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Old 12-20-2014, 05:08 PM   #2651
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Re: Canadian Online Poker Tax Thread

Guy is arrested and goes to trial for murder. Much evidence is presented to show the defendant guilty.

In the end, he is found not guilty. The judge says "if you'd found the defendant with the smoking gun in his hands at the murder scene, he would've been found guilty".

This, of course, in no way indicates that the defendant actually was at the murder scene with a smoking gun, or that he is guilty.
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Old 01-07-2015, 02:54 PM   #2652
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Re: Canadian Online Poker Tax Thread

I see a lot of very in depth discussion here. Which is nice. I would just like to know what the tax laws are though. Recently I have been finding on google that there was a case won where it basically makes poker winnings non taxable in Canada? Is this true. Certainly sounds too good to be true.

Anyone here know the concrete answer and maybe play poker professionally and have first hand experience?
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Old 01-07-2015, 03:04 PM   #2653
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Re: Canadian Online Poker Tax Thread

Quote:
Originally Posted by zippymoose View Post
I see a lot of very in depth discussion here. Which is nice. I would just like to know what the tax laws are though. Recently I have been finding on google that there was a case won where it basically makes poker winnings non taxable in Canada? Is this true. Certainly sounds too good to be true.

Anyone here know the concrete answer and maybe play poker professionally and have first hand experience?
Quote:
Originally Posted by TaxGuru View Post
The two sources of law are each on their own reasonably clear, but they are in tension / conflict.

1. The Income Tax Act is clear in that profits from business, including all professional activities, are to be income for tax purposes. This then raises the thorny issue (which can only be resolved by the courts) of what constitutes a gambling activity that is carried on in a sufficiently professional or business-like way to be income.

2. The case law interpreting and applying the statute is equally clear that all gambling activities are strongly presumed to be casual and non-taxable (see Leblanc (2006), Cohen (2011), Radonjic (2013), and many, many earlier cases discussed here: http://ssrn.com/abstract=1971415 )

The challenge for the CRA is that the Tax Court of Canada will ultimately decide on every case in which a taxpayer does not agree with their assessment. If a taxpayer hires a lawyer, their chances of succeeding at the TCC go up significantly (see the research just completed here).
TaxGuru is known to be Ben Alarie - http://www.law.utoronto.ca/faculty-s...enjamin-alarie

The law says business is taxable, but then the question is whether or not full-time poker playing is a business. Seems that it is a very hard case to make that full-time poker playing is a business without something extreme to mitigate risk such as running bots or cheating.

The discussion is a result of when poker is a business and then the law says "taxable" and when poker isn't a business and then by law it's non-taxable.

My personal history is to have paid taxes previously, and I'm fighting with the CRA to get it back.

They've ruled that my poker playing wasn't taxable. Though I'm currently only getting a partial refund due to them not being able to determine that the entirety of my claim originated from poker.

I will be appealing to recover the full amount I've previously paid as an entitlement.
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Old 01-07-2015, 03:10 PM   #2654
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Re: Canadian Online Poker Tax Thread

Interesting. Thanks for your speedy reply. So in your eyes (or just as a fact) currently in Canada poker is not taxable?

Since you have so much experience in this I guess I might ask another question. Not to get a long drawn out discussion since this thread is about taxes, but just an opinion. What is your outlook on online poker for the future as a source of income for a skilled player? I have started to take the game seriously and would like to be a pro one day. Currently working on goals and learning at the micro stakes. I see a lot of negativity regarding the future of it. Is this negativity justified or just blabbing of pessimists and people trying to be "realistic".

Currently I am an engineer and have a decent job so it's not like I am trying to drop out of college and play with no backup plan.

Thanks for any insight.
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Old 01-07-2015, 03:27 PM   #2655
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Re: Canadian Online Poker Tax Thread

Quote:
Originally Posted by zippymoose View Post
Interesting. Thanks for your speedy reply. So in your eyes (or just as a fact) currently in Canada poker is not taxable?

Since you have so much experience in this I guess I might ask another question. Not to get a long drawn out discussion since this thread is about taxes, but just an opinion. What is your outlook on online poker for the future as a source of income for a skilled player? I have started to take the game seriously and would like to be a pro one day. Currently working on goals and learning at the micro stakes. I see a lot of negativity regarding the future of it. Is this negativity justified or just blabbing of pessimists and people trying to be "realistic".

Currently I am an engineer and have a decent job so it's not like I am trying to drop out of college and play with no backup plan.

Thanks for any insight.
My opinion is that poker in and of itself is not taxable, but that it could become taxable in special circumstances. What those circumstances are is what is up for debate at this time.

It seems that there needs to be some extreme level of risk reduction or a very extended time of positive results before poker could be considered as of a business.

