Online casinos are raising difficult questions when it comes to taxes. Should players have to declare all winnings as income? Or should losses incurred be subtracted from the winnings before taxes are added?US law is unclear on taxing online gambling winnings because of its relatively current subject matter. There is no federal law that defines what illegal gambling is or if it pertains to online gambling.
In this case, officials have to look at individual state tax laws to determine proper protocol. In some states, it is up to banks to decide if they will accept deposits from online casinos or not. They can return the deposits, deny them or even to close accounts attempting such deposits. In others, such as California, the player has the burden of proving that online casino games are legal and that their losses can make up for their winnings.In the meantime, the Unlawful Internet Gambling Enforcement Act (UIGEA) was imposed in 2006 and is set to become effective on December 01, 2009.
There are so many different opinions on online gambling that some officials are requesting the Act be pushed back until 2010 so the details can be straightened out. Some different options for the online gambling industry are; it could be deemed illegal in all forms, certain online games are allowed or it can remain as it is now where only sports betting is illegal.In the meantime, suggestions, especially for California residents, teeter on the line between legal and illegal in that they say to report full winnings and deduct losses on a separate line. In the case of online gambling, all deposits would be recorded in the client’s account and are therefore easy to prove.