Neteller, the DOJ, and the IRS

[AR182]

"Let's say you have $5K still in Neteller. April rolls around and your funds are still stuck in there. Are you supposed to declare this money and pay tax on it?"


Ask the easter bunny to pay it? <font color="purple"> </font>

[LotsOfOuts69]

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If you're one of those who just lost the first gamble, do you want to double-down and bet that the IRS won't find you or do you want to amend your return(s) and pay the tax that you knew you owed...and the interest and penalties?


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FWIW, I dont see the difference between these two options. OBVIOUSLY, if you have between $100,000-$1 million in unreported income, they will come after you, I dont need an internet article to let me know that I'm in trouble.

I think most people are more small time and a little concerned over the few thousand dollars they may have made over the past few years...will the IRS really come after that?

I think those letter audits are the most likely outcome, even for the bigger time transactions. Its no big deal if you just give them the money that they are due.

They just want their money.

[1MoreFish4U]

Just so you know, casinos can &amp; will supply you with hard copy records of your rated play if you request it in writing.

I have worked at several and this question came up many times, for tax reasons and divorce proceedings - and every casino produces it upon written request and proof that you need it.

That may be good or bad - depending on your reason.

[joker122]

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They just want their money.

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seriously. the IRS does not measure its success by how many indictments it makes. rather, it is simply a matter of dollars and cents. if they put you in jail you can't pay them. they just want to be paid.

[momo_the_kid]

yeah. it is funny how many people here think they will automatically go to jail if IRS finds them not report or under-report gambling income. Besides, the tax law on gambling itself is just not a great example of legal wisdom. The IRS probably just doesn't think anybody can make consistent profit on gambling, so they dont even bother to write a good law about it.

[Leader]

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Although I don't have intimate knowledge of this stuff, as I'm not in accounting, I believe there are quite a few tests. Just FYI.

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How about the actual fact that many of us actually play much larger live than online and have had some huge losses?

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In my understanding it's not about size of losses. One test involves the distribution of the first number of your loss. If you're just filling in random numbers, the numbers will be evenly distrusted. The first digit of real numbers that count things, in this case amount lost, are heavily skewed toward 1. There's an exact formula. I'm sure it's on Wiki or something. In any case, it's my understanding that there are other relationship tests like this which are commonly used to detect accounting fraud. If you're numbers are real, it's very unlikely you'll be flagged.

[Catt]

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How does receiving more than $10,000 in one transaction make Neteller a "foreign bank account?"

An e-wallet is not a bank under any meaningful definition of the word.

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Luckily, you needn't concern yourself with what might be considered a "meaningful definition" nor even the definition of "bank" -- because the regs are quite a bit clearer about what must be reported (of course, you can always challenge the Treasury Dept's authority to define it in such a way pursuant to its grant of authority under the enabling law. Please let me know how that goes.)

Look, I don't necessarily have a view on the government's approach to online gambling, or to the rumors / speculation about what Neteller might be discussing with DOJ -- but if you want to try and make an argument about general legal obligations, at the very least do so on the basis of some rudimentary knowledge of the obligations at issue and not on nothing more than your own personal view of what the terms used in a marketing message from a CPA "client alert" means in terms of of authority or enforceability. It's these sorts of posts that lead guys like spino1i into a certain degree of over-confidence (IMHO).

[Troll_Inc]

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In my understanding it's not about size of losses. One test involves the distribution of the first number of your loss. If you're just filling in random numbers, the numbers will be evenly distrusted. The first digit of real numbers that count things, in this case amount lost, are heavily skewed toward 1. There's an exact formula. I'm sure it's on Wiki or something. In any case, it's my understanding that there are other relationship tests like this which are commonly used to detect accounting fraud. If you're numbers are real, it's very unlikely you'll be flagged.

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Just use Excel's random number generator.

[damaniac]

Is this it Leader?

Cliff's notes: Benford's Law
Benford's law, also called the first-digit law, states that in lists of numbers from many real-life sources of data, the leading digit is 1 almost one third of the time, and larger numbers occur as the leading digit with less and less frequency as they grow in magnitude, to the point that 9 is the first digit less than one time in twenty.

[damaniac]

Here's the issue I have with it. Okay, granted, the IRS is unlikely to criminally prosecute everyone they find, let alone a bunch of poker players who made between say $1k/10k unreported. So they send those letter audits. Here's the dilemma as I see it for the poker player: still, why pay (if you haven't already, obviously; I'm talking more about past returns than going forward, specifically if you didn't pay for say 1 year, not a pattern of abuse).

If you get caught with a letter audit, you owe the back taxes plus interest plus penalties. Is this any different from what you'd pay if you amended and paid late? If so, they don't do a very good job incentivizing one to voluntarily pay late. They should either provide more lenient treatment to voluntary amenders, harsher penalties to those they catch in letter audits, or a respectable number of prosecutions of small-timers. The last is undesirable both for the direct economic gain (costs way more than its worth unless the deterrent effect is quite strong) and is may have some public backlash. This make sense?