It also seems that someone such as yourself would have a hard time thinking their own play is taxable unless they're engaging in something extraordinary.

I originally thought that I was an extreme outlier that would be subject to taxation. More recently it has come to light that what I thought was extreme in my case was still not enough.

As far as online poker goes as a potential source of income, that's a tough one. I believe that there are very few people who have the skill to do so at this time, and that many of those who do will not be able to continue showing profit after a couple of years from now.

This is coming from many millions of hands of experience, as well as much time spent coaching very smart players.

I have a pretty good idea that most people who are very smart and "get it" will not succeed at poker beyond a relatively short period of time.

The distinction of being a "pro" is an interesting one. Does one become a professional as soon as they show some wins at the table?

It seems that to truly be considered a poker professional would require the knowledge of what makes one's self a winning player both now and years into the future when games have changed.
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Old 01-07-2015, 03:30 PM   #2656
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Re: Canadian Online Poker Tax Thread

Quote:
Originally Posted by zippymoose View Post
Interesting. Thanks for your speedy reply. So in your eyes (or just as a fact) currently in Canada poker is not taxable?
In his eyes yes but he doesn't know what he is talking about so...

The law is very clear -- if you play poker professionally your winnings are taxable.

The problem is in determining what is required to establish if someone is a professional or not.

To this point CRA has been unsuccessful in the few poker cases there have been but that doesn't make poker winnings non-taxable. It only establishes that CRA will not be successful with their current approach.

What this tells is about the future is next to nothing. CRA could use a different approach and win the next case. I don't expect them to but if they wanted to they could -- I just don't think this matters enough for them to put in the effort and cost to do a proper poker case. I also don't think they would be able to do it without external assistance.

At this point there is no way anyone should be voluntarily paying income tax on winnings. That said though you also shouldn't proceed with the belief that at some point you might not be required to pay tax on your winnings. Since this is still all hypothetical for you I wouldn't worry about it.
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Old 01-07-2015, 03:42 PM   #2657
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Re: Canadian Online Poker Tax Thread

Once I start making my income plus a grand or two a month from poker I would consider playing professionally. It is still important to consider if I am budgeting for the future. How much does my monthly winnings have to be to sustain my lifestyle is what I am wondering. If I am paying income tax which is pretty damn high in Canada it's going to have to be a lot higher than if I am not.

I am kind of confused by your anwer because you say that people shouldnt be paying taxes currently but you also say if you play professionally you owe taxes. Why would you not pay taxes only to have them bring the hammer down on you later?

So your saying don't pay but also don't blow all your money on the assumption that you will never owe anything?
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Old 01-07-2015, 03:55 PM   #2658
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Re: Canadian Online Poker Tax Thread

Because the odds that they will ever bring down the hammer is ridiculously low.

The best analogy would be downloading tv shows -- yes, it is a copyright violation to do so, but you're never going to get nailed for it.

Further, with gambling income it is a freeroll since even if you are unlucky to be someone CRA pays attention to, youto you'll be no worse off than if you paid taxes originally.
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Old 01-07-2015, 04:04 PM   #2659
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Re: Canadian Online Poker Tax Thread

Henry, are you advising people to break the law because they probably won't get caught?
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Old 01-07-2015, 04:06 PM   #2660
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Re: Canadian Online Poker Tax Thread

Yes
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Old 01-07-2015, 04:06 PM   #2661
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Re: Canadian Online Poker Tax Thread

Ya that was kind of my thought as well. Cant they charge you or do they simply ask for the money that you didnt give them? Can you simply plead that you were ignorant and didnt know you had to pay (seems like a stretch for any educated person)? Otherwise I would think you might get into some serious legal problems.
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Old 01-07-2015, 06:39 PM   #2662
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Re: Canadian Online Poker Tax Thread

Quote:
Originally Posted by zippymoose View Post
Ya that was kind of my thought as well. Cant they charge you or do they simply ask for the money that you didnt give them? Can you simply plead that you were ignorant and didnt know you had to pay (seems like a stretch for any educated person)? Otherwise I would think you might get into some serious legal problems.
The risk there is the interest you'd have to pay which can be pretty high depending on how far back it goes.
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Old 01-07-2015, 09:16 PM   #2663
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Re: Canadian Online Poker Tax Thread

Unless you actively engage in behavior designed to hide the winnings you're not going to be charged with anything -- this is way too much uncertainty for that. So unless you have an elaborate laundering scheme, you're not getting charged with anything.

The second concern would be a failure to report income penalty, These could be substantial -- 20% of what you failed to report. This is never going to happen for a gambling income situation because of the uncertainty.

