US online game players to pay taxes

Anyone who needs to report their winnings is automatically emailed a request for tax information, said Seth Palanksy, vice president of corporate communications for Caesars Interactive Entertainment, which operates WSOP. Additionally, WSOP will not release the winnings until the player has provided them with the necessary information. Players do have the option of having the taxes withheld in advance, as opposed to having to deal with them later themselves.

Before online gambling was regulated, players tended to play in offshore accounts, and thus avoided the radar of the IRS. But now that online gambling is legalized in these three states, the IRS has an easy way to track winnings, and to tax them.

As of now, Nevada is the only state that does not have a data-sharing agreement with the IRS, but the federal government can easily deliver a summons to any of the state's regulated sites in order to track a player's winnings. Nevada's regulated gambling sites include Ultimate Poker, WSOP and Real Gaming.

Russ Fox, a federally licensed tax practitioner in Las Vegas, commented, "Now if the IRS wants to get the records, they can," Fox said. "Those companies will be cooperating. They have to."

Brad Polizzano, a New York tax and gaming attorney, said, "The IRS is in position to get the message out and make an example of some taxpayers who don't (pay taxes on Web gaming)."