House bill would require withholding taxes

[P.V.]

A House proposal to regulate and tax Internet gambling would require online gambling establishments to withhold taxes from net online winnings, and provide detailed information about gamblers to the government in an attempt to help ensure the collection of these taxes. It would also impose a two percent federal tax on Internet gambling providers, and give states the option of taxing these companies at a rate of six percent.

Full article from the Hill:

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[Glunn11]

I love the comment on that article by Hoosier Patriot, the self-proclaimed expert on what every American wants.

I think this is genuinely the best shot at keeping online gambling in the USA. The feds are getting smarter and options are depleting rapidly. I mean, that Linwood processor stint was pretty damn sneaky and detrimental to the industry, and who knows what else they have up their sleeve? The sooner the US acknowledges online gamblers simply as players rather than criminals, the better.

Of course, this bill will not legalize gambling in the USA, but just provide a revenue mechanism if it does get legalized.

They're not attaching an additional tax on the winnings (on the federal level, anyway) from what I understand. They're simply withholding the taxes that you should be claiming on your tax returns already as per the US gambling laws that have been around for quite a while.

If we do get banned from every online casino except ones operated by American giants, so be it. It's not like we'll be getting liberty for the sake of liberty anytime soon. I quite agree with my old calculus teacher on this one: "People won't change unless it's profitable."

 

[EndofEsau]

So let me get this right. America may soon legalize online gambling. These casinos will be ran by American companies. So If I make a deposit and lose. The company owning this casino keeps my money. And If I win the American government gets some of it as well. Feels good to be an American.

 

[Glunn11]

So let me get this right. America may soon legalize online gambling. These casinos will be ran by American companies. So If I make a deposit and lose. The company owning this casino keeps my money. And If I win the American government gets some of it as well. Feels good to be an American.

If you lose, the American government will also skim a bit from the company, as well, in addition to the normal income tax that the company would have to claim.

With every spin, the government wins!

 

[jetset]

That phrase "It's all about the money" is well worn but true imo - despite all the blab by politicians on protecting gamblers, I get the feeling that the principal driving forces for legalisation are (a) tax revenues and (b) because it will be profitable for land gambling companies with political influence.

It does not appear to be about how Americans choose to spend their discretionary income, nor about their right to indulge in a pastime that impacts noone but themselves and is carried out in the privacy of their own homes.

US legalisation is indeed coming, it would appear, but at a cost for the ordinary player in terms of money, freedom of choice and player liquidity.

Looking at the positives, at least it will again be easier for US gamblers: you'll be able to move your own money around (in the US and to US companies) without having to resort to furtive tactics; you will be thoroughly protected by federal laws; you'll have recourse to complain about shoddy or unfair treatment; you will probably have a good selection of games and promos, and you won't feel as if your own government is trying to make you a criminal.

Trying to be positive here

 

[Nifty29]

I don't know why they don't adopt the Australian model.

A fixed % of RTP goes to the government, the machine owner, and the machine operators.

1.5% goes to a community support fund to provide problem gambling services and other public amenities.

No tax is paid on winnings by the individual.

At present the carve up in my state is 4% gov, 4% owner, 4% operator and 1.5% CSF which leaves about 88% returned to players.

I think its ridiculous that everyone has to keep track of winnings and file tax forms.

 

[Glunn11]

I don't know why they don't adopt the Australian model.

A fixed % of RTP goes to the government, the machine owner, and the machine operators.

1.5% goes to a community support fund to provide problem gambling services and other public amenities.

No tax is paid on winnings by the individual.

At present the carve up in my state is 4% gov, 4% owner, 4% operator and 1.5% CSF which leaves about 88% returned to players.

I think its ridiculous that everyone has to keep track of winnings and file tax forms.

Oh hey, that makes complete and total sense.

Of course, so does the metric system.

 

[slotplayer]

I don't know why they don't adopt the Australian model.

The tax infrastructure is already in place for land casinos and lotto games, no need to rebuilt it.

