Neteller, the DOJ, and the IRS

[efficacy]

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.

[spino1i]

well I do report some of my taxes and all the money that was once in my Neteller account is long gone now. Sure there are records of that money once existing (though there was never more than 15k-ish in my account), it has since dissapeared and been "lost" gambling. I report 13k-ish a year in taxes to make sure I have enough money in my bank account that it can all be accounted for by my reported income. The rest of the money (most of it is in Bodog) still cant be seen by the IRS. The IRS gets Bodog's financial records or PartyPoker's financial records and im in trouble.

The whole point is as long as you dont have large amounts of money (signifigantly more than you reported on your tax returns) hanging around in your bank account for long periods of time your fine. I have a 20k check coming from Bodog which will be cashed, go into my by account, withdrawn into cash, and "dissapear". The money will be claimed to be "lost" in the casinos, so that it can be deducted against my winnings. In reality the money will be stored in casino chips and cash.

[cardcounter0]

I wonder if someone could do a search and pull together all the old posts of:

a) I don't need to pay taxes because I use a neteller ATM card.

or

b) I don't need to pay taxes because the IRS can never force the Isle of Man Corporation Neteller to turn over their records.

I put the over/under on about 200 posts

[RockMySocks]

[ QUOTE ]
well I do report some of my taxes and all the money that was once in my Neteller account is long gone now. Sure there are records of that money once existing (though there was never more than 15k-ish in my account), it has since dissapeared and been "lost" gambling.

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[ QUOTE ]
Note: All Content is Copyright © 2006 and 2005 by Clayton Financial and Tax

First, Neteller is considered to be a foreign financial institution. If you have a foreign bank account, and have $10,000 or more in a foreign bank account(s) at any one time, you are required to file Form TD F 90-22.1 by June 30th of the following year with the Department of the Treasury and check the box at the bottom of Schedule B. If you have a foreign bank account and don't declare it, you can face civil and/or criminal penalties.

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?

Posted by Russ on Thursday February 8, 2007 at 12:20pm

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[chaz64]

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?

[JuntMonkey]

[ QUOTE ]
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?

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No, you're supposed to violently overthrow the government.

[TheRock69]

[ QUOTE ]
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?

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All you need to do is report your profits and deduct your losses for each session. It doesnt matter where your money is it is still taxable and If over 10k in an offshore account it also needs to be reported. In other words if you bury cash in Antarctica it is still taxable income!

But if they steal from you:
You can deduct a casualty or theft loss as a miscellaneous itemized deduction subject to the 2% limit if you used the damaged or stolen property in performing services as an employee. First report the loss in Section B of Form 4684, Casualties and Thefts. You may also have to include the loss on Form 4797, Sales of Business Property, if you are otherwise required to file that form. To figure your deduction, add all casualty or theft losses from this type of property included on Form 4684, lines 35 and 41b, or Form 4797, line 18a. For other casualty and theft losses, see chapter 25.

[FakePlasticTrees]

Guys, sorry for the semi-thread hijack here, but I don't think this deserves it's own thread. I want to deposit 300$ into a site, but only have 289$ in account ATM (I know lol brokeaments). I just deposited my latest work check for @250$, and it just hasn't hit my account yet. If I deposit on the site now, will I get hit with overdraft fees or will it be ok until my check hits?

[TheRock69]

[ QUOTE ]
Guys, sorry for the semi-thread hijack here, but I don't think this deserves it's own thread. I want to deposit 300$ into a site, but only have 289$ in account ATM (I know lol brokeaments). I just deposited my latest work check for @250$, and it just hasn't hit my account yet. If I deposit on the site now, will I get hit with overdraft fees or will it be ok until my check hits?

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Deposit $288.99?? Don't risk it. Banks these days get fees anyway they can.

[jacattac]

[ QUOTE ]
well I do report some of my taxes and all the money that was once in my Neteller account is long gone now. Sure there are records of that money once existing (though there was never more than 15k-ish in my account), it has since dissapeared and been "lost" gambling. I report 13k-ish a year in taxes to make sure I have enough money in my bank account that it can all be accounted for by my reported income. The rest of the money (most of it is in Bodog) still cant be seen by the IRS. The IRS gets Bodog's financial records or PartyPoker's financial records and im in trouble.

The whole point is as long as you dont have large amounts of money (signifigantly more than you reported on your tax returns) hanging around in your bank account for long periods of time your fine. I have a 20k check coming from Bodog which will be cashed, go into my by account, withdrawn into cash, and "dissapear". The money will be claimed to be "lost" in the casinos, so that it can be deducted against my winnings. In reality the money will be stored in casino chips and cash.

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As a CPA who worked in the tax industry for a few years I can tell you that your idea of the $20 disapeering will not hold water with the IRS. The point that everyone seems to misunderstand when it comes to the IRS is that YOU have to prove THEM wrong!!! You can't simply say you lost the money gambling, they would require you to show withdrawls from a casino, hotel reservations, records from a pit boss ect... Now of course the probability of this happening is slim, however when it comes to an IRS audit your are considered GUILTY until proven Innocent. This also applies to all other deductions such as donations, contributions ect..

Also, for everyone who thinks their are magical loop holes, or have an accountant that is going to get you a big refund, your kidding yourself. Anyone who knows the tax system and the IRS will tell you that you can and never will get away from anything.