Question About Filing Winnings in Taxes

Canadians pay NO taxes on gambling winnings, full time pro or part time grinder. US residents must declare winnings because they are allowed to claim there losses also. If I were a US citizen, I would NOT declare any online poker winnings as online poker itself is illegal in some states and you leave yourself open to prosecution. As you sat Chuck, if you register yourself as ChuckT poker player as a business, you will be able to claim certain things as a business expense, which then exposes your winnings to federal & provincial taxes.

Pothole said:

Canadians pay NO taxes on gambling winnings, full time pro or part time grinder. US residents must declare winnings because they are allowed to claim there losses also. If I were a US citizen, I would NOT declare any online poker winnings as online poker itself is illegal in some states and you leave yourself open to prosecution. As you sat Chuck, if you register yourself as ChuckT poker player as a business, you will be able to claim certain things as a business expense, which then exposes your winnings to federal & provincial taxes.

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I'd be happy to accept that as truth. Do you have some reference or link to prove it is true though?

Pothole said:

Canadians pay NO taxes on gambling winnings, full time pro or part time grinder. US residents must declare winnings because they are allowed to claim there losses also. If I were a US citizen, I would NOT declare any online poker winnings as online poker itself is illegal in some states and you leave yourself open to prosecution. As you sat Chuck, if you register yourself as ChuckT poker player as a business, you will be able to claim certain things as a business expense, which then exposes your winnings to federal & provincial taxes.

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You have a source for that? I'd be highly suprised if that was true.

I doubt they care so long as you aren't a professional gambler, but when you can no longer account for time spent/money earned separate from poker then i think it would have to be considered some form of tax fraud (seems logical at least).

@ chuck

yea i found the same when i tried to look into this back a while ago...it seems like such a grey area where nobody has a clue what is going on. From what i gathered, most of the ppl making "100k+" did not play poker full time but had other full time jobs...they just happened to make alot of money making poker. But yea i have no idea...i just don't think it would hurt to find out. If they don't have legal recourse to make you file your winnings then no harm, but if they do obviously you don't want to be in a situation where you could be guilty of tax fraud, seeing as it is super super serious.

IT-334R2 Miscellaneous Receipts

IT-334R2 income tax interpretation bulletin. It has the info on what the CRA considers taxable gambling income, and it certainly seems to me that player poker professionally would fall under this category.

@ pothole

Refusing to report money generated because it wasn't obtained "legally" is very illegal. Just look at section 10 in the IT-334R2...CRA at least makes it very clear you have to declare winnings from illegal gambling etc (provided you fall under the category of having to declare gambling winnings).

feitr said:

IT-334R2 Miscellaneous Receipts

IT-334R2 income tax interpretation bulletin. It has the info on what the CRA considers taxable gambling income, and it certainly seems to me that player poker professionally would fall under this category.

Refusing to report money generated because it wasn't obtained "legally" is very illegal. Just look at section 10 in the IT-334R2...CRA at least makes it very clear you have to declare winnings from illegal gambling etc (provided you fall under the category of having to declare gambling winnings).

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An interesting bulletin, the are many interpretations I can see where it could be argued that ONLINE poker winnings are exempt from taxation. Tournament winnings could easily be exempt under 3a and 3f, ring games could be exempt under 10c. I also suspect that as online poker is under the control of an rng, it could be classified as a game of chance and therefore could arguably be considered lottery winnings which are exempt. It could also be argued that there is no expectation of profit under section 11 as the randomness of an rng makes it impossible to predetermine the outcome, therefore there can be "no expectation" of a profit. The only clear information that can be gleaned from the bulletin is that illegal or illicet gambling profit is taxable, unusual for a CRA bulletin.

Pothole said:

An interesting bulletin, the are many interpretations I can see where it could be argued that ONLINE poker winnings are exempt from taxation. Tournament winnings could easily be exempt under 3a and 3f, ring games could be exempt under 10c. I also suspect that as online poker is under the control of an rng, it could be classified as a game of chance and therefore could arguably be considered lottery winnings which are exempt. It could also be argued that there is no expectation of profit under section 11 as the randomness of an rng makes it impossible to predetermine the outcome, therefore there can be "no expectation" of a profit. The only clear information that can be gleaned from the bulletin is that illegal or illicet gambling profit is taxable, unusual for a CRA bulletin.

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The skill argument is irrelevant. If you win the lottery, you pay taxes on it.

zachvac said:

The skill argument is irrelevant. If you win the lottery, you pay taxes on it.

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NOT in Canada. You will also find that anything YOU as a US citizen, win in Canadian casinos, you have no taxes witheld, yet Canadian players ( at certain games ) have taxes witheld by US casinos and have to claim it back. Enjoy Niagra Falls.

Pothole said:

Canadians pay NO taxes on gambling winnings, full time pro or part time grinder. US residents must declare winnings because they are allowed to claim there losses also. If I were a US citizen, I would NOT declare any online poker winnings as online poker itself is illegal in some states and you leave yourself open to prosecution. As you sat Chuck, if you register yourself as ChuckT poker player as a business, you will be able to claim certain things as a business expense, which then exposes your winnings to federal & provincial taxes.

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ChuckTs said:

I'd be happy to accept that as truth.

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Thread. Unless you are from the usa dont worry about it man.

Pothole said:

NOT in Canada. You will also find that anything YOU as a US citizen, win in Canadian casinos, you have no taxes witheld, yet Canadian players ( at certain games ) have taxes witheld by US casinos and have to claim it back. Enjoy Niagra Falls.