When a player wins at land casino or from a lotto ticket they get a W2 form. With filing taxes electronically there is no need to mail in the form.

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On the US federal tax form the filer can deduct losses up to winnings so effectively it can be a wash.

I imagine the software makers like MG for example would open an office in the US or more likely license the software to a US based company that handles all the paper work logistics.

I might add I haven't played online in a year or more but the last thing I'd do is give one of these online casinos my ss # unless they were somehow US based.

 

[jetset]

And talking of internet taxation....

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[4 of a kind]

And talking of internet taxation....

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That article is very interesting. You actually could agree with the arguments on both sides.

I also agree with your prior post that none of this is about anything to do with the constitution and USA players.

The Federal, and State government employees fighting for taxes are no different then big corporation employees trying to do what's best for their employer.

The difference is the governments will always win. All they have to do is pass a law against their competitors.

Our own constitutional rights have long ago been thrown into the sewer in exchange for money and personal careers.

 

[Mousey]

What is so funny (well... not ha ha funny, but you know what I mean) is that the feds have collected enough funds from online players w/ their seizures to pay a hell of a lot of players' income taxes.....

Speaking of which... won't the feds lose out on income taxes now as so many players (especially poker players who tend to leave more funds than they should in the poker rooms) never received their monies?

 

[Nifty29]

What is so funny (well... not ha ha funny, but you know what I mean) is that the feds have collected enough funds from online players w/ their seizures to pay a hell of a lot of players' income taxes.....

Speaking of which... won't the feds lose out on income taxes now as so many players (especially poker players who tend to leave more funds than they should in the poker rooms) never received their monies?

Mousey, please refrain from using common sense. It has no place in discussions about the US Government/s.

 

[Mousey]

Mousey, please refrain from using common sense. It has no place in discussions about the US Government/s.

My apologies... you're correct. I don't know what I was thinking.... :smilewink:

 

[Casinomeister]

It'll be interesting to see if US players will continue to participate at non-US licensed casinos just to avoid the "big brother" aspect of the feds keeping track of your gambling activities.

...To help enforce this, companies would be required to provide the names, addresses and tax identification numbers of all players to the government. They would also have to provide information on gross winnings, gross wagers and gross losses on each person for every calendar year, and the amount of tax withheld on these winnings...

US players will be in a database and the US government will know how much each individual spends on gambling...to the penny.

Like I have said so often, be careful what you wish for.

 

[4 of a kind]

If online casinos were to start withholding taxes from winnings, and at the end of the year the punter lost more then he won; wouldn't the taxes withheld then be refunded to the punter?

At land based casinos several times I had to sign the tax form to receive my winnings. When tax time came I would then have mailed to my house from the three casinos I play heavy at my win/loss records for that year. If I lost more then I won I paid no taxes on the winnings, and filed my win/loss records in case of an audit in the future, being able to prove my losses. Never once was I audited after claiming more losses then wins and not paying any tax on the winnings.

Would this not be the same gambling online? Wouldn't withheld taxes after a win online have to be refunded under these same conditions?

 

[vinylweatherman]

The industry would have a problem with this because it makes it hard for them to compete outside of the US, where players will not tolerate this kind of "paperwork" for their gambling.

They could get around this by separating US and non-US players, but given the size of the US market, this could reduce their ability to compete for non-US players with promotional offers that are likely to be funded from their profits, most of which will come from the US.

A 2% tax on the company seems reasonable, and the UK screwed up by asking for 15% "VAT" on companies that wanted a UK license, which is why almost no-one has one, preferring instead to use a whitelisted territory which taxes at around the 2% level proposed here.

The US system of taxing players directly, rather than the company, makes it hard to compete in an international arena. Most other countries tax the companies, and individual customers do NOT have to declare anything on their individual rax returns. This system is far more "internet friendly" than the US system, which was designed in the days when casinos could not be trusted to pay the correct taxes if they were administering the system, so the onus was placed on the players to declare their wins individually based on a compulsory form that casinos had to hand over when paying larger wins.

