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Casinos and other poker tournament sponsors will be required to report most payouts to winners and the Internal Revenue Service next year.

Some casinos and players have questioned whether sponsors who hold money for participants in a poker tournament are required to report the winnings to the IRS and withhold tax on the winnings.

The new requirement, which goes into effect March 4, 2008, is designed to clarify tax-reporting rules for poker tournaments.

For tournaments completed before March 4, casinos and other sponsors of poker tournaments will not be required to report winnings or withhold tax. After then, the IRS will require all sponsors to report winnings exceeding $5,000, most likely on an IRS Form W-2G.

Tournament sponsors who comply do not need to withhold federal income tax. If a sponsor does not report winnings, the IRS will enforce the requirement and require the sponsor to pay any tax that should have been withheld from the winner if the requirement had been asserted.

Withholding normally is 25 percent of any amounts that should have been reported.

For tournament sponsors to comply, a winner must provide a taxpayer identification number to a sponsor. If a winner fails to do so, the sponsor must withhold federal income tax at the rate of 28 percent.

Tournament winners by law must report all winnings on federal income tax returns regardless of the amount whether the winner receives a Form W-2G or any other reporting form.
by Christian Moises