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The falls will be hella fun, i predict some serious gambol going down. zach you want to do $500 on black with me? =X

Pothole said:

NOT in Canada. You will also find that anything YOU as a US citizen, win in Canadian casinos, you have no taxes witheld, yet Canadian players ( at certain games ) have taxes witheld by US casinos and have to claim it back. Enjoy Niagra Falls.

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Oh I apologize, thought you were talking about US.

Well imo that argument (re: the rng) still doesn't hold any weight, regardless whether lottos are taxed in Canada or not.

10. Profits derived from bookmaking or from the operation of any gambling establishment (carried on legally or otherwise) constitute income from a business. In addition, an individual may be subject to tax on income derived from gambling itself, if the gambling activities constitute carrying on the business of gambling; see the decision of MNR v. Morden, (1961) CTC 484, 61 DTC 1266 (Ex. Ct.). The issue of whether or not an individual's activities are such that he or she can be considered to be carrying on a gambling business is a question of fact that can be determined only by an examination of all of the circumstances and the taxpayer's entire course of conduct. Although no one factor may be conclusive, the following criteria should be considered in making the determination:
(a) the degree of organization that is present in the pursuit of this activity by the taxpayer,
(b) the existence of special knowledge or inside information that enables the taxpayer to reduce the element of chance,
(c) the taxpayer's intention to gamble for pleasure as compared with any intention to gamble for profit as a means of gaining a livelihood, and
(d) the extent of the taxpayer's gambling activities, including the number and frequency of bets.

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...leads me to believe that online poker is very taxable, especially by the means I'm winning. My heart is sinking

I guess you could still argue that there could be a loophole with respect to gambling online vs in a 'gambling establishment', but I'm still not confident about it...

Playing live would be so much easier to get away with. Online you're leaving a trail everywhere

Pothole said:

Canadians pay NO taxes on gambling winnings, full time pro or part time grinder. US residents must declare winnings because they are allowed to claim there losses also. If I were a US citizen, I would NOT declare any online poker winnings as online poker itself is illegal in some states and you leave yourself open to prosecution. As you sat Chuck, if you register yourself as ChuckT poker player as a business, you will be able to claim certain things as a business expense, which then exposes your winnings to federal & provincial taxes.

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By claiming your winnings in the USA you do NOT open yourself up to prosecution....the IRS cannot report what you claim to anyone....Once you do NOT report is when you open yourself up to prosecution. In the end...it's up to you, chances are it's going to be at least a few years if ever that the USA will say...We give your poker playing online our blessing....but, with that said, if Obama wins, he's open to at least looking at the possibility of allowing online poker.

Pothole said:

An interesting bulletin, the are many interpretations I can see where it could be argued that ONLINE poker winnings are exempt from taxation. Tournament winnings could easily be exempt under 3a and 3f, ring games could be exempt under 10c. I also suspect that as online poker is under the control of an rng, it could be classified as a game of chance and therefore could arguably be considered lottery winnings which are exempt. It could also be argued that there is no expectation of profit under section 11 as the randomness of an rng makes it impossible to predetermine the outcome, therefore there can be "no expectation" of a profit. The only clear information that can be gleaned from the bulletin is that illegal or illicet gambling profit is taxable, unusual for a CRA bulletin.

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The rng argument is terrible...that is like saying because you shuffle the deck in live poker it is a complete luckbox. Profitting from poker has zilch to do with the randomness of the cards dealt. I'd presume the reason lottos aren't taxed in Canada is because playing the lotto is a huge losing proposition so if you luck out you luck out but overal nobody is "making a living" from playing the lotto.

I don't see how 3a or 3f exempt tournaments...sure they are exempt if you are a casual poker player in which case hitting it big on a tournament is certainly a welcome suprise, but nothing the winner could ever predict. If, however, you play MTTs day in and day out and make a living from them, then profitting from tournaments is no different than grinding out cash.

Anyways, bottom line as i see it...if you are playing poker for a living without another source of signficant income or are not a student, then you are essentially a professional poker player (for that period at least) and have to report your winnings.

I don't report anything now, but if i was to not take a summer job at the end of the school year and play poker for 4 months instead, then i would consider that my summer job, and, as such, would report all income i made/cashed out (how can you report money you haven't cashed out :S i don't get that at all).

I'd guess this is such a grey area because so little of gambling-related activities can show a "reasonable expectation of profit" so most of the gambling money CRA would have to deal with would be luckbox activities like slots/vlts/craps/lotto/bingo etc.

Read the bad beat section if you think online poker isn't a "luckbox". All CRA bulletins are subject to interpretation, how one inspector or auditor interprets a "rule" may differ from another. Why do you think there are so many appeals and court cases ? It's 6 months to tax time, why not consult a tax specialist Chuck.

I said earlier in this post somewhere that IF and WHEN the USA allows gambling there will be a way for them to find out if you owe taxes or not...Well.....https://www.cardschat.com/forum/gen...ternet-poker-bill-s-3616-a-129232/#post939250

It MIGHT come sooner rather than later....

Pothole, I don't know how the CRS feels..but in the USA, you risk many many years in jail if you fail to report income.....once again, I refer you to Wesley Snipes..and don't just say because it is A LOT of money, IF the USA wants to nail ya...they'll nail you...I for one don't want to take a chance at what one auditor or another interprets the law to be.