To my knowledge, freebie, while neteller is most likely not associated with your bank, it still uses a US bank and that bank can communicate your information with the IRS. Moreover, that bank is obligated to do report the info, depending on the amount of money you're moving. Just because the money is being taken from an ATM doesn't protect it from being flagged to the IRS.
This is an important and timely discussion.
I wonder what is worse: having to pay the extra 15% (self-employment tax for declaring "pro gambler") or not being able to contribute to certain retirement savings with gambling winnings (for example, IRAs).
I suppose it's difficult to generalize but I'd like to see the numbers crunched on a few examples. I'm going to use tax software and create a few test cases to get a better feel for how bad it is.
But before crunching the numbers I thinks it's obvious that certain types of gamblers are getting screwed worse than others (well, we're -all- getting screwed -- except those living in gambling friendly countries, darn you!)
Let's take an extreme example, a gambler who wins enough in the year to put him in the highest tax bracket: are you telling me he is required to pay an -additional- 15% for self-employment SS tax? Good God, that puts him at about 50% taxes for everything over about $326,450. Further, even before he hits the 50% mark, he's paying about 43% on most of the rest (numbers off the top of my head)!
And that's only federal income tax, now we have to consider state taxes (unless you live in one of the handful of states with no state income tax, such as Nevada, Alaska, Florida, and a few others). State income taxes vary depending on state anywhere from 0% to about 9%, depending on income. Some states have flat-rates (Pennsylvania, for example, has a flat rate of 3.07% AGI) while others will mug you for more.
Oh, it's not over yet because now you have Local Taxes which, again, vary from location to location. They vary from very little or nothing to signifincat, that is, over 1% AGI.
If you factor in the taxes it is obvious the 'rule of thumb' about having to hit about 53% to break even realistic. Gambling income doesn't happen in a vaccuum and pretending you only need to win about 53% of your bets to break even doesn't make sense if you then get jacked by Uncle Sam for another 10% or 15% or more. Without doing the math, I'd have to estimate many sports bettors would have to hit 55% just to break even once the taxes are considered.
Again, it's difficult to make generalizations because the US tax laws are complicated. If I feel like it I will post the results of the example I run in the tax software to get something more solid.
The example I gave above is for a bettor who wins -huge-, but don't think that it's much different for a "low-roller". It may be -worse- for the little guy because he loses out on the much needed tax breaks mentioned in this thread. That is, not only is he bumped into the higher income bracket possibly, but he also loses the tax credits. As concluded earlier, he is in effect -paying- to break even. Not only that but if he's filing jointly with his wife it fucks her up too. It would have the same effect as if she were making a few dollars less an hour or making a signigicantly less salary per week! Even if her husband breaks even, she still loses out on the tax breaks and is possibly bumped into the next higher tax bracket. See the original poster's post for more details.
Well, wouldn't it be nice to just get away from it all? Run away to another country (preferably beather weather tax-haven country such as the Caymen Islands or similar). Well, that's a nice fantasy but there's a nasty little things that gets in the way and it's called Reality. US citizens must pay federal income tax no matter where they live on the planet (unlike in many European countries where you only have to pay taxes due to the place you live). You could be sitting in an igloo in Antartica and end up checking your mail to find out you're getting audited for your income from the previous year.
What if you want to become an ex-patriate and change citizenship? Well, the IRS has thought of that contingency too. If you have something like a net worth of $500,000 you're considered to be leaving to avoid taxes and it's going to be difficult. Further, even if they let you out, since you're declared to be leaving for this reason, you are still required to pay income tax for the next 10 years.
I'm starting to talk too long but to wrap it up: if you are a "high roller" it seems you are going to get hit with heavy taxes (up to about 50% winnings) and if you're a "low roller" you're going to get hit lose out on a lot of much needed tax breaks (mentioned in the OP's post) -and- pay significantly higher taxes. And lastly, there's nowhere to legally hide, no way out and no exit.
I wonder what is worse: having to pay the extra 15% (self-employment tax for declaring "pro gambler") or not being able to contribute to certain retirement savings with gambling winnings (for example, IRAs).
I suppose it's difficult to generalize but I'd like to see the numbers crunched on a few examples. I'm going to use tax software and create a few test cases to get a better feel for how bad it is.
But before crunching the numbers I thinks it's obvious that certain types of gamblers are getting screwed worse than others (well, we're -all- getting screwed -- except those living in gambling friendly countries, darn you!)
