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Old 04-13-2009, 03:01 AM   #1
jcl
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Does WSOP Tax Withholding Apply to Aussies?

The WSOP site says players from a non tax treaty country will have a % of their money withheld. I looked up US tax treaty countries and Australia is listed so I assume I wouldn't have any money withheld. However I was reading an Australian player's blog the other day and he mentioned wanting English citizenship or passport or something so that he wouldn't get taxed at WSOP so I'm confused. Any help?
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Old 04-13-2009, 07:16 AM   #2
bav
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Re: Does WSOP Tax Withholding Apply to Aussies?

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Originally Posted by jcl View Post
The WSOP site says players from a non tax treaty country will have a % of their money withheld. I looked up US tax treaty countries and Australia is listed so I assume I wouldn't have any money withheld. However I was reading an Australian player's blog the other day and he mentioned wanting English citizenship or passport or something so that he wouldn't get taxed at WSOP so I'm confused. Any help?
Where'd you find Australia in the list? I don't see it. http://www.irs.gov/businesses/small/...106252,00.html says:
Quote:
Gambling income of residents (as defined by treaty) of the following foreign countries is not taxable by the United States: Austria, Czech Republic, Denmark, Finland, France, Germany, Hungary, Ireland, Italy, Japan, Latvia, Lithuania, Luxembourg, Netherlands, Russian Federation, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Tunisia, Turkey, Ukraine, and the United Kingdom.
Austria != Australia
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Old 04-13-2009, 07:22 AM   #3
jcl
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Re: Does WSOP Tax Withholding Apply to Aussies?

I was lokoing at the wrong thing I guess. So how does it work? What % do they take and do you get it back later if you show you're not taxed in Aus or is it just gone forever?
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Old 04-13-2009, 08:07 AM   #4
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Re: Does WSOP Tax Withholding Apply to Aussies?

IIRC its 30% and you don't see it again.
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Old 04-13-2009, 08:06 PM   #5
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Re: Does WSOP Tax Withholding Apply to Aussies?

It's not gone forever if you have gambling losses other than your wins. In essence, you pay 30% of your net gambling gain to the IRS.

You file a 1040NR to offset your gambling losses against any gambling wins over that calendar year that are played in the United States.

Remember to keep a diary of all of your gambling activities within the United States to substantiate those losses. Keep all tournament entry fee stubs, and a precise record of any/all cash games that you play. There's lots of good info out there on here about what constitutes a good diary for IRS purposes.
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Old 04-13-2009, 08:35 PM   #6
NeBlis
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Re: Does WSOP Tax Withholding Apply to Aussies?

so vacationing foreign nationals now owe US income tax??? WTF? IRS scumbags deserve a bullet to the brain.
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Old 04-13-2009, 09:27 PM   #7
jcl
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Re: Does WSOP Tax Withholding Apply to Aussies?

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Originally Posted by SlightlyMad View Post
It's not gone forever if you have gambling losses other than your wins. In essence, you pay 30% of your net gambling gain to the IRS.

You file a 1040NR to offset your gambling losses against any gambling wins over that calendar year that are played in the United States.

Remember to keep a diary of all of your gambling activities within the United States to substantiate those losses. Keep all tournament entry fee stubs, and a precise record of any/all cash games that you play. There's lots of good info out there on here about what constitutes a good diary for IRS purposes.
well the main event is the only US tourney im gonna play the entire year so itll effectively be taxed at 30% this means if i cash
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Old 06-08-2009, 03:23 AM   #8
yummyt
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Re: Does WSOP Tax Withholding Apply to Aussies?

What happened with Hachem? Did he pay the 30% to the US govt? From what i've read he didn't pay any to the Aust govt.
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Old 06-08-2009, 03:59 AM   #9
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Re: Does WSOP Tax Withholding Apply to Aussies?

Hachem paid the full 30%. The tax treaty with the United States does not include the refund of a tax credit for gambling taxes witheld, unlike I believe the United Kingdom. So it cannot be claimed back in Australia. The good news is that the remaining 70% is probably tax free in Australia.

Lesson from this is save your satellite bankroll for a non US tournament.


cheers

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Old 06-08-2009, 10:13 AM   #10
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Re: Does WSOP Tax Withholding Apply to Aussies?

