I care because if everyone else in a simliar situation is not paying I don't see why I should be. While I do feel I am a moral person and I am somewhat risk adverse I would just like to see a definative answer. I know your thoughts that the law is perfectly clear but in my opinion it is not and I think because of that is the reason so many people choose not to pay.

Several people have also said they have received legal advice that they should not pay, these kinds of conflicting posts make me want to find a way to not pay and yet cover myself. I think it would be somewhat foolish to simply not pay and just ignore it with everything I know at this point.

Tax is for suckers.

Then don't.

So you honestly think people would start paying if they knew that legally they had to even though there is very little chance of ever getting caught if they don't?

That is interesting. My experience with people is that it wouldn't matter. Unless there is a good chance of getting caught they won't pay even if CRA makes a formal statement.

I guess the point is that if the CRA did make sure a formal statement it would become much easier for them to go after people hence the increased risk of getting caught, which I believe would lead to more people paying.

No. If it was the IRS I might agree but CRA is staffed with morons. Not that it would be easy to detect even if the CRA staff was competent. It is very difficult. The only people who would get caught are people stupid enough to brag about it or people who got snitched on by someone.

Henry17: So I take it your position is that while someone in my position should legally be paying tax they however should not actually pay simply because of risk/reward?

I don't know your situation specifically but if you are making a living playing poker then yes there is no question that your winnings are taxable income and that you owe taxes.

If you should or shouldn't pay is not for me to comment. That is a personal choice based on how you feel about taxes and if you feel you have a moral obligation to pay them. I can only answer that for myself. I do not pay taxes. I have been gambling for a living for almost two decades and have never had an issue. But I also have political views that put me in a place where I don't have any moral angst about not paying them. In fact if I was put in a position where I had to pay taxes I'd probably abandon my Canadian residency.

If you are asking me to evaluate the risk then I think it is minimal but it also depends on what amount of money we are talking about and how savvy you are in dealing with that money. The risk is pretty minimal but will probably increase over time if we keep having people bragging in magazines. The Leblancs had been doing their pro-line gambling for a long time. CRA would never had bothered them if Terry had just stayed away from Pigale.

There are also certain benefits to paying tax on your winnings. Every car I've bought I've had to pay cash for. I rent now but when I owned I had to pay cash. I'm looking to buy now and I'm going to have to pay cash again or get a mortgage at much higher rates. If you declare your income you may have to pay tax on it but if you are looking at buying large ticket items it might still be in your best interest.

taxes are gay...just cash your cheques at money mart, or don't cash out amounts that makes banks forced to report you, btw if your always putting in more then 5k they get fishy...

Banks don't report large cheque deposits only cash and that has nothing to do with taxes.

I really don't see the benefit of using Money Mart to cash cheques either unless you plan to keep the funds in a safety deposit box or home safe.

Pat -

If you went for the advance tax ruling when would you do that and would you share the results with us?

I totally agree with you that it's unclear, and it's frustrating not just from a moral perspective but from the perspective of wanting to be able to plan for the future without setting aside huge sums of money for potential interest and penalties and whatnot.

Neonclaws - Absolutely I would be sharing the results. I am not 100% clear on all of the details yet however it does take 4-6 weeks to receive a response. There is also a cost to it, $100/hour they spend on it ($500 is required as a down payment, it can take more or less). My accountant is still researching the idea for me to see if this is something that might benefit me. Unfortunatly in the end I think I would wind up paying to learn what I already suspect, which is that we should be paying tax.

At this point I believe that the letter of the law states that we should be paying tax. However if you chose not to pay it seems likely that you would never be forced to. If the CRA did come after you it seems the worst case senario would be that they make you pay. (+interest/fees obv)

This is unfortunate for me because I am truely a sucker and feel somewhat obligated to obey the law.

I might end up going for the advance ruling too. I've thought about it recently as well, and I would be sure to ask "so if this is taxable, and I end up losing instead of winning, I'd assume I would be able to deduct the losses from future tax years."

Just want to make sure the spectre of losing players claiming deductions is on their mind, especially with the stuff about Kyle Wilson banking on that.

Advance tax rulings may be useful, but they are only valid if you fully report the situation with all the facts accurately. That means you better be careful when you send in the request that everything is accurate for your situation or the CRA will not be bound by it. You aren't bound by it (you can always change your mind), only the CRA and I believe they can be submitted without your name so you aren't tipping them off, so to speak.

The rulings may be particularly useful in these situations where taxability is a question of fact and not law. You can see how they weight the facts in your case.

Audits are usually conducted by the lowest level employees. Tax rulings are usually written by mid level employees. Auditors run through checklists and look for the same things over and over without regard as much for unique or unusual situations while tax rulings are researched for tax law and CRA policy.
It might give you an idea of what they are thinking policy wise and where they are "drawing the line". I know some have already been filed for poker earnings but they apply to individual situations.

Whether you choose to pay taxes pretty much depends on whether you morally feel you should contribute to society's bills since the risk is currently low (unless your winnings are publicly out there). I wouldn't count on the courts backing you up though if it came to that since eventually the CRA will fix its flawed strategy.

By the way, banks and other financial intermediaries like Money Mart can and sometimes do report cheques. They are required to report transactions where they can not reasonably ascertain the source of funds (again, a small likelihood of discovery but it still exists)

All cheques clearing in Canada are also available to FINTRAC for datamining as well.

Neonclaws - Yep you can use it as a tax deduction.

Re: losing players

A consistent losing player can't deduct his loses.

Oops I misread what you asked Neonclaws. I thought you meant could you deduct the money spent on the Advanced Tax Ruling.

You say that, and I certainly see the argument that the losing player doesn't have expectation of profit, but it's still a tricky argument for them to make. I'm pretty sure the point has been made here that you could run poker like a business - research a bunch, play many hours, intending to make a living - and still come out a loser. Add to this the fact that it would be very difficult to sort out the losers who had expectation of profit and your average loser and I think this could be a saving grace.

I really don't feel any moral compulsion to pay, but its the inability to know how much money I need in the future that makes me need certainty.

The test is not subjective.

I like your approach though Neonclaws. If they can deem you need to pay tax on it they should also guarentee you the ability to write off your losses. Makes sense to me.

Not sure why people would think that the tax system needs to be fair.

There are specific provisions in the Tax Act that deny losses for a hobby and make a business taxable.
You would be presumed to be a hobby (and thus not eligible for deductions) until you proved you could make business of it, presumably by having a history of wins to prove you have a reasonable expectation of profit (and thus the question of pyin tax on the winnings).
Much like in the US where you can't file as a pro until you hve some history of results.

Ok but if you provided the CRA all your info in a Advanced Tax Ruling and they said you had to pay tax this means your a business correct? Based on that you would be able to write off losses next year no?

Yes, once you are established as a business and paying tax, then your future losses would be deductible as long as you are still in the business of poker.

I remember someone saying that the CRA has won 2 of 12 gambling related cases. Does anyone know a way I could pull all these cases up?

They might be on CanLit. Otherwise QuickLaw if you can get access (lawyer or law student friend who will share password). Or the old fashion way by looking them up in actual books at any law school library.