The problems with cashouts and tax liability

[Unabridged]

with recent delays/problems with cashouts, some may believe that it is uncertain whether or not they will ever see the money they won. would it then be legal to only claim money that actually reaches your bank account as income?
for example, lets say you were a drug dealer and you think someone owes you $10000. they may dispute how much they owe and you are not sure if they will ever pay you this much or nothing at all. does the IRS expect you to claim this $10k that exists only in your mind as income before you ever see a dime?

[genesisgkh1]

This is why much of the information given in this forum is suspect. All of the tax info given is based on B&M poker rules. Easy to define sessions and income when you play live. Those rules are harder to apply to online play. Obviously, there is no income to report or taxes to pay if you do not receive any income. Yet according to many here, you must pay taxes on "virtual income". IMO money you have earned but may not be able to cash out is much like accounts receivable on a balance sheet. It may be owed to you but until you are paid you do not pay taxes on it. Unfortunately, the IRS has not yet clarrified any rules with regard to online poker. Heck, they haven't even defined a "poker session". So, to answer your question, I don't know. Maybe you should report the income per session then deduct a loss later for theft.

[Unabridged]

what if think your employer is going to give you $1 million for work done, but he only ends up paying you $1000? are you supposed to claim $1 million in income then deduct $999000 in losses?

[Sniper]

[ QUOTE ]
with recent delays/problems with cashouts, some may believe that it is uncertain whether or not they will ever see the money they won.

[/ QUOTE ]

Your starting premise is faulty... just pay your freakin taxes... Neteller is not running off with your money...

[ChipLeeder]

OP says "IMO money you have earned but may not be able to cash out is much like accounts receivable on a balance sheet."

You are absolutely categorically wrong...and besides that you have no clue...you are taxed on money as you earn it..where it is parked is irrelevent

Lawyers have tried a similar trick by leaving earned money in there trust account and not transferring to there operating account...when caught they have been nailed by the IRS

[Eric H]

It's called "Constructive Receipt." Once the money is deposited into your account, you are deemed to have constructive receipt since you now have access to the funds. Wether or not you are able to transfer that money from Neteller, would be irrelavant in the eyes of the IRS.

The IRS defines constructive receipt as; "the date when a taxpayer received income, such as a dividend payment, interpreted as the first date the taxpayer has the right to claim it, whether or not that claim was actually exercised."

Good luck.

[Zobags]

[ QUOTE ]
first date the taxpayer has the right to claim it, whether or not that claim was actually exercised.

[/ QUOTE ]

I am trying to exercise my claim to the money, but it isn't working. It seems I don't have that right as of yet.

[phish]

I'm pretty certain you are supposed to declare everything you've made/won, but can then deduct for uncollectible debts, casualty loss, etc.

[coltrainSTL]

When the money is in your pstars account(or whatever site) you have access to it and you are able to use it to make more money therfore you must pay taxes on this money. Just because you choose to transfer your funds to a third party instead of requesting a check means nothing.

[dollerAday]

Who’s to say the poker site will actually pay you? If such places are funding terrorist activities they surely couldn't be trusted enough to pay out, correct?

[Unabridged]

[ QUOTE ]
Who’s to say the poker site will actually pay you? If such places are funding terrorist activities they surely couldn't be trusted enough to pay out, correct?

[/ QUOTE ]

exactly, in the governments eyes this is no different than drug dealing. why should a few numbers on a computer screen from a criminal equal recieved money.

[sports_quant99]

Guys - i'm pretty well versed in gambling tax laws... this is a tricky area.

The counter argument to the "constructive receipt" doctrine might be that there is a "substantial risk of forfeiture". But then the counter argument to that is that before 1/14/07, there was no "substantial risk of forfeiture".

So what if you won $10k in Dec 2006, and Neteller now stiffs you? My hunch is that technically in the eyes of the IRS, you would owe tax on the $10k in 2006, then have to claim a bad debt or theft deduction in 2007.

On the other hand, what if you won $10k yesterday, and the book only allows a transfer to Neteller. Then Neteller stiffs you. In this scenario, i do not believe you would owe tax.

[r0eKY]

gross, all of it

this entire place is a mess