the money the player gave to the fake-backer)."

And, yes, that did happen.

But in this scenario the "approaching people" will be paying tax on money that they didn't actually receive.

Say tax rates of 20%.

Player A wins $100.
Player A gives Person B $10.
Player A reports that he gave Person B $60.

On the $100, Player A would get $100 and have $20 of tax. Net +$80.

Under the new "deal" Player A would get $90 and have $8 of tax. Net +$82. Good for Player A. But Person B would get $10 and have $12 of tax. Net -$2.




As far as I can see it, there is no way both parties can benefit from this unless:

(1) The "approaching person" will be in a lower marginal tax bracket than the player (this may be the case for a lot of non-large scores; are these "approaching people" usually pretty much completely broke with no income because I guess that would make sense), so that the "approaching person" would pay less in taxes on this "additional" income than the player would; or

(2) Somehow one of the parties involved is able to and will be committing some sort of tax evasion separate from this "deal".

If you had read the OP a litter more closely, you'd see that your post is absolutely false. There would be no line out the door for a mincash of a $1500, bc that wouldn't net the player $5000+ in profits.

Is money received from backing considered, "gambling income"? As I understand US law, gaming losses can be used to offset gambling income, but only in the year that the losses occurred. So, IF $ generated from backing players is gaming income and IF the "approaching person" was going to otherwise have a large net gambling loss for the year, then he could fraudently claim the additional "income" without taking on any additional tax liability, right?

Yea, I guess that would work too if the "approaching person" had enough gambling losses.

The approaching person has documented offsetting gambling loses that can absorb the gains (or is in a sufficiently low tax bracket that it makes sense or is a tax fraud). This is literally done all the time. I cannot understand how everyone is "Shocked! Shocked!"*

*I sold Sports Book losing tickets a couple of Vegas trips ago (They were large by any measure as I was middling and betting both sides of the same game) for a few pennies on the dollar to someone looking to justify a story of offsetting gambling losses to limit their tax liabilities on gambling winnings. This is very common.

What you're arguing doesn't really matter anyway, under the current system that can still happen using 1099-MISC. The real issue is Caesar's breaking federal tax laws and making life more difficult for the players that are paying tons of rake.

First, aren't you admitting to tax fraud by doing this? Second, unless you were already deep into gambling losses for the year, wouldn't you want to claim these losses yourself to offset your own wins?

This is true.

As stated in several posts above, people may misreport things on Form 5754 to fraudulently allocate income to someone in a lower tax bracket or with large losses to be used as deductions. But Caesars is still obligated by law to accept Form 5754 and the individuals doing this can it just as easily if Caesars does not accept Form 5754 as they can if Caesers does accept such form. So even if that fraud is extremely prevalent, it isn't any reason for Caesars to refuse to accept Form 5754 in violation of law ad it isn't any reason to change the law.

That would help of course.

But in the most simple way, you just shift money from someone in California to someone in Nevada to avoid state income tax.

Or imagine a scenario where you win 500k which would be subject to 39.6% federal income tax rate. Now you split that money over 10 of your college friends and you are below the 25% tax rate threshold for everyone who earns less than 37k on the side [those 37k would put you at 25% anyway]. Saves you a cool 73k..

Americans pay taxes on gambling winnings. Other countries do not impose such an unfair practice on their citizens (I am a citizen of such a country).

If someone wants to buy a losing sports book ticket from me that is the by-product of an effort at middling and that has literally no value to me they are welcome to it. What they do with it, be it to show off a big losing ticket to their friends or use it for their own taxes is not my concern.

Too much inside the box thinking.

http://www.irs.gov/Businesses/Intern...aties---A-to-Z

or what restorativejustice mentioned ages ago ITT

Or you can just 1099 your investors and make them pay taxes like everyone else

Or hold 30% of large scores if they don't want taxes and win even more money. Easy game

Yes, I forgot to consider residents of other countries who won't owe any tax due to tax treaties.






But I think the thread kinda got sidetracked. Partly my fault.

I think it was really meant to be about Caesars following tax laws rather than refusing to do so and forcing players to do extra paperwork (or pay more money to an accountant or other tax professional) to do it) to straighten out the misreporting done by Caesars.

Complicated and problematic (since your winnings will be reported by the casino on a W-2G, not a 1099).

Would be a lot easier if Caesars obeyed IRS tax regulations and accepted Form 5754, as they are REQUIRED.