Taxable Talk

The 2015 World Series of Poker begins on Wednesday at the Rio Hotel and Casino here in Las Vegas. While many things have changed for this year (for example, the WSOP will have a “Colossus” tournament this coming Friday and Saturday with possibly 20,000 entrants), some things have not. The Rio will continue to refuse to accept IRS Form 5754 for individuals backed (or ‘staked’) by others.

This player-unfriendly policy exists at few casinos, and it places a burden on players. Back in 2007 I wrote about this situation. It has now been eight years and nothing has changed. If you’re backed, you have to send out 1099-MISC’s or 1042-S’s for your backers:

1. If you’re backed by an American get a signed and completed Form W-9 from him before you pay him. If someone refuses to complete a Form W-9, you are required to withhold.
2. The issuance of 1099s is based on you backer profiting $600 or more for the entire year. So realize that if you have backers who profit $600 or more, the onus is on you for sending out Form 1099-MISC’s. (The 1099s are not sent until year-end.)
3. If you’re backed by a non-American, the situation is far more complex. You will need to obtain a Form W-8BEN; make sure it’s the new version that was released this year. The form must be complete in order for you not to withhold. It must have an ITIN, a Tax Treaty Article noted, with reasoning why there is no withholding, and it must be signed and dated. If you don’t have the complete paperwork, you must withhold even if your backer is from a Tax Treaty friendly (for gambling) country. If you don’t, you could be held liable for the tax plus penalties and interest! For specific scenarios, see this article I wrote in 2011.

Contrast the policy of the Rio to the player-friendly policies at other venues in Las Vegas that will be running other tournament series. The Venetian (which will run its Deep Stack Extravaganza), Binion’s (which has the Binion’s Poker Classic), and Caesars’ owned Planet Hollywood (with its Goliath Series) will all issue multiple W-2Gs for winners.

The policy of the Rio violates IRS rules. Unfortunately, only two sets of individuals can force the Rio to change its policy: WSOP management or the IRS. It’s clear that WSOP management is willing to accept the risk of violating the rules. They’re likely thinking, ‘We’ve done it for seven years and nothing has happened; there’s no reason to make a change that will cost us money.” I know that players have complained about it to the powers that be at the WSOP but they haven’t budged.

The IRS could also get involved. I recently spoke to two individuals at the IRS and mentioned this issue to them. Unfortunately, I have no idea if either will do anything about it (though both took notes on what I told them). Even if something were to happen it’s not likely to happen quickly: The IRS is not know for expedience in the best of times. Meanwhile, I get to issue 1099s for clients impacted by the Rio’s policies.

If you’re coming to Las Vegas for the WSOP or any of the other tournament series in town, have fun and good luck at the tables. Just remember that you will likely need to issue your own 1099s or 1042-S’s if you are backed.

This entry was posted on Monday, May 25th, 2015 at 4:44 pm and is filed under Gambling. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.