Understanding Withholding Tax for Australians at the WSOP

By: Paul Birman

Unfortunately Australia does not have a tax treaty with the United States.  That means any time an Australian wins more than $5,000 above the buy-in amount in a poker tournament in the US (such as the WSOP), the casino is obliged to deduct a 30% withholding tax.

The only way around it is if you have dual citizenship and can produce a passport where the country has a tax treaty with the USA.  In other words, if you have two passports, produce the European or US passport when claiming your cash.

But all is not lost.  As an Australian (or other nationality with no tax treaty), you are entitled to lodge a US tax return and can claim back the tax taken from you. 

This is why it is very important to hold onto your receipts.  You can expect to claim back the expenses you incurred while earning your winnings.  The key deductions will usually be tournament buy-ins, airfares, accommodation, car hire, food and drinks.  If you have been gambling on table games and lost money – those losses can also be included as deductions.

The US tax return is separate from your Australian tax return. You will still need to lodge your regular Australian tax return. 

I highly recommend engaging an agent to assist you in the process of lodging a US tax return.  It can be a difficult process that can be made much easier by having a good agent’s assistance.

After last year’s WSOP, I engaged Theresa Fox of Fox and Associates, Inc.  The company’s website is http://www.tfoxandassociates.com.  A few trusted Australian poker professionals recommended me Theresa’s services. I paid a fee up front and the firm drafted and lodged all the required papers.  I needed to provide to my agent copies of all my receipts, a copy of my Form 1042-S (explained below) and a certified copy of my passport from the Passport Office.   The certified copy process is free and took about five minutes at the passport office in Melbourne.  You just hand over your passport and inform the attendant that you require a certified copy to lodge a US tax return. 

When you receive your cash from the casino, they will issue you a Form 1042-S.  This form lists a number of important details including the amount of withholding tax the casino has withheld.  Keep this form in a safe place, as you will need to provide a copy of it to your tax agent. 

If you have not previously lodged a US tax return, your US tax agent will also assist you in applying for a US Individual Taxpayer Identification Number (ITIN).   Once you have one, you should keep this number with you when collecting your winnings in the US, as it will help speed up the process when you lodge your US tax return.

Once all the documents are lodged, and as long as there are no irregularities, you can expect a $US cheque delivered to you in Australia or the refund amount deposited into your nominated $US bank account.  You then have the choice of paying fees in Australia to bank a non-$AU cheque or open up a $US based account (here or in the US).  I plan on opening up a bank account in Las Vegas when I arrive, depositing my refund cheque and then withdrawing the funds. 

The amount of the refund will depend on your winnings and expenses.  For an estimate of the expected return, you can ask your tax agent.  Obviously, there needs to be enough tax withheld by the casino to justify your expense of hiring the tax agent – but any time you can get some money back it seems worthwhile.

The process works and last week I received my tax refund for all the money withheld from my 2012 WSOP Main Event cash.     

Poker players are not the only Australians subject to US withholding tax in casinos.  Any winnings at a US casino over $5,000 can be taxed.  So when you win that slots jackpot or ship a baccarat or black jack tournament – reread this article and KEEP THOSE RECEIPTS!

Incidentally, Australian casinos do not deduct tax from visiting poker players, as gambling is generally not considered taxable income in Australia.  Better beer, friendliest people, professional staff and no withholding tax on winnings – no wonder why the world wants to play poker in Australia!

If you have any questions regarding tax in the US, please feel free to post them in the comments section below and we'll do our best to answer them.

The above information is provided as a guide and is based on the author’s personal experience. Readers should conduct their own investigations and seek legal advice with respect to tax matters.

Paul B Birman will be attending the WSOP from 12 June to 15 July for Poker Asia Pacific and NOVA FM.  You can follow Paul on twitter at @PBBirman.