That leaves interest as the only concern and the interest is not significant. I think am_man is confusing interest with the late filing penalty which is really high. The late filing fee is anywhere from 5% to 50%, but the interest rate is lower than even a low interest credit card. I'd have to look it up, but I'd guess it is about 5%.

Obviously someone can be unlucky-- Epel was a very small time player who ended up on CRA's radar, but typically you have nothing to worry about. Even doing everything possible to poke CRA into coming after you in my experience they don't. All the gambling cases were forced onto CRA either as the continuation of a non-gambling situation or by the player seeking to claim losses or requesting a restatement of a previous return.
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Old 02-04-2015, 05:22 AM   #2664
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Re: Canadian Online Poker Tax Thread

Quote:
Originally Posted by Henry17 View Post
Unless you actively engage in behavior designed to hide the winnings you're not going to be charged with anything -- this is way too much uncertainty for that. So unless you have an elaborate laundering scheme, you're not getting charged with anything.

The second concern would be a failure to report income penalty, These could be substantial -- 20% of what you failed to report. This is never going to happen for a gambling income situation because of the uncertainty.

That leaves interest as the only concern and the interest is not significant. I think am_man is confusing interest with the late filing penalty which is really high. The late filing fee is anywhere from 5% to 50%, but the interest rate is lower than even a low interest credit card. I'd have to look it up, but I'd guess it is about 5%.

Obviously someone can be unlucky-- Epel was a very small time player who ended up on CRA's radar, but typically you have nothing to worry about. Even doing everything possible to poke CRA into coming after you in my experience they don't. All the gambling cases were forced onto CRA either as the continuation of a non-gambling situation or by the player seeking to claim losses or requesting a restatement of a previous return.
Sorry but i have to correct you. And i strongly advise people to not think the interest is low...

http://www.cra-arc.gc.ca/tx/ndvdls/t.../menu-eng.html

Its 1% up to 2% a month calculated DAILY, you pay interest on interest basically. Calculated this way its more than credit cards...
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Old 02-04-2015, 08:40 AM   #2665
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Re: Canadian Online Poker Tax Thread

Interest rates for the first calendar quarter
December 15, 2014 - Ottawa, Ontario - Canada Revenue Agency

The Canada Revenue Agency (CRA) today announced the prescribed annual interest rates that will apply to any amounts owed to the CRA and to any amounts the CRA owes to individuals and corporations. These rates will be in effect from January 1, 2015 to March 31, 2015.

There have been no changes to the prescribed interest rates since last quarter, except for the interest rate for corporate taxpayers’ pertinent loans or indebtedness.

Income tax
The interest rate charged on overdue taxes
, Canada Pension Plan contributions, and employment insurance premiums will be 5%.
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Old 02-04-2015, 09:23 AM   #2666
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Re: Canadian Online Poker Tax Thread

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Sorry but i have to correct you. And i strongly advise people to not think the interest is low...

http://www.cra-arc.gc.ca/tx/ndvdls/t.../menu-eng.html

Its 1% up to 2% a month calculated DAILY, you pay interest on interest basically. Calculated this way its more than credit cards...
You're confusing late-file penalty with interest. They are not the same thing.

If you file your taxes but there is legitimate ambiguity over the taxable status of your gambling winnings obviously you shouldn't be paying the late-filing penalty since you didn't file late.

Also being calculated daily is standard for interest so not worthy of capitalization.

As TaxGuru pointed out the rate is 5% which I would consider quite low and also happens to be what I guessed. The rate fluctuates but it is always less than what even those really low-rate credit cards charge and typically just a percent or two more than someone would pay for secured borrowing.
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Old 02-04-2015, 09:12 PM   #2667
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Re: Canadian Online Poker Tax Thread

This 5% is penalty for having filled late or incomplete. The interest rate is 1% per month up to 12 months and in some circumstance they can ask 2% up to 20 months.

Last edited by WarrenBuffetTrade; 02-04-2015 at 09:19 PM.
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Old 02-04-2015, 11:20 PM   #2668
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Re: Canadian Online Poker Tax Thread

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Originally Posted by WarrenBuffetTrade View Post
This 5% is penalty for having filled late or incomplete. The interest rate is 1% per month up to 12 months and in some circumstance they can ask 2% up to 20 months.
Not correct. See:

http://www.cra-arc.gc.ca/tx/ndvdls/t.../menu-eng.html
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Old 02-14-2015, 05:52 PM   #2669
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Re: Canadian Online Poker Tax Thread

This is a pretty interesting subject. So here's my question on the matter.

Suppose a person has a mortgage, obtained because he worked a normal job for 6 months. He then quits his job, plays poker fulltime. 10 years later, his house is entirely paid for, could he ever run the risk of losing his house if he gets audited?

