I think they have max amounts until they have established you as a reliable customer... like 1k or 2k max to start... probably $500 to 1k if it's not a paycheck....

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how about if someone sells a $6k item on ebay. If they accepted payment via paypal or check, do most people report those items?

You have to... its reported as income... there was a lady on our local news this past year that got audited because she didn't report 5k in income from small ebay sales....

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Most of the time a single cheque for 6k is going to be in the form of a cashier's cheque, which can certainly be tracked as it's insured by the federal government if the funds were drawn from a US bank. Most sellers will not accept a personal cheque in the amount of 6k. I know I wouldn't.

But to answer your question I would venture to say that a lot of people don't report these things. Some get caught some don't. I really wouldn't risk it, the penalties can be very severe.

I know personally of several cases where the IRS knew of the debt but did not bring it forth to the individual. They sat on it for 10 or 15 years adding penalties and interest before finally bringing it to the attention of the person in debt. What may have been $500 turns into 50k or 100k over time. Even if a few years went by on some unreported income you could never be sure that it went under the radar. I would reporting taxes on all income to be safe.

ANY income you earn is subject to federal income tax. ANY.

Great post Mike! You've answered a lot of my tax related questions and I'm sure you've helped answer others as well. thanks

Thanks right back at you! Nice to know people appreciate the stuff we talk about on these forums!

I agree, everyone on this site has been very helpful. To further the discussion, I have one more question.

Let's say you win $6000 from online poker and you do report it on your taxes. If you wanted to claim losses against it, what proof is required and/or accepted by the IRS to prove that you actually did lose that much? I'm sure you can start with showing all deposits you put into Neteller/Firepay/etc but I've read that you may actually need written logs of each poker session that show even the smallest details for the IRS to accept your claimed losses.
Such details would be buy-in & cash-out amounts, table number(s), time of beginning & end of session, table limit amount, etc...

Basically, I've had some luck lately and won $8k and am trying to figure out the best way to take it out. I'm already 99% that I plan on reporting it in full on my taxes but I also have had losses against it. The losses are probably in the area of $1000.
I'm thinking that I shouldn't even bother claiming any losses against it because I don't have a detailed log of the above mentioned activity. In essence, no real proof of losses that would be accepted.
That being said, I'm assuming that going forward, I should log all online poker activity in the event I get lucky again but I'm not sure if there's a standard set of information that should be in a 'poker log'. If I'm going to log everything, I might as well make sure it's enough to satisify the IRS.
Does anyone know if there is a list of standards for this?

Thanks!

AAAQQ:

Reporting losses really will not help you if you ended up in the positive. The IRS is going to want to see what income you have earned.

Let's say for example however you spent $20,000 over the course of a year, losing most of the time. Then, when you're down to $1,000 you make it back to 8 grand and want to withdrawal the 8k. You haven't earned any income that hasn't already been taxed, so technically you wouldn't have to report it. If overall the amount of taxed dollars you invested is more than what your return was, then you shouldn't have to report it.

However, if you put in $1,000 then lost $500, then won $8,000 then you'd need to report on the gain of $7,000.

"They" are going to want to see what income you have GAINED that you have not paid tax on. Losses really only become a factor in the whole mess when you are cashing out less than your investment. If this is not the case don't bother claiming losses.

I suppose the best way to go about it without having to mess too much with the IRS would be to spend money from your firepay/neteller. This is still subject to investigation, but not nearly as much as depositing that into a bank account would.

I'm not sure that keeping track of each hand or each session even would be relevant. I don't know the answer for this one but I would venture to say that hand/session history would mean little to the IRS. Records from your bank or your online intermediary such as firepay should be sufficient to show if you've had a loss or gain. I could be wrong, but I just can't see the IRS being too involved with the analysis of your play to determine hand for hand how much money you won or lost.

Just to note that to my understanding (and Deme has stated it several times) UK (and EU) citizens do not have to pay tax on winnings in the US while US players do have to pay tax on winnings in the EU. Apparently there is a reciprocal agreement which effectively screws US citizens and makes it all very nice for us

That is hilarious gder. But not entirely correct. It is 40%state, 60%federal and 10% municipal for a total tax burden of 110% and an actual out of pocket expense of 10% of the winning money. Why do you think an American didn't win. They couldn't afford the loss this year.