Even non-US residents have to navigate this system when visiting a US land casino, and if they get it wrong, will end up losing 30% of their payout, and face having to claim it back later, if possible. I was told to have my passport handy so that I could prove I was visiting from abroad, and would not have to have 30% withheld from any payouts.

 

[samoas]

It'll be interesting to see if US players will continue to participate at non-US licensed casinos just to avoid the "big brother" aspect of the feds keeping track of your gambling activities.



US players will be in a database and the US government will know how much each individual spends on gambling...to the penny.

Like I have said so often, be careful what you wish for.

Agree with this statement wholeheartedly! Here in the US we are federally taxed on winnings at a rate of 26%. Disgusting! And the state will want their cut too, mind you!

I was audited by the IRS in 2006 for taxable land-based casino (Vegas and AC) winnings from 2002. I was an avid yet disciplined, video poker player for many many years and that specific year was very profitable. I did pay the taxes according to my win/loss statements, however the IRS claimed I had won a couple thousand more than claimed. I sought counsel from a reputable CPA attorney and after scouring through numerous statements from approximately 20+ casinos, he advised that I pay since our numbers were off by a few hundred. The battle would cost me as much in attorney fees if not more. I took his advice, IRS removed penalties and paid up. Figured headache gone. Then along came the state taxes......Ugh!!!

To this day I am "red-flagged" in the IRS system. God forbid I have a single W-2G in a year, I can count on a questioning of my refund. This year I have 3 so far. Tax time will be interesting.

If online gaming is legalized in the US, you can bet your sweet ass that they will have every bit of data tucked away to ensure they get their cut. For this reason , it would make a reputable, non-US establishment much more appealing to me.

 

[samoas]

Even non-US residents have to navigate this system when visiting a US land casino, and if they get it wrong, will end up losing 30% of their payout, and face having to claim it back later, if possible. I was told to have my passport handy so that I could prove I was visiting from abroad, and would not have to have 30% withheld from any payouts.

This is very true and most visitors (or should I say novice visiting gamblers) are unaware.

I work for an OTB in the horse racing industry. In my 13 years of employ, have only paid out once to a non-US citizen. He was Canadian. I was the processor of the win. He did not have his passport on him but apparently knew the rules. He drove 20 miles back to his hotel for that passport to avoid the 30% and I don't blame him one bit.

 

[vinylweatherman]

This is very true and most visitors (or should I say novice visiting gamblers) are unaware.

I work for an OTB in the horse racing industry. In my 13 years of employ, have only paid out once to a non-US citizen. He was Canadian. I was the processor of the win. He did not have his passport on him but apparently knew the rules. He drove 20 miles back to his hotel for that passport to avoid the 30% and I don't blame him one bit.

I would just have to take the lift upstairs

It was in the room safe where I was staying. I didn't want to carry it around because Vegas is pretty hot, even in September, and I didn't have much pocket capacity to ensure it didn't get nicked or lost. Losing a passport would have been far more inconvenient than getting a form and having to claim back the tax.

 

[P.V.]

If online casinos were to start withholding taxes from winnings, and at the end of the year the punter lost more then he won; wouldn't the taxes withheld then be refunded to the punter?

At land based casinos several times I had to sign the tax form to receive my winnings. When tax time came I would then have mailed to my house from the three casinos I play heavy at my win/loss records for that year. If I lost more then I won I paid no taxes on the winnings, and filed my win/loss records in case of an audit in the future, being able to prove my losses. Never once was I audited after claiming more losses then wins and not paying any tax on the winnings.

Would this not be the same gambling online? Wouldn't withheld taxes after a win online have to be refunded under these same conditions?

I think you're right on track with your post.

 

[Nifty29]

I do know that at skill gaming sites in the US, winnings are subject to withholding tax which can be claimed back at the end of the year. The gaming company reports to the IRS and issues income forms etc to allow this to occur. AFAIK in some cases where there is a net loss, any tax withheld is refunded at regular intervals by the company itself.

