Frozen Neteller funds *ARE* taxable

[Poker CPA]

On midnight December 31st, if you have YTD winnings sitting on the table, in your poker account or in Neteller; its taxable. If you lose the money the next year, playing or by theft, its still taxable as of December 31st. The loss or theft applies to the year in which it happens, which in this case is next year. Mr "sports quant99" is 100% correct. You pay tax on YTD winnings, no matter where it is.

Therefore, COULD HAVE equals taxable. This is TAX 101.

If on December 31s the amount you have available is not part of your YTD winnings, then its nontaxable.

[Uglyowl]

Practical application of tax law is more important than anything [img]/images/graemlins/smile.gif[/img]

Good CPA's make their money by knowing what is "bendable" and what is not.

[Lottery Larry]

[ QUOTE ]
then write off a loss due to theft.

In the neteller example, the money has not been stolen from you (yet), it is simply inaccessable.

[/ QUOTE ]

I thought you COULDN'T deduct the theft amount?

And I still don't understand how accessibility has anything to do with the defintion of earned income. If you choose NOT to withdraw the funds from the online site, you'd have to still report the gains as income.

Why would the ability to access the funds have anything to do with Uncle Sam the Tax Man?

[TheMathProf]

Wait a minute, though...

I'm hearing two different things:

(1) The moment at which your wins or losses are recorded are when you end a session.

(2) The IRS will likely have access to Neteller records regarding withdrawls and deposits.

But these two don't necessarily coincide.

For instance, suppose my biggest cashout of the year took place in January of 2006, with a big win taking place in December of 2005. I've already recorded the session in 2005, and paid taxes on it on April 15, 2006, even though the withdrawl took place this year. Suppose that I was a relatively break-even player both before and after that event.

Do you think this is so far fetched that the IRS would take the time and energy to process each of these? Realistically?

That's not saying that I condone any kind of violation of the law or not paying your taxes, but I simply don't think it's probable that something like this would really happen.

[DING-DONG YO]

[ QUOTE ]
Practical application of tax law is more important than anything [img]/images/graemlins/smile.gif[/img]

Good CPA's make their money by knowing what is "bendable" and what is not.

[/ QUOTE ]

[img]/images/graemlins/heart.gif[/img] and [img]/images/graemlins/smile.gif[/img]

[Poker CPA]

If you lose money due to the Neteller situation, don't regard it as a theft. There are 2 limitations imposed on theft and they are harsh. Treat it as a gambling expense (or loss) on Sch A or Sch C. But the best option, of course, depends on the entire tax picture of an individual. One size does not fit all. Thats why I get the Big Bucks.

[sports_quant99]

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this is pretty solid stuff, sports, thx for the expertise..

as far as point #2 above...

in terms of the IRS reviewing ANYONES personal Neteller records (hard to figure them going through all US Neteller clients) will this ever be put on public record or be confirmed by "inside sources" do you think?

[/ QUOTE ]

Hey - not sure what you mean by inside sources or public record, but i would just assume the IRS will eventually see everything Neteller related. That's because, in addition to the Neteller records the DOJ will get, the Neteller ATM records can be subpoena'd via the domestic bank(s), and also any deposits/wires into your bank acct can obviously be seen by the IRS.

So just claim your taxes correctly and file form TDF 90-22.1 and Schedule B if necessary (search other threads for discussion of that form).

[/ QUOTE ]

I had assumed the IRS would see these records eventually also, I was just wondering if it would be a matter of public record the way the announcement of Neteller turning over records to the DOJ was...

I've posed this question on another thread but haven't received an answer, perhaps you would know...

Is it possible to ammend an '05 return in regards to claiming a foreign bank acct on form TDF 90-22.1? I did not file this form for '05 by the JUN 30 deadline...

If this is in fact ammendable do you know if there is a penalty and how much it is?

[/ QUOTE ]

Highly doubt it will be public record, unless you are criminally charged.

Can you amend 05? Yes, but you might get fined, and it might raise your audit risk to 90%. On the other hand, if you dont file, and get caught, i'm not sure what the risks are. Start here:
http://finance.groups.yahoo.com/group/JacobsReport

[Sniper]

[ QUOTE ]
If you lose money due to the Neteller situation, don't regard it as a theft. There are 2 limitations imposed on theft and they are harsh. Treat it as a gambling expense (or loss) on Sch A or Sch C. But the best option, of course, depends on the entire tax picture of an individual. One size does not fit all. Thats why I get the Big Bucks.

[/ QUOTE ]

PCPA... how can you consider the Neteller situation as a gambling loss, when Neteller has nothing to do with the business of gambling... they are a financial processor, that is all...

[sports_quant99]

[ QUOTE ]
Practical application of tax law is more important than anything [img]/images/graemlins/smile.gif[/img]

Good CPA's make their money by knowing what is "bendable" and what is not.

[/ QUOTE ]

But the scenario in this thread is not "bendable" at all, at least as far as what is legally correct. Under the facts (2006 poker winnings, 2007 Neteller freezes funds), there is no gray area at all, in front of the IRS or a tax court judge.

Now, when there is a legal gray area, that's where things are bendable....e.g. are poker accounts "foreign accounts" for purposes of TDF 90-22.1? That is a bendable gray area (for now), which even Russ Fox agrees with (see other thread today on that subject).

Now, would a CPA bend the rules a little and not claim the 2006 income? (since funds were frozen in Jan 2007). Yes, i'm sure CPA's will do it for many people. And chances are, the worst that would happen is that the taxpayer would only pay penalties, and that's only if they are caught. But that's more of a risk management strategy....one which many CPA's will NOT do, since it's technically illegal.

It's a whole different ballgame than a true legal gray area where the CPA can say with a straight face that they are making a good faith argument.

[sports_quant99]

[ QUOTE ]
Wait a minute, though...

I'm hearing two different things:

(1) The moment at which your wins or losses are recorded are when you end a session.

(2) The IRS will likely have access to Neteller records regarding withdrawls and deposits.

But these two don't necessarily coincide.

For instance, suppose my biggest cashout of the year took place in January of 2006, with a big win taking place in December of 2005. I've already recorded the session in 2005, and paid taxes on it on April 15, 2006, even though the withdrawl took place this year. Suppose that I was a relatively break-even player both before and after that event.

Do you think this is so far fetched that the IRS would take the time and energy to process each of these? Realistically?

That's not saying that I condone any kind of violation of the law or not paying your taxes, but I simply don't think it's probable that something like this would really happen.

[/ QUOTE ]

Don't quite understand your question, but it's very simple... as long as you've claimed it correctly on your 2005 taxes, it doesnt matter when (or even if) you ever cashed out, nor does it matter when (or if) the IRS ever gets any records.

Form TDF 90-22.1 is a whole other matter, but that's a subject for another thread.