You will be required to pay a flat tax rate of 25% only if your net earnings for the year are higher than $5,000. Net earnings, in this case, refers to the difference between your total winnings and all your losses. If your total winnings for the year amount to $8,000, but you lost $4,050 (resulting in net earnings of $3,950, then you are not obligated to pay federal taxes on your winnings.</