Ok, so I just listened to the tax segment on last night's show and want to clear a few things up:
#1 -- the arguement regarding the IRS not getting involved with Neteller and PokerStars is bad on two levels. First these were not handled by the DOJ, and they dealt with frozen, not seized funds (the companies never lost possesion of the money, or the lists of what players were owed, where the DOJ is using forfeited/seized/fines to repay players and has a list of precisely who is recieving what). Second, and more importantly, the IRS can get you either coming or going, so there is no telling if players who received large sums of money from these payouts (especially on Neteller which is linked to a persons credit card or bank account and easily trackable) were targeted when they did their taxes, so Druff's assertion that the IRS didn't care about these is just a guess considering most people don't talk about audits.
#2 -- The idea that the IRS "would take your word for it" is laughable. When you are audited the burden of proof falls on you to show a paper trail of where the money came from. If you have no records showing a $20,000 deposit than the $6,000 you are cashing out is considered untaxed unless you can prove otherwise. I've been audited, my aunt is a CPA and walked me thorugh the whole process, and the first thing they want are your financial statements (the detailed day-to-day reports) which they can match up to your claimed income (in my case they mainly matched up my PayPal account with my bank statements along with a few thousand dollars from poker sites that came in via checks). If it doesn't match up then you are in trouble, and your word means ZERO. They also look at your purchases (cars, houses, what have you) and see if your lifestyle matches your income.
For cash game players they would look at your deposits and withdrawals from your bank accounts and such, and piece it together as best they could. So if you deposited $60k in the bank over the course of the year and are claiming $40k in income there is going to be issues. But the point is: It is up to YOU to show the paper trail, if you can't then the IRS has a case against you.
#3 -- Druff is overlooking that these tax evasions may be going back 5 years with some players. It's not just the current cashout money on Full Tilt that would come into play, but also the money these players haven't been declaring for years --which would come out in a full audit. For someone like Tom Dwan who has made millions online over the past five years it's bigger than the $1,000,000 he may have in Full Tilt at the moment.
#4 -- for most players pokers winnings would be counted as gambling winnings (unless you are listed as a pro player on your returns) so you fall into the same category as someone winning the lottery. Gambling winnings are taxed differently and require a separate form after xx amount, which you may just have to fill out if you cash out from Full Tilt, just like you would at a casino.
#5 -- I asked around and the Full Tilt money would be considered 2012 income regardless of when you made the money. So it's more likely that the IRS will just monitor the cashouts when 2012 taxes are prepared. My guess is that poker players getting audited rises significantly next year.
#6 -- this "income" from someone who made big money will not just get nailed as a 35% tax rate, but he also has to pay SS and MediCare taxes on it, which is like 12% or so last year for self-employment tax. So if big winners have been avoiding taxes they will get reamed and possibly face criminal charges for tax evasion and possible fines and penalties
#7 -- Finally, this information is being handed to the IRS on a golden platter since all the DOJ has to do is send them the list of people who cash out from Full Tilt. A single IRS agent could enter than into the computer system and bingo, they have an earmark on every person who recieved at least $xx from FTP. If there are discrepencies when the tax returns are filed the computer system will pick them up and ... Audit.
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Originally Posted by JimmyG_415
