Poker tournaments must withhold part of winnings for taxes

September 4, 2007

The I.R.S. added a regulation today requiring that sponsors of poker tournaments withhold for taxes 25 percent of players’ winnings above $5,000, and provide information to the I.R.S. The regulation, 26 C.F.R. § 31.3402(q), takes effect March 4, 2008.

An article on a poker trade website notes that online and offshore poker is not subject to the regulation, and may thus become more attractive to players. The article also notes that Canada only taxes the winnings of professional poker players.

More on compliance costs and the complexity of our tax system in general here.

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