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Originally Posted by SlightlyMad View Post
It's not gone forever if you have gambling losses other than your wins. In essence, you pay 30% of your net gambling gain to the IRS.

You file a 1040NR to offset your gambling losses against any gambling wins over that calendar year that are played in the United States.
Wrong. It is gone forever. There is no provision in the Tax Code for any refunds of this withheld tax for Australians. Only Canadians get this break; the US-Canada Tax Treaty has this provision.

If you're a professional gambler from Australia and you have US income tax withheld on your winnings, it is likely that you can claim a tax credit on your Australian income tax for the money withheld as otherwise you'd be a victim of double taxation.

-- Russ Fox
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Old 06-09-2009, 08:41 AM   #11
yummyt
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Re: Does WSOP Tax Withholding Apply to Aussies?

Thanks for the advice guys.
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Old 11-09-2010, 02:15 AM   #12
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Re: Does WSOP Tax Withholding Apply to Aussies?

http://www.irs.gov/businesses/intern...=96739,00.html

Australia is on that list. Don't know what this implies.

As far as I know Hachem paid the 30% to IRS and then almost paid again in Australia. He contested it in court and it was accepted that his primary source of income was being an accountant, not a professional gambler, so he didn't have to pay tax again.

If for example he won 2011 main event he would have to pay 30% tax in US and tax again in Australia (~45% for top tax bracket on most of it) as he is now a professional poker player.
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Old 11-09-2010, 07:41 AM   #13
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Re: Does WSOP Tax Withholding Apply to Aussies?

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Originally Posted by Boonce View Post
http://www.irs.gov/businesses/intern...=96739,00.html

Australia is on that list. Don't know what this implies.

As far as I know Hachem paid the 30% to IRS and then almost paid again in Australia. He contested it in court and it was accepted that his primary source of income was being an accountant, not a professional gambler, so he didn't have to pay tax again.

If for example he won 2011 main event he would have to pay 30% tax in US and tax again in Australia (~45% for top tax bracket on most of it) as he is now a professional poker player.
You are looking at the wrong list. That list is a list of all countries that have any tax treaty with the U.S. It includes both treaties which do and do not exempt gambling winnings from US taxation.

Look at the Gambling Winnings section here:
http://www.irs.gov/publications/p515/ar02.html

It has a complete list of all the countires that have a tax treaty which does exempt US taxation of gambling winnings. Australia is not included:

Quote:
Tax treaties. Gambling income of residents (as defined by treaty) of the following foreign countries is not taxable by the United States: Austria, Belgium, Bulgaria, Czech Republic, Denmark, Finland, France, Germany, Hungary, Iceland, Ireland, Italy, Japan, Latvia, Lithuania, Luxembourg, Netherlands, Russia, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Tunisia, Turkey, Ukraine, and the United Kingdom.

Claimants must give you a Form W-8BEN (with a TIN) to claim treaty benefits on gambling income that is not effectively connected with a U.S. trade or business. See U.S. Taxpayer Identification Numbers, later, for when you can accept a Form W-8BEN without a TIN.
Note that to avoid the tax withholding, a foreigner has to have a US Taxpayer ID Number (get one from the IRS) and submit the proper form to the casino.
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Old 11-09-2010, 10:09 AM   #14
jcl
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Re: Does WSOP Tax Withholding Apply to Aussies?

i can safely say now that the tax withholding DOES apply (and it cost me dearly )
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Old 11-09-2010, 06:28 PM   #15
BruceN
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Re: Does WSOP Tax Withholding Apply to Aussies?

When Joe won the WSOP he at least had some comfort in the fact that the exchange rate variations meant that his final $A conversion brought his net winnings up in local currency.

As the Australian dollar at the moment is at parity the 30% witholding becomes even more burdensome.

Personally, I would save my tourney/ satellite bankroll for local, asian and european torunaments.
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Old 11-10-2010, 09:36 AM   #16
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Re: Does WSOP Tax Withholding Apply to Aussies?

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Personally, I would save my tourney/ satellite bankroll for local, asian and european torunaments.
Yes, because 70% of $8Million, international fame and a lifetime of product sponsorship just isn't worth as much as 100% of $1Million.
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Old 11-11-2010, 09:20 AM   #17
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Re: Does WSOP Tax Withholding Apply to Aussies?

