foreign account reporting due today - question

[efficacy]

I have waited until the last minute to do this. Can you please tell me where in the world the following poker sites are stationed:

Party poker
Full Tilt
Poker Stars

also, neteller.

Thanks.

[drtofu66]

I might as well piggy-back onto this, so...

What did you all put for NeTeller regarding the 'Type of account'. It's not really a security. I guess you could call it a bank, even though it garners no interest. I'm seriously thinking about checking 'Other' and putting 'E-Wallet' and letting them deal with it.

What about the "country in which the account is held"? Isle of Man?

[efficacy]

I figured it out... all the info for the poker sites is here:

poker scout'

Neteller is headquartered in Isle of Man. For 'type', I just wrote 'Neteller', lol.

[PokeReader]

Country is England, technical term is financial institution. Be sure you are ready for the audit. You understand because of constructive receipt you need to pay tax from the moment the money is in your Neteller or gaming site account, not from when you actually physically receive the money.

Some useful websites:

http://www.gambling-law-us.com/Artic...mbling-tax.htm
http://www.taxabletalk.com/posts/1170966022.shtml

[Route66]

As I understand it, reporting is only required if you had 10K+ in the account during the year, correct?

[DrewOnTilt]

[ QUOTE ]
As I understand it, reporting is only required if you had 10K+ in the account during the year, correct?

[/ QUOTE ]

yes.

[efficacy]

[ QUOTE ]
As I understand it, reporting is only required if you had 10K+ in the account during the year, correct?

[/ QUOTE ]

I believe you need to report if you had 10K+ total across all your foreign accounts at any time.

[ChipLeeder]

I contacted the IRS/Treasury Department Foreign bank directly and confirmed with them that e-wallets such as Neteller are reportable foreign accounts for U.S. foreign bank account reporting (due July 2, 2007.)

While I was at it I asked about monies at online gambling sites such as PartyPoker. This was their reply:

"As for a response on the Party Poker account, it may be harder to determine if it is reportable. If it is just a transfer service account it is not considered reportable."

It is my belief now that:

Most likely, most of monies are held at PartyPoker, PokerStars, etc. not reportable. While all non-US online e-wallets are reportable.

FYI

Chip CPA

[PokeReader]

I agree with this and this seems to be the general consensus of the way the issue is being handled this year. I would like to make clear that the definition of financial institution is so broad, and because sites allow peer to peer transfers especially, the IRS would have a case to extend FBAR reporting to them. I would also warn players that do a peer to peer transfers in number, or at larger amounts you could face additional problems if the IRS chooses, as under Title 31, you could arguably have to register as a financial institution on your Form TD F 90-22.1.

The FBAR had previously been under enforcement by FinCEN, and when it was transfered to IRS it created some questions about Title 26 protections, (the taxpayer protection laws enacted in the '90's). The IRS has decided that if the FBAR investigation comes about in a normal audit, and the foreign account was not used for tax evasion, then Title 26 protection will apply and the FBAR investion will be dropped. However, if the FBAR is a direct FBAR investion, or if it was used for tax evasion or criminal purposes, then the taxpayer will not have any typical Title 26 rights.

There is a four part test the IRS is using to determine if a unwilling violator can receive leniency, which would mean a penalty of a maximum of 5-10% of the maximum value of the account.
1. The taxpayer has no history of FBAR violations.
2. The funds passing through the foreign account were not from illegal sources or used for criminal purposes.
3. The taxpayer cooperated during the investigation.
4. The IRS did not fine the taxpayer based on failure to report income from the foreign account.
If you do not think you pass this four part test, and be aware that the IRS believes that internet poker is illegal and money laundering, be sure you have very good help during your audit, as the audit rates for first year Form TD F 90-22.1 filers are 100%.

The penalties for not properly filing a FBAR are:
1. Non-willful transaction/account: 5-10% of transaction/account or 10K whichever is more.
2. Willful transaction/account: 50% of transction/account or 100K whichever is more.
3. Criminal FBAR: Fine of not more than 250K and/or 5 years and if it is a pattern of illegal activity a fine of not more than 500K and/or up to 10 years.

While the OVCI has expired, and taxpayers who had no opportunity to take advantage of it will undoubtably get a much worse deal, there are still two IRS programs of note for taxpayers who should have filed FBAR's in the past. One the LLCI, is for taxpayers the IRS has already identified as likely tax cheats, and has no criminal waiver. This program is only for taxpayers identified by the IRS. The other program is the Voluntary Disclosure Policy, which would normally shield taxpayers from most criminal liabilty from self identifying, however, as the IRS is maintaining no Title 26 protections for direct FBAR
filings, tax firms are at this time unsure whether this protection will apply. Current IRS legal memo appear to say it will not.

I am also going to make sure everyone knows about the rule of bring cash into or out of the U.S. You must fill out a CMIR, a currency or monetary instruments report. If you break the money up into less than 10K to avoid the CMIR, you are guilty of a structuring crime. So anyone winning money outside of the U.S. must be filling out CMIRs or FBARs to repatriate it.

Also, be careful of making a number of under 10K deposits, especially in cash. The reason that the gaming sites are prefering under 10K transfers is that they avoid filing a CTR, currency transaction report, in that case. However, if you make many of these deposits, your bank may file a SAR, suspicious activity report, and the FBI and Homeland Security will come see you. It will be bad and expensive. The best way to avoid this is to be sure some of your deposits are over 10K and trigger a CTR, which are rarely investigated. Talk to your bank, make sure they know that you are a professional poker player. This is why your deposit record might be odd. Banks have a program KYC, which is based on them knowing their customers, but it is mostly a very sophiscated computer program. The problem for poker players is that their typical deposit records can look alot like a money launderer or other illegal business. In general, a smaller bank, with a hometown branch will have more input from staff about filing a SAR.

Good Luck, FILE BY MIDNIGHT, THERE IS NO EXTENTSION FOR FBARS!

[MiltonFriedman]

... with a sitcky.

Thanksfor the clarification on treatment of late filers. Bottom line: EVEN if you missed the deadline this week, go ahead and file anyway.

The only different point I would make is that offshore gaming companies avoid filing a CTR, currency transaction report, because they are offshore and because they do not take cash.