I can't advise people to break the law. I only point out what the law says and what their options are and then it's up to them. Generally my job is to limit the downside and avoid too much risk. If clients desire to take on additional risk that is their call.

My specialty is forensic accounting and investigations so I am well versed in all kinds of ways people get around the law since you need to know that to find them, but again I don't go around telling people the best way to conceal assets or evade the law.

As a law student, early on in my academic career (largely on the basis of the Morden decision from the early 1960s), I had long thought that gambling gains were much more susceptible to tax than the subsequent 45+ years of case law has suggested. After having looked into it in exhaustive detail (I've spent literally hundreds of hours analyzing the legal precedents, talking with players, tax lawyers, and other tax professors), I'm no longer of the same view. In fact, it seems to me that given the state of the case law it would be very hard for the CRA to effectively tax gambling gains without a legislative amendment (e.g., along the lines of the US), which would require Parliament to do something to amend the Income Tax Act.

The major problem, though, is I don't necessarily trust the CRA to 100% understand the case law and the solidity of the conclusions that my research has yielded. The legal conclusions (at least in the abstract) are clear: you need a sustained track-record (at the very least several months and probably more) of reliably profiting before you'll tip from non-taxable and casual to taxable and professional. The precise timing of the "tip" is a matter of legal debate, but also a serious financial question, particularly when there is so much financially riding on just a few months of winnings (e.g. if you cleaned up in a few months, the tax turning at issue could easily stretch into six figures).

Hi, great thread and great information. I've been reading this thread for almost two hours now and what I understand is that you legally do need to pay taxes on poker in Canada but the risk of being investigated is very slim that it makes it worthwhile to not pay taxes and play the 'i didn't know you have to pay taxes on poker' card if the CRA does come knocking on the door. Am I right?

Here is my specific situation and I would really appreciate any advice or insight on my specific case.

I've been playing poker for 4.5 years now. The first 2 years I was in school and made ~40k during that time frame. Then, I dropped out of school to play poker full time. Over the past 3 years, my income is as follows... 2007 - 60k ... 2008 - 50k ... 2009 so far - 80k...I have never had a real job (aside from 2 months at telemarketing 4 years ago). I did not file taxes on any of this and do not have most of the records for any of this.

So that pretty much summarizes my poker career and I don't know whether I should declare taxes next year (and whether to declare on the previous years; which would be very bad since it would take a huge chunk of my savings and stuff) If I start declaring taxes starting September 2009 and forward, would they be more likely to investigate me and make me pay taxes on previous years (but the problem is i don't have records for this)?

When I withdraw, I always (with the exception of 1 time when i used insta-debit) get cheques ranging from 1000-5000.

Now that I gave a background on my situation, what are the chances that the CRA will contact me? What is my best move?

Anyone here an actual accountant or lawyer that lives in the Toronto area that would be willing to meet in person to discuss this in more detail? what is your rate? PM me.

thank you!

With months of play I would be more inclined to agree with you. When I say that it would be consider income I'm considering a player who has played poker for at least two years and more likely three years winning at least $50k a year and excluding players who made the majority of their money by wining one or two big tournaments. When it comes to months or even one year I think it is very unlikely that CRA would be successful.

I am a Canadian citizen and have lived in Canada until now but will be living in Korea for at least 5 years from next year, and probably never come back. But I will still be cashing out to my Canadian bank account while physically being in Korea. Does it make any difference? The idea of having to pay Canadian taxes while not even living there just disgust me to the stomach.

One of the things they look at with respect to residency is did you maintain Canadian bank accounts. In and of itself it probably is not enough but why risk it when there is no reason to use a Canadian bank account for this.

Where do you see this? I am a VIP and have heard nothing about this and I don't see it on their website.

There's a reason, online gambling is illegal in Korea and there's a possibility they might track me down if I use Korean bank accounts.
So I need to be a "resident" to pay taxes in Canada?

Canada income tax is based on residency unlike the US which to my limited understanding is based on citizenship.

We have covered this a few times in this topic and I know I have linked to the CRA's interpretation bulletin on what they consider when evaluating residency.

Just because you need a bank account that is not in Korea does not mean that you need to keep your Canadian one. I would look at getting a HSBC offshore account before leaving Canada. I have never had this particular offshore account so no personal experience with it and I recommend it only because the requirements are low ($10k balance or $50k if you want no monthly fees) and HSBC is reputable and solid. There are other options but they either are super sketchy banks or they require you have a lot of money ($100k min usually considerably more).

