Frozen Neteller funds *ARE* taxable

[DING-DONG YO]

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Example 2 (In case you just said what I thought you were going to say):

I wanted to move $5000 from Full Tilt to Stars, so I moved it from FT to Neteller...and then to Stars. I could have cashed it out when it hit Neteller, but I didn't.

Is that taxable too?

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Yes....has nothing to do with moving money around and/or cashing it out. It's taxable when you've finished a winning session (and assuming that the Poker site is solvent and would pay you upon request).

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read that sentence and read it again.

[sports_quant99]

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OP, you are not forced to pay income that you never realize. If you cannot access the funds, then you never realized the income.
I'm too busy to look up the exact guidance on this right now, but you're not correct. I've been doing this for 10 years, trust me.

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You're 100% wrong. Trust me.

It's not whether you "can" access the funds. It's whether you "could have" accessed the funds. And you "could have" accessed the funds in 2006. That's constructive receipt in the eyes of the IRS. They don't care that you chose not to.

I'm not sure what you've been "doing" for 10 years, but it's not tax law.

[Our House]

[ QUOTE ]
[ QUOTE ]
Example 2 (In case you just said what I thought you were going to say):

I wanted to move $5000 from Full Tilt to Stars, so I moved it from FT to Neteller...and then to Stars. I could have cashed it out when it hit Neteller, but I didn't.

Is that taxable too?

[/ QUOTE ]

Yes....has nothing to do with moving money around and/or cashing it out. It's taxable when you've finished a winning session (and assuming that the Poker site is solvent and would pay you upon request).

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Half of the payment processors are owned/controlled by the poker sites. You're saying that because Neteller is independently (not pokersite) owned, that it doesn't qualify as a "Poker site being insolvent"??

If that's the case, and Neteller has no liability or connection to gambling sites, then why were their founders arrested in the first place?

[DING-DONG YO]

ok then, I'll look it up later. I am a CPA and I've been doing this for 10 years.

Post links to your guidance on this if you're so sure.

And again, you are wrong.

[sports_quant99]

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
Example 2 (In case you just said what I thought you were going to say):

I wanted to move $5000 from Full Tilt to Stars, so I moved it from FT to Neteller...and then to Stars. I could have cashed it out when it hit Neteller, but I didn't.

Is that taxable too?

[/ QUOTE ]

Yes....has nothing to do with moving money around and/or cashing it out. It's taxable when you've finished a winning session (and assuming that the Poker site is solvent and would pay you upon request).

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read that sentence and read it again.

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Good catch....let me clarify. Read this carefully:

It's taxable when you've finished a winning session and assuming that the Poker site was solvent and would have paid you upon request right after completion of the session.

Not sure where the cutoff point is for "right after".

[Our House]

FWIW, my accountant told me that my online income isn't taxable until it's received by me (cash in hand), or by my bank (electronically).

[DING-DONG YO]

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“Income although not actually reduced to a taxpayer's possession is constructively received by him in the taxable year during which it is credited to his account, set apart for him, or otherwise made available so that he may draw upon it at any time, or so that he could have drawn upon it during the taxable year if notice of intention to withdraw had been given. However, income is not constructively received if the taxpayer's control of its receipt is subject to substantial limitations or restrictions.” IRS Regulation 1.451-2(a)

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Could the IRS take this stance and say you need to pay taxes on what is held up in neteller, sure they could.

Could you take them to court and argue that "substantial restrictions and limitations" have been placed on those funds and beat them? Probably.

I see your point, but this isn't a cut and dry "funds held in NT ARE taxable" issue. It's a "funds held in NT may be, but probably aren't, taxable"

[sports_quant99]

[ QUOTE ]
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[ QUOTE ]
Example 2 (In case you just said what I thought you were going to say):

I wanted to move $5000 from Full Tilt to Stars, so I moved it from FT to Neteller...and then to Stars. I could have cashed it out when it hit Neteller, but I didn't.

Is that taxable too?

[/ QUOTE ]

Yes....has nothing to do with moving money around and/or cashing it out. It's taxable when you've finished a winning session (and assuming that the Poker site is solvent and would pay you upon request).

[/ QUOTE ]
Half of the payment processors are owned/controlled by the poker sites. You're saying that because Neteller is independently (not pokersite) owned, that it doesn't qualify as a "Poker site being insolvent"??

If that's the case, and Neteller has no liability or connection to gambling sites, then why were their founders arrested in the first place?

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It's very simple. The fact that you chose to transfer funds from the poker site to Neteller shows the IRS that you could have instead received a check from the Poker site, or at the very least, cashed out of Neteller immediately (Neteller was still cashing people out as of 12/31/06 with no delays).

Even if Neteller was owned by a poker site, the argument still wouldnt hold water. If you won 10k in Jan 2006, and could have cashed out in Jan 2006, but didnt, you would probably still owe tax - the grey area is how "immediate" does a declined cash out request need to be? (a good point which i need to look into).

But in the Neteller case, it is close to black and white.

[Austiger]

So if I won money in 2005, but it was in Neteller until 2006, at which point I withdrew it to my bank...can I pay taxes on it for 06 or do I need to do an ammended return and count it as '05. (it's only about 1,500.)

I was going to do an ammended return, but if what you're saying is true, it would actually count as 06 income.

[sports_quant99]

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FWIW, my accountant told me that my online income isn't taxable until it's received by me (cash in hand), or by my bank (electronically).

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Your accountant is wrong, although as a practical matter, you'll probably get away with it and/or not get in trouble (unless we're talking big amounts here)