I received this email from my CPA. She got the info from a blog she reads. Thankfully, I have paid all of my taxes.
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Note: All Content is Copyright © 2006 and 2005 by Clayton Financial and Tax
Neteller, the DOJ, and the IRS
One of my practice areas is professional gambling.
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It's clear from the Neteller press release that they are in negotiations with the DOJ, and that transaction records are being sent from Neteller to the DOJ.
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It's also certain that as part of such a deal Neteller will agree to release details of all transactions between American customers and Neteller.
What does the DOJ want with thousands of pieces of data? Well, Neteller required the customer's name, address, and for many accounts, their social security number. The details of those transactions will undoubtedly be sent to a government agency that's in the revenue collection business: the IRS.
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So what does that mean for the customer who used Neteller?
If you complied with the law—you reported all of your gambling income and your foreign bank accounts—you have nothing to worry about.
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... will check their records and come after those who didn't declare their Neteller account. A few individuals may even face criminal prosecution over this, if they had extremely large transactions from Neteller.
Second, the IRS will check their records and see if individuals receiving funds from Neteller declared gambling winnings. The IRS will almost certainly target those receiving large amounts. If an individual received large amounts from Neteller, and didn't declare any gambling winnings, now is the time to amend your return, and pay the tax, interest, and penalties. It's almost always better to come forward to the IRS than to have the IRS knock on your door.
The IRS's first targets will be those with large (in dollars) transactions. But given the ability of the IRS to conduct computer matching, if you received funds from Neteller and didn't declare any gambling winnings, you might receive a "letter audit" from the IRS. ("Dear taxpayer, we've added $xxx [the amount of money you received from Neteller] to your income. If you agree, pay the tax, interest, and penalties....')
I believe that a few individuals will likely face criminal prosecution over this. If the IRS can find an online gambler who earned over $100,000 and didn't declare his gambling income (and I think the IRS will have several to choose from, and might even find someone who earned over $1 million) that individual could find himself facing jail time for tax evasion.
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As I've said many times, gambling income is taxable. The Tax Code isn't fair to gamblers, but the alternatives if you don't pay your taxes are worse than paying the tax that you owe.
Posted by
Russ Fox on Thursday February 8, 2007 at 12:20pm.