A compromising situation…

Yet another gambling law has been made, this time for the turn-over of 25% of winnings made from poker tournaments at casinos and poke-rooms. Get informed on the situation here.

A new law has been made by the IRS that all winners of poker tournaments taking home more than $5,000 will have to be reported by the poker operator. Despite that this has not yet been authorized by the Congress, the IRS has gone so far as to demand 25% of the winnings from poker tournaments in this price range.

Yet according to the published statement of the IRS regarding the taxing of poker tournaments, the IRS is not liable for additional taxation for violations of withholding this obligation, so long as the sponsors of the poker tournaments meet all the requirements regarding the reporting. So while absolutely having to hold at least 25%, no penalties or added tax will be required of operators.

This situation is likely to cause significant difficulties for both operators and players of poker tournaments, yet it is clearly the preferred outcome of what was initially intended to be an all out devastation of land based poker tournaments. The main setback for tournament winners will be the highly probable audit that they may undergo following the win, according to the “Eye on Gambling” website.

As for the casinos and poker clubs, some facilities are withholding winnings whilst others are not, making the situation furthermore complex. This is due to the above mentioned “waiver of liability”, which can be difficult to track and decode. Lawyers and accountants, however, are nevertheless advising that the facilities send large chunks of the prizes distributed at their poker tournaments to the IRS, since it has implied that according to the Internal Revenue Code, not complying with taxation laws entails criminal penalties.

In opposition to this ‘law’ on poker tournaments, the public, who is required in order to provide input regarding new laws, was absent throughout the time that this decision was made. The IRS claims in defense that it simply interpreted the 1976 law in which the term “wagering pool” is mentioned, yet it seems that no one until now was ever under the impression that poker tournaments fitted under this title.
In summary, despite the disappointing means by which this law has been made, the IRS is ultimately granting a free pass to all poker rooms and casinos holding poker tournaments so long as they do not withhold the winnings.