I guess the question is are you happy to have the IRS earn interest on your money or would you rather have it in your pocket?

 

[4 of a kind]

I guess the question is are you happy to have the IRS earn interest on your money or would you rather have it in your pocket?

I clearly understand your point here, but there are still several other ways to look at this when and if the USA decides to regulate and tax online gaming.

Everyone for the most part is usually aware of the tax laws that would apply relating to just about anything we do. Every level from poor to rich people understands these tax laws. Although some may want to say here they are law abiding citizens and never cheat the tax laws, most people throughout their lives will go out of their way to avoid paying taxes every chance they get.

A person buys a used motor vehicle and gets a bill of sale for less then they paid to avoid paying taxes on the full amount when they register it. I know people that sold million dollar properties, with six digit amounts of cash under the table transactions to avoid capital gains. People with multi million dollar annual salaries hire tax lawyers to mange their income and know every loop hole in the laws to avoid paying taxes. The people paying these tax specialists salaries must obviously feel it’s worth it considering what they must be gaining in fewer taxes. The list of tax cheating going on everyday is endless and takes place just about every time there is an opportunity.

I think most would agree (excluding whales) that paying taxes on gambling winnings really isn’t that big of a deal. Most gamblers will lose more then they win every year and will usually get off tax free. Of course not paying any would be ideal, but when you consider you couldn’t buy a pack of chewing gum without being taxed, why should gambling be any different?

With land based casinos of course if you’re playing slots and hit big you have to sign a tax form and be bothered with the efforts of being able to prove you lost more then you won for that year. I would also like to mention here that even if you won more then you lost gambling during any given year; their are ways to gather fraudulent records to prove otherwise, and is being done constantly. At a land based casino if you win more then ten thousand dollars in chips at the tables, you never go to the cashier and flop all your chips at once on the counter. You make several trips throughout the day at different windows cashing a couple grand at a time. Horse bettors knowing they have a good chance to make a big spike at race tracks, place their bets in small intervals making several trips to several windows, and if they spike cash out the same way.

The only problems I see with paying taxes and online gaming is that every bet is recorded. Their would be no sneaky ways to cash out if you’re a big winner. In addition if big brother wanted to review your gambling activity, I would assume with a simple request would be able to review all your past bets. This could be a serious problem for the player that losses more then he could justify, which would indicate further tax evasion being conducted with other personal incomes that were reported in the past.

If loop holes can’t be figured out concerning online gaming and taxes if this all were to even come about, players would know this and be certain to gamble within their alleged means online.

Regardless, most punters wouldn’t need to worry one way or the other if in fact they are low-rollers and like most say here, are reformed, and never gamble beyond their means.

In addition, gambling should be viewed by most as just another form of entertainment. If the USA regulates and taxes online gaming you would then have to make a choice. Are you more comfortable knowing it’s regulated and you‘ll receive every cash out in the USA? If you think your going to win too much and taxes will become a major problem then of course you’ll have to opt out.

If you have to worry about who’s going to collect the interest on your taxes that are withheld from winnings during the year, maybe that’s not that bad of a problem to have. Paying millions of dollars in taxes up front after winning a lottery is considered a blessing.

 

[GrandMaster]

I guess the question is are you happy to have the IRS earn interest on your money or would you rather have it in your pocket?

Experience shows that Americans would rather lend money to the government interest-free and get a refund than adjust their withholding and owe money on their tax return.

 

[P.V.]

UK online gambling tax.

Well not sure if this will pass but it appears the UK is facing online gambling taxes too.

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[felicie]

It'll be interesting to see if US players will continue to participate at non-US licensed casinos just to avoid the "big brother" aspect of the feds keeping track of your gambling activities.



US players will be in a database and the US government will know how much each individual spends on gambling...to the penny.

Like I have said so often, be careful what you wish for.

Shhhhhh

And I saw yesterday Vegas stocks went up nicely although don't know if that has anything to do with anything but it made me go ah ha! lol