Further, if poker is your only source of income, could they make the onus be on the person paying the mortgage to account for where they obtained the money to pay the mortgage?
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Old 02-14-2015, 07:08 PM   #2670
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Re: Canadian Online Poker Tax Thread

Ignoring how ******ed of a financial decision paying off your mortgage is the answer to your first question is yes of course -- the house is an asset so if you were to get reassessed as a professional player and required to pay income tax on your winnings that you could not afford to pay then any asset can be taken. This has nothing to do with you using the poker winnings to pay the house. The same would be true if you blew all your poker winnings on hookers and blow and then inherited a house. In all likelihood you would not likely lose the house but a lien would be placed against it and the amount owing would be recovered by the government when you tried to sell the house. They could repossess but I think the lien is more likely.

The answer to question #2 is also yes. Paying a mortgage is like any other expense. CRA has the ability to look at anyone's life and just say you should not be able to afford the life you are living with the income you reported. This is true if you are paying a huge mortgage or if you're spending a grand a night in clubs -- the only real difference is that the latter is a lot harder to establish. This happened to my ex-gf's mom's BF -- he wasnèt a gambler but he was in a profession where he owned a business that did about half their jobs for cash. He bought a fairly expensive truck and two top of the line seadoos and someone must have ratted him out because CRA found out and he had a lifestyle assessment and was required to pay a tax on what CRA determined was his real income. Once it gets to this stage the onus is on you to prove how you could afford the lifestyle on your reported income.
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Old 02-15-2015, 09:17 PM   #2671
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Re: Canadian Online Poker Tax Thread

So given the circumstances above, how is the government going to assess someone as a professional player? There's no precedence of them doing it in the past is there? And just curious, Henry, do you work for the government or CRA or something? You know a great deal on the subject.
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Old 02-16-2015, 12:19 AM   #2672
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Re: Canadian Online Poker Tax Thread

Is paying off your mortgage ******ed because as long as you can invest the amount of what you save by only paying your minimum interest at a higher rate than your interest rate, you come out ahead? And the longer you wait to pay off your mortgage inflation makes the debt in real dollars worth less?
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Old 02-16-2015, 01:21 AM   #2673
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Re: Canadian Online Poker Tax Thread

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Is paying off your mortgage ******ed because as long as you can invest the amount of what you save by only paying your minimum interest at a higher rate than your interest rate, you come out ahead? And the longer you wait to pay off your mortgage inflation makes the debt in real dollars worth less?
Pretty much nailed it.
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Old 02-16-2015, 09:16 AM   #2674
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Re: Canadian Online Poker Tax Thread

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So given the circumstances above, how is the government going to assess someone as a professional player?
The issue of being a professional player wouldn't come into it until later in the process. CRA would simply assess that you spend more than you report as income and you'd be required to pay income tax on the income CRA estimates you make to afford the lifestyle.

When that happens you would respond by saying that the reason you could afford the lifestyle was gambling and claim that the gambling winnings are a non-taxable source -- windfalls are not taxable.

That could be the end of it or the government could respond to your response by claiming that your gambling activity falls under the professional activity type of gambling and that is when you have the professional vs hobby player situation.

Quote:
There's no precedence of them doing it in the past is there?
There are not that many people who gamble for a living long enough that I'd say this happens a lot but given the number of people who gamble for a living there has been a decent number who were either paying tax voluntarily or who were convinced to pay tax after coming to CRA's attention.

Where it becomes confusing is that CRA has managed to lose every single modern gambling case that has gone to court. This is a small number but still being 0-4 isn't great and pretty much has convinced everyone that poker winnings are not taxable. That conclusion is incorrect since CRA lost all those cases due to their own incompetence. If CRA was competent they could have gone 4-0 and they certainly would be at least 2-2 but pretty much everyone who works in the public service is a lazy ****** and there is no reason to expect that to change. Losing every case has changed things so now people who were paying voluntarily are asking for their money back.

This is such a odd situation -- the law is absolutely clear but we get incorrect outcomes consistently. It makes it really difficult to say what will happen five or ten years down the road.

Quote:
And just curious, Henry, do you work for the government or CRA or something? You know a great deal on the subject.
I don't work. I've been around law and gambling for two decades.
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Old 02-16-2015, 06:10 PM   #2675
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Re: Canadian Online Poker Tax Thread

I also agree that the government is too lazy/inept to actually do what it takes in order to successfully gather taxes from poker players.

So Henry, you wouldn't advice paying a mortgage off? How would you go about it instead?

And, supposing you were the poker player with a mortgage, would you simply pay the house off and worry about challenging the CRA when they come knocking for their piece of the pie?

Also, thank you kindly for all your replies. They are much appreciated.
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