Very early Saturday morning, Congress passed the Safe Port Act. Appended at the end of the legislation is the “Unlawful Internet Gambling Enforcement Act of 2006.” (The link takes you to the entire text of the act; go to page 213 to read the relevant portion.) Many of my clients have asked the question, will this change their tax situation?
No.
Whether or not an activity is legal generally does not change whether or not you report income from the activity. Indeed, this Act does not criminalize being an online gambler. (It does make it illegal to be in the business of operating an online gambling site.) Now, if I were a professional online gambler I’d leave out “online” from my profession on my Form 1040. But otherwise this new law changes nothing regarding the tax treatment of gambling winnings and losses.
If you want more information on the Unlawful Internet Gambling Enforcement Act of 2006, see:
Chuck Humphrey’s Analysis
Nolan Dalla’s Thoughts
Two Plus Two Legislation Forum (Lots of threads on the Act)