Though still in final negotiations, American professional poker players will be elated when the official announcement is made that the US Internal Revenue Service and the American Gaming Association reached an agreement regarding the IRS Procedure 2007-57.
IRS Revenue Procedure 2007-57 states in Section 3.01 that the procedure would put the classification of poker tournaments as a ‘wagering pool’. IRS regulation 31.3402(q)-1(b)(2) requires withholding on wagers in a wagering pool if the proceeds from the wager exceed $5,000. The regulation further states The IRS will not assert any liability for additional tax or additions to tax for violations of any withholding obligation with respect to amounts paid to winners of poker tournaments under section 3402, provided that the poker tournament sponsor meets all of the requirements for information reporting under section 3402(q) and the regulations thereunder.
The AGA Tax and Finance Task Force was successful in lobbying against the Internal Revenue Procedure 2007-57. Quite a panic was initially spread when unofficial announcements were made that the 25% withholding tax on all winnings over $5,000 was already set in stone. Walter Chalmers, AGA Vice President, Government Affairs is reported as saying that the proposal was abandoned after an assessment of the rule’s viability and following negotiations with the IRS’s rulemaking group and that a new IRS Revenue Procedure will be issued in accordance with the new rule once the final details have been worked out.
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