IRS has advised that, starting on Mar. 4, 2008, casinos and others sponsoring poker tournaments must report most winnings to winners and IRS. The guidance is designed to clear up confusion about the tax-reporting rules that apply to poker tournaments.
IRS clarifies reporting and withholding requirements
In IR 2007-173, IRS clarifies that, beginning Mar. 4, 2008 - when Rev Proc 2007-57 goes into effect - IRS will require all tournament sponsors to report tournament winnings of more than $5,000, usually on Form W-2G, Certain Gambling Winnings. Tournament sponsors who comply with this reporting requirement will not need to withhold federal income tax at the end of a tournament. If any tournament sponsor doesn't report the tournament winnings, IRS will enforce the reporting requirement and also require the sponsor to pay any tax that should have been withheld from the winner if the withholding requirement had been asserted. The withholding amount is normally 25 percent of any amounts that should have been reported.
For tournament sponsors to comply with these requirements, winners must provide their taxpayer identification number (usually their Social Security number) to the tournament sponsor. If a winner fails to provide this identification number, the tournament sponsor must withhold federal income tax at the rate of 28 percent.
For tournaments completed during 2007 and before March 4, 2008, casinos and other sponsors of poker tournaments aren't required to report the winnings to IRS or withhold taxes on the winnings.
IRS also reminds tournament winners that, by law, they must report all their winnings on their federal income tax returns - regardless of the amount or whether they receive a Form W-2G or other form. IRS notes that this requirement applies for 2007, that it applied for earlier years, and that it will continue to apply after the reporting requirements in Rev Proc 2007-57 go into effect.
Donald E. Shelton, CPA, M.S. Tax, has over 27 years of experience in public accounting and is a business and tax consultant.