Don't mean to dereail the thread from taxes (and thanks to Henry, CF, et al for their insights), but does anyone have any more information about this?

I've contacted MB (I am a VIP) but they didn't even respond to my query about MB debit cards. Anymore info anyone?

Thanks

I have seen several people talk about this. On the last moneybookers newsletter I believe I saw a little blurb about contacting your vip manager regarding the debit card. Don't know when it would be implemented but best to contact your personal vip manager.

This is the response I received from MB regarding the debit/mastercard:

We have launched the Moneybookers prepaid Mastercard last week. Unfortunately the bank-issuer has set a condition that only residents of the European Union are able to apply for the card. Therefore we did not inform our non-EU customers. Let me assure you that we do our best to renegotiate the contract and introduce more countries in 2010.

Well, that sucks. I guess I have to go to C2P.

I actually feel better about that. Not really obviously I would prefer to have a MB card but it took me over a year to get C2P to send me one. I finally got an e-mail from them saying they would send it out Wednesday and then 4thstreetpete posted the MB news and it was just a little too ironic.

This is a very good thread.

So what's keeping these young internet players from U.S. (who are not tied down by marriages and such) from moving to Canada and maybe pursuing a Canadian citizenship? It seems it would help their bottom line a lot. I know that leaving the country for tax reasons is illegal but unless you are a high profile baller, you don't have to make it obvious... Am I right?

Well US tax is based on citizenship not residency so it is not clear if simply moving to Canada would allow them to avoid paying income tax.

There is also the whole issue that you can't just move to Canada. There is a process and I don't imagine claiming you are unemployed and not moving for employment purposes is really going to help you immigrate. If you claim to be able to support yourself from poker then you would be subject to the much higher income taxes on your winnings than you paid in the US. The only real option would be to get admitted to a Canadian university and then move on a student VISA but tuition would probably be fairly significant relative to what you'd pay in income tax in the States and now you also have to at least maintain sufficient academic standing to progress to the next year.

A US citizen is subject to tax on worldwide income regardless of where they are resident.

If you don't have any income, are you still supposed to file taxes reporting nil income? I have always had a job and filed taxes, last year was the first year I didn't work and i lived off poker, but didn't file any taxes. Is this bad? And a red flag, or is it understood that if you don't have income you shouldn't file taxes anyways. (I wasn't really pro poker last year anyways)

Theroetically, you don't have to file.

However, if you had no income, why didn't you file to at least get a GST tax credit? RC4210 stipulates that you must file a tax return, even with no income, to get the GST credit. $248 (as a single individual with no income) for the price of a 54 cent stamp seems like a bargain to me.

but he will stay on the cra's radar if he files. going from x income to zero income raises eyebrows, especially since there's no EI. if they decide to investigate further and find out that you're living beyond your declared means, you will get audited.

He will be red-flagged if he doesn't file and will be receiving a notice to file somewhere down the road.

This is what happened to me. I didn't file again this year so let's see what happens. If anyone is going to get audited for poker it's probably going to be me as I have purchased property, car, etc and basically done absolutely nothing to hide it.

So you didn't file two years and go a notice to file but didn't file again last year? Or you haven't ever received a notice to submit taxes.

Don't forget that if you have non-registered investments, rental properties, etc., then you should probably be filing. Also, if you've done any coaching, etc., for payment, that's income, too.

Legally you are not required to file if you do not owe money or have not been requested to file.

The advantages of filing are that you get your GST as already noted plus some other credits depending on your location and situation. In Ontario for example you'd get the standard $100 plus a small percentage of your rent if you paid any. I have been told that in some provinces you have to file because of the supplemental health care fee but that is a provincial requirement and not anything to do with CRA.

I have also been told that if you wish to have a TFSA you must file but I find that odd and I don't trust the source.

With respect to will it set off red flags I don't know. Like I said before in theory all this information is in computers. It is really easy to program computers to do a lot of checking for stuff that is suspicious. Historically though CRA has missed some stuff that was very very blatant so it is unclear how much effort they put into it. My opinion of public servants is such that I wouldn't really worry too much.

I went to HSBC today to ask about the offshore account. I just talked to the teller but the teller said I cannot open an "offshore" account. And it's automatically HSBC canada account. Maybe the teller doesnt know enough ? When I asked whether he could ask the manager, he just repeatedly said I can't open the account.