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Do you have to pay taxes on offshore gambling winnings?

| Oct 18, 2017 | blog

You’ve been playing poker for years. You started when you were a teen, playing with your friends for fun. No money changed hands. You learned the ins and outs of the game, though, and found you were really good.

Then poker blew up. It was all over the television. You started playing more and more at casinos. You began taking trips out to Las Vegas to play in big games and tournaments.

When you found online poker sites, you were in heaven. You didn’t have to go anywhere. You could play right from your computer.

Best of all, you don’t have to pay taxes, right? The sites you use are all based overseas. These aren’t U.S. corporations. The gambling isn’t on U.S. servers. The money doesn’t come from U.S. sources.

Does that mean you don’t have to pay U.S. taxes?

It does not. This is one of the most common misconceptions about online gambling. People think of it differently because it happens on the computer and the companies — and other players — aren’t Americans. They don’t think of it the same way they view playing in Vegas. They assume they don’t have to pay taxes, that they earned the money “under the table.”

There’s no gray area in the U.S. tax code, though. It says that you must pay taxes on money that you earn if you are a citizen of the country. That includes money earned through gambling — this goes beyond mere poker games — and it counts money you earn overseas.

There’s a bigger picture here, as well. Maybe you never earned the money online. Maybe you physically travel overseas to play poker and do other types of gambling. Then you electronically stash the money in your bank account and head back to the U.S.

You still have to pay. You must claim that money when filing your taxes. It’s still income. The government is less concerned with where you got the money — from a tax perspective — and more concerned with where you live. If you live in the United States, you’re not exempt from taxes.

Some people wrongly assume that they don’t have to pay because the money isn’t tracked. There’s no company filing tax papers with the U.S. government, like you get with your wages.

While that may be true, the IRS can still find that money. It’s in your bank account. An audit is going to show that mysterious income. It remains unaccounted for.

As you can see, it’s important not to fall prey to myths about the U.S. tax codes. No matter how many times you hear these myths repeated, you must search out the truth and know your real rights and obligations.