SOURCE: Las Vegas Sun

Imagine that you've just won $100,000 in a poker tournament. But before you can pocket the cash, the casino swoops in to collect $25,000 to pay Uncle Sam.

That was the worst-case scenario feared by casinos and players after the Internal Revenue Service issued a bulletin last month saying that casinos would be required to withhold 25 percent of poker tournament winnings over $5,000.

The notice sent a shock wave through the poker community, which feared short-circuiting tournament growth in Las Vegas and beyond. Withholding taxes could have devastated legions of professional poker players who require a large cash bankroll to ply their trade, driving them from land-based casinos to offshore Internet competitors that allow players to dodge U.S. tax laws.

Or so everyone feared.

Negotiations between the IRS and the casino industry as recent as last week appear to have yielded the rarest of all outcomes: a win for all parties.

Rather than forcing casinos to withhold players' winnings, the IRS will require casinos to report winnings on a W-2G form. Players will continue to be responsible for paying taxes on their winnings at tax time. The policy will take effect March 4.

The American Gaming Association, which has butted heads with the IRS regarding the rate of casino worker tip taxes, is cheering the new rule.

"The IRS was appreciative of our efforts to ensure the flow of these tournaments," gaming association lobbyist Wally Chalmers said. "We're very happy with this procedure."

The IRS also benefits from the decision by the creation of a paper trail on players who win more than $5,000. Gambling winnings, with some exceptions, are taxable.

Although the World Series of Poker, the world's largest poker tournament, had reported winnings to the IRS, several casinos in town did not issue W-2Gs. Players at those casinos could collect winnings under the radar, potentially avoiding taxes.

Casinos that don't report winnings could be liable for players' back taxes, though it's unlikely the IRS would go after the casino.

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