Ed Miller's Tax Article

[mmcd]

I'd just like to point a few things about the IRS and taxes more generally.

The IRS neither makes tax law nor decides what tax law means. When dealing with the IRS/taxes, it helps to look at it as an adversarial process. Congress and the Treasury Department make tax law and the Courts decide what that law means in questionable or ambiguous situations. IRS publications are great if you're just looking to avoid trouble, but if you are trying to pay the minimum possible without breaking the law, they are a very poor source to look to. Invariably, the IRS will interpret the law in a light that is most favorable to it (not necessarily correctly). Dealing with taxes and the IRS is like playing a game. You must follow certain rules, but those rules are a LOT wider than the IRS would have you believe. There is a huge difference between commiting fraud in the form of tax evasion and being aggressive when computing your taxes. There is also a difference between doing things that could potentially result in penalties/fines/interest from the IRS and things that could result in criminal liablity. Where exactly these lines lie is not readily apparent, so it would be ill-advised to do anything too questionable on your own if you don't have some degree of expertise in the area, but if you are looking at large tax burden, it would be well worth it to hire a competant professional that will act very aggresively on your behalf. Less than 2% of all individual returns get audited, and that <2% is NOT a random sampling of all returns. The IRS looks for certain red flags in deciding who gets audited, and if your return does not have any of these red flags, the chance you will get audited is very small. If make sure to stay below the line of potential criminal liability, then it really becomes a matter of weighing your savings against the cost of an audit (including penalties and interest should decide not to fight the matter in court) X the liklihood of an audit.

I've noticed a tendency on these boards to make the IRS seem a lot more powerful and scary than it really is, and this article had a bit of that tone to it.

[Ed Miller]

[ QUOTE ]
I've noticed a tendency on these boards to make the IRS seem a lot more powerful and scary than it really is, and this article had a bit of that tone to it.

[/ QUOTE ]

To be sure, the IRS is an organization with an almost impossibly complex mandate, and it's not exactly a well-oiled machine.

However, failing to report tens of thousands of dollars in poker income will not be seen by the IRS or any tax court as a "gray area." Suggesting otherwise (not that you did) is misleading and can get people into serious financial, if not criminal, trouble.

[mmcd]

My main point was don't just look at the IRS publications and forms, plug the numbers in, and cut a check for that amount. Doing so would be giving up too much too easily.

If you can make a good faith argument based on the law as to what you are doing, there is plenty of play in the joints here. As I said earlier if you don't know a lot about these things, hire a CPA or a tax attorney, and hire a pitbull not a lapdog.

Outright not reporting your income is a stupid gamble because it's impossible to asses what the consequences and chances of getting caught are ahead of time. Many times it will come down to whether a specific bureaucrat decides to be a prick about it or not, and if he does, the consequences could be VERY severe.

I'd be willing to bet that among winning poker players at large, the vast majority either don't report or severely under-report their winnings, and this is certainly a bad idea. But here I think many are paying more than they have to because they blindly follow whatever instuctions the IRS gives them.

[dogsballs]

Yea, good post.

Couple questions I have:

Anyone know if there are any good online sources for finding a cpa/tax professional?

Is it advisable to get one in your area/state that you can contact in person, or is going online/by distance fine/

[Ed Miller]

[ QUOTE ]
My main point was don't just look at the IRS publications and forms, plug the numbers in, and cut a check for that amount. Doing so would be giving up too much too easily.

If you can make a good faith argument based on the law as to what you are doing, there is plenty of play in the joints here. As I said earlier if you don't know a lot about these things, hire a CPA or a tax attorney, and hire a pitbull not a lapdog.

Outright not reporting your income is a stupid gamble because it's impossible to asses what the consequences and chances of getting caught are ahead of time. Many times it will come down to whether a specific bureaucrat decides to be a prick about it or not, and if he does, the consequences could be VERY severe.

I'd be willing to bet that among winning poker players at large, the vast majority either don't report or severely under-report their winnings, and this is certainly a bad idea. But here I think many are paying more than they have to because they blindly follow whatever instuctions the IRS gives them.

[/ QUOTE ]

Ya, I definitely agree. I recommend (in addition to hiring a CPA which is INDISPENSIBLE.. note the caps) a book called Lower Your Taxes - Big Time! by Sandy Botkin. Despite the cheesy name, it's a pretty serious look at what is and isn't deductable, and how to structure your life and finances to maximize the amount of your deductible expenditures.

[Munkster]

Does anyone know or can point me to a source on how poker winnings are taxed in Canada?

Thanks in advance.

[StellarWind]

Online gambling businesses are currently illegal in the U.S. It could be a mistake to assume that will continue indefinitely. A political solution could appear that makes Party and friends 100% legitimate. Certainly there are many people who would like to see that happen including U.S. business interests that would like to join the game.

There will be a price for legitimacy. The offshore businesses will be required to cooperate with the IRS, FBI, and every other Government agency that cares about financial transactions. Years of old records could be turned over to the IRS in the blink of an eye. No casino is going to risk their access to the U.S. market by refusing to comply with a rule they don't even care about.

[Lawman]

Makes me glad to be British
(i) no taxes on gambling income
(ii) no tax on overseas earnings not repatriated.

[9cao]

From what I can gather, poker winnings are not taxable as long as they are not your main (only) source of income.

[DespotInExile]

Party doesnt have your taxpayer ID