The definitive answer to this question lies in Joe Hachem's private ruling 58038 down in the bottom paragraphs. The key points were:
1) Joe paid withholding tax in the USA
2) Joe was not held to be in the business of gambling in PBR58038
3) Therefore, as there was no business, the US tax credits could not be reclaimed.

A better explanation is in the ruling itself at the bottom http://ato.gov.au/rba/content.asp?do...tent/58038.htm
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Old 11-11-2010, 09:22 AM   #18
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Re: Does WSOP Tax Withholding Apply to Aussies?

Quoting PBR58038 (Joe's ruling)

You are entitled to a foreign tax credit if you:
· are an Australian resident
· have received foreign income that is taxable in Australia, and
· have paid foreign tax for which you were personally liable in respect of that income.

The key here is that the income was not held to be taxable in Australia, therefore Joe was not entitled to a tax credit.
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Old 11-11-2010, 09:50 AM   #19
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Re: Does WSOP Tax Withholding Apply to Aussies?

Quote:
Originally Posted by DrFuzzy View Post
Quoting PBR58038 (Joe's ruling)

You are entitled to a foreign tax credit if you:
· are an Australian resident
· have received foreign income that is taxable in Australia, and
· have paid foreign tax for which you were personally liable in respect of that income.

The key here is that the income was not held to be taxable in Australia, therefore Joe was not entitled to a tax credit.
Good thing, too. Otherwise Joe would have paid the 45% Australian individual income tax rate on the amount over $180K rather than the US 30% withholding rate.
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Old 12-02-2010, 04:22 AM   #20
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Re: Does WSOP Tax Withholding Apply to Aussies?

lol Joes ruling

Just remember this private ruling is not applicable to anyone other than who it was provided to..if that was joe then its joes ruling i guess....but the ruling is only indicative of its position at that time on those circumstances. It is not binding on our Commissioner of Taxation other than in respect of the person it was delivered to and can not be relied upon by any other taxpayer. it is useful to consider the thought process the ATO went through and what they thought was important in assessing your own position but does not provide certainty.

Anyway to clarify a point above. Australia and the US included a clause in paragraph 21 of their Double Tax Agreement that basically alllows each country to tax items of "other income" where it is sourced in the non-resident state. this is because of an Australian Governments position in relation to other income in that it thinks it should be able to tax "other income" sourced from Australia. Its just that in the US this term includes gambling profits.

Effectively allowing the US to tax profits from gambling activities or prizes etc if they levy that tax under their local legislation.

What that means is that Aus tax residents are not able to be excluded from the Withholding tax levy on tournament winnings. hence we pay 30% if we win the WSOP ME.

I am not sure if the WHT is a final tax in the US or whether you can in fact lodge a US income tax return with a credit for US taxes less your losses. I have asked a US tax expert to clarify this for me. I will let you know when i find out next week. I should note that WHTs are sometimes a final tax (ie no recourse for refund of them), but can also be a way of collecting taxes where a country is doubtful that a foreign person will ever lodge a income tax return correctly.

I always recommend that you go to a suitably qualified tax advisor if ever in doubt.

For the record I have a Masters in Tax from Melbourne University and work as a Senior manager in a corporate tax division in Australia.

have a nice day.
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Old 12-02-2010, 08:29 AM   #21
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Re: Does WSOP Tax Withholding Apply to Aussies?

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Originally Posted by FSL009 View Post
What that means is that Aus tax residents are not able to be excluded from the Withholding tax levy on tournament winnings. hence we pay 30% if we win the WSOP ME.

I am not sure if the WHT is a final tax in the US or whether you can in fact lodge a US income tax return with a credit for US taxes less your losses. I have asked a US tax expert to clarify this for me. I will let you know when i find out next week. I should note that WHTs are sometimes a final tax (ie no recourse for refund of them), but can also be a way of collecting taxes where a country is doubtful that a foreign person will ever lodge a income tax return correctly.
A pro player can file a US income tax return with a Schedule C Profit or Loss from Business, with deductions for losses and business expenses.

