You [should] pay taxes on any income you earn in the US. Whether you are playing for fun or as a hobby.

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“There's no sense in being precise when you don't even know what you're talking about.” - John von Neumann

really? I get such mixed answers from so many different people. Someone just told me that as long as you cash out under 10k, its tax free

I understand that this forum might help people with these tax questions, but what's so difficult about calling up an accountant and asking?

As for my personal advice, taking the check to a check cashing place sounds like a good idea, then depositing the cash in your bank account. In the event of an audit, couldn't you just say you had a yard sale or sold some family heirloom to a collector? Neither the IRS nor anyone else could prove otherwise...

It isn't the IRS's job to prove otherwise: It's your job to prove its true.(At least by my 16 year old understanding of tax laws)

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“There's no sense in being precise when you don't even know what you're talking about.” - John von Neumann

To address a few points here;

1. no the gambling site does not have your ss#, but your bank account does.
2. you *could* deposit a 5k check and not report it, and probably not get audited. Usually the 10k mark is where the IRS flags you. Do you really want to take that chance though?
3. Tax is subject to where you live. TX has no income tax, and the federal tax on winnings is capped at something like 33.7% Therefore if you won 10 million you'd get to keep about 6.5 million. If you live in a state where there is a state income tax, then that has to come out too.
4. Hachem still has to pay the US tax. Regardless of nationality or country of origin, if you win in the US you pay the US. EU citizenship is not going to help either. I have friends that have retained citizenship in European countries and they pay income tax regularly.
5. yes as a pro you have to pay taxes, and the bigger a pro you are the harder it would be to evade taxes. However, you have to also consider that if you pay professionally, your buyins, travel, hotel, food away from home, all things basically required for you to play professionally are tax deductible, so really the tax rate becomes quite comparable to working class tax rates when you factor that in.
6. if you sell an heirloom the profit you made on it is taxable. Yard sales are taxable if you have more than 2 a year or you make more than $1,000 on them, so neither of those scenarios solves the problem. The IRS does have to prove that you didn't pay your share of the taxes, the burden of proof does fall on them and that is the purpose of an audit. However, they just look to see what income you have earned and what you have paid in taxes. If you have not paid enough taxes for the amount of income earned, THEN arguments as to why this is the case could be waged on your part. Banks are required to report any transactions at 10k or above. This doesn't mean that your 5k would slip under the radar, it only means that the bank doesn't have to alert the IRS to the transaction.

Wow! Thanks for such detailed information- I'm sure everyone who posted on this thread really appreciates you clearing the air on all those tax issues, and also agrees that US tax laws suck!

Just a thought then, maybe the WSOP should consider moving the main event to a country with no taxes on gambling income, like Canada, Ireland, or Australia... I know it obviously wouldn't have the flair and glitz of Vegas, but I'm sure EVERYBODY who plays in the events in the hopes of cashing would be very up for it... What are everyone's thoughts?

At a casino (or racetrack, or whatever) 10K is the point where THEY withold taxes and report it to the IRS. You are supposed to report ANY income on your tax return. Yes you COULD just deposit your check into your account, but if you do get audited I'm sure a deposit of that size would stand out and you'd be asked to verify where it came from.

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I'm CDO. It's like OCD, but everying is in order just like it should be.

True Girevik, and to add to that;

there is opportunity to claim gambling winnings on your tax return, even an opportunity to claim income from illegal sources.

there is an organization that you can belong to, and they have an annual membership fee of something like $200. What you get is information on taxes and auditing, and if you are audited they represent you, handle the audit, even provide an attorney and legal services to see you through it. I forget the name of the place and by now there might be more than one, but I know that no person who is a member of this organization has ever been audited.

Probably the best thing to do if you really want to stay under the radar is play only live games, cash out under 10k, and keep your cash out of bank accounts. Buy a safe for your home. When you spend that money use it to pay bills or buy goods that do not have titles or deeds attached to them. Honestly though if I was winning that kind of money regularly I'd just report and pay the taxes and not have to be looking over my shoulder or be careful about my spending.

You guys are also forgetting the fact that when you deposit a cheque into your bank, depending which one you deal with , may have initiatives to prevent anit-money laundering, and consider amounts in excess of even 5k to be suspect. Remember that the bank has to inform authorities of possible unusual activities with regard to someones account.

Be careful.

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All good points. Thanks for the feedback. Anyone know if check cashing places have the same rules as a bank where they have to report checks over certain amounts?