A non-pro player cannot take any loss deductions against the 30% tax.

http://www.irs.gov/publications/p519...link1000222305

Quote:
A nonresident alien's income that is subject to U.S. income tax must be divided into two categories:

Income that is effectively connected with a trade or business in the United States, and

Income that is not effectively connected with a trade or business in the United States (discussed under The 30% Tax, later).


The difference between these two categories is that effectively connected income, after allowable deductions, is taxed at graduated rates. These are the same rates that apply to U.S. citizens and residents. Income that is not effectively connected is taxed at a flat 30% (or lower treaty) rate.
http://www.irs.gov/publications/p519...link1000222429

Quote:
Resident and nonresident aliens can claim similar deductions on their U.S. tax returns. However, nonresident aliens generally can claim only deductions related to income that is effectively connected with their U.S. trade or business.
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Old 12-02-2010, 04:49 PM   #22
BruceN
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Re: Does WSOP Tax Withholding Apply to Aussies?

Whilst it's true that the private ruling system in Australia as issued to an individual taxpayer is only applicable to the individual, I wouldn't quite use the phrase lol in regards to intent and scope of effect.

In fact, pointing to the similarity of ATO view used in previous private rulings was a critical part of our argument when successfully contesting Mahogany's (details were in another thread) adverse private ruling.

The trend of arguments in private rulings should be consistent, and indeed no less an authority than the Inspector General of taxation has confirmed this.

As the comment above is slightly off topic, all the previous comments re US witholding are correct.
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Old 12-06-2010, 10:53 PM   #23
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Re: Does WSOP Tax Withholding Apply to Aussies?

Quote:
A pro player can file a US income tax return with a Schedule C Profit or Loss from Business, with deductions for losses and business expenses.

A non-pro player cannot take any loss deductions against the 30% tax.
I have had this confirmed by a tax advisor from the US. The point is that the WHT is not a final tax and can be credited against your US income tax return.

if your a non-pro player the WHT and income tax equal so there is no point in doing an US ITR

also remember if your saying your a pro in the US the ATO will want to use this against you later upon an audit - rightly or wrongly.

Quote:
Whilst it's true that the private ruling system in Australia as issued to an individual taxpayer is only applicable to the individual, I wouldn't quite use the phrase lol in regards to intent and scope of effect.

In fact, pointing to the similarity of ATO view used in previous private rulings was a critical part of our argument when successfully contesting Mahogany's (details were in another thread) adverse private ruling.

The trend of arguments in private rulings should be consistent, and indeed no less an authority than the Inspector General of taxation has confirmed this.

As the comment above is slightly off topic, all the previous comments re US witholding are correct.
lol was indicated in relation to the fact that people refer to it as "Joe's ruling" only not about its scope, or intention...lol. I actually think that the ruling is very important for whoever the taxpayer was that received it. I also think in relation to the facts provided that it was probably correct. the thing is everyone is different and those facts may not overlay very many other players.

plus if its wrong, which we dont know as its never been tested in a court specifically in relation to poker. Then its useless to everyone else other than the taxpayer that requested it. but we wont know that until down the track. So despite the IGTs comments at law they can not be relied upon to the extent that a public ruling can be. sure use it all you like but just be aware that if the position changes you have no protection without your own private ruling request being answered.
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Old 12-07-2010, 12:01 AM   #24
kikadell
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Re: Does WSOP Tax Withholding Apply to Aussies?

how does this effect a dual national (me, australian/british)? if i were to enter on my british passport and won moneys i get it back right?
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Old 12-07-2010, 12:09 AM   #25
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Re: Does WSOP Tax Withholding Apply to Aussies?

Quote:
how does this effect a dual national (me, australian/british)? if i were to enter on my british passport and won moneys i get it back right?
Where are you a tax resident?

the ability to use the UK-US DTA is dependent on you being a tax resident of either country as i understand it. Meaning you would need to be a tax resident of the UK (or whatever the equivalent term is there) as defined in the UK-US DTA. if your not a tax resident in the UK but are a tax resident in Australia you dont get access to the UK-US DTA and its benefits and are suppose to be taxed the same as other Aus tax residents.

If it is not clear then my recommendation is to check with a UK tax advisor regarding the UK-US DTA and the definition of tax residency or the equivalent terms used in those countries.

Cheers
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