Let's take an extreme example, a gambler who wins enough in the year to put him in the highest tax bracket: are you telling me he is required to pay an -additional- 15% for self-employment SS tax? Good God, that puts him at about 50% taxes for everything over about $326,450. Further, even before he hits the 50% mark, he's paying about 43% on most of the rest (numbers off the top of my head)!
And that's only federal income tax, now we have to consider state taxes (unless you live in one of the handful of states with no state income tax, such as Nevada, Alaska, Florida, and a few others). State income taxes vary depending on state anywhere from 0% to about 9%, depending on income. Some states have flat-rates (Pennsylvania, for example, has a flat rate of 3.07% AGI) while others will mug you for more.
Oh, it's not over yet because now you have Local Taxes which, again, vary from location to location. They vary from very little or nothing to signifincat, that is, over 1% AGI.
If you factor in the taxes it is obvious the 'rule of thumb' about having to hit about 53% to break even realistic. Gambling income doesn't happen in a vaccuum and pretending you only need to win about 53% of your bets to break even doesn't make sense if you then get jacked by Uncle Sam for another 10% or 15% or more. Without doing the math, I'd have to estimate many sports bettors would have to hit 55% just to break even once the taxes are considered.
Again, it's difficult to make generalizations because the US tax laws are complicated. If I feel like it I will post the results of the example I run in the tax software to get something more solid.
The example I gave above is for a bettor who wins -huge-, but don't think that it's much different for a "low-roller". It may be -worse- for the little guy because he loses out on the much needed tax breaks mentioned in this thread. That is, not only is he bumped into the higher income bracket possibly, but he also loses the tax credits. As concluded earlier, he is in effect -paying- to break even. Not only that but if he's filing jointly with his wife it fucks her up too. It would have the same effect as if she were making a few dollars less an hour or making a signigicantly less salary per week! Even if her husband breaks even, she still loses out on the tax breaks and is possibly bumped into the next higher tax bracket. See the original poster's post for more details.
Well, wouldn't it be nice to just get away from it all? Run away to another country (preferably beather weather tax-haven country such as the Caymen Islands or similar). Well, that's a nice fantasy but there's a nasty little things that gets in the way and it's called Reality. US citizens must pay federal income tax no matter where they live on the planet (unlike in many European countries where you only have to pay taxes due to the place you live). You could be sitting in an igloo in Antartica and end up checking your mail to find out you're getting audited for your income from the previous year.
What if you want to become an ex-patriate and change citizenship? Well, the IRS has thought of that contingency too. If you have something like a net worth of $500,000 you're considered to be leaving to avoid taxes and it's going to be difficult. Further, even if they let you out, since you're declared to be leaving for this reason, you are still required to pay income tax for the next 10 years.
I'm starting to talk too long but to wrap it up: if you are a "high roller" it seems you are going to get hit with heavy taxes (up to about 50% winnings) and if you're a "low roller" you're going to get hit lose out on a lot of much needed tax breaks (mentioned in the OP's post) -and- pay significantly higher taxes. And lastly, there's nowhere to legally hide, no way out and no exit.
Offshore accounts are included as far as any ruling so far -- the problem being well established UK books like Stan James etc operate "off shore" in Gibraltar, so they'd have trouble drawing definitions between Gibraltar and other places... heck Mansion are Gibraltar, probably a few others too
wolfie_cr said:
Wolfie_cr, I suspect it does have personal info. I've no evidence it does, but do you really think the USA would allow money (what is it, $1000 per day per individual?) to be moved into the country -anonymously-? Especially in today's terroristic atmosphere. (sarcasm)Al Qeada sleeper cell members would be signing up in droves!(/sarcasm)
to be 100% legit you are suppose to report winnings, and your losses, no matter if you brok even, or lost for the year. If you win 10K, but lose 20K you have to report it. Although you can only deduct up to the 10K in losses, not anything over.
These tax laws are against the gambler. Its already tough enough to win, let alone be hit with taxes on top of it. I do what I do, to stay out of trouble.
BB
These tax laws are against the gambler. Its already tough enough to win, let alone be hit with taxes on top of it. I do what I do, to stay out of trouble.
BB
earl said:
The United States just needs to allow online gaming and require books to submit forms and make the whole process a lot easier. It seems to me that 99%+ of the people have no to very little clue how the whole process works and I would include people in the IRS, and top CPA's and lawyers as well. Well the later may understand some of the process, but it seems to me that they do not think it is worth the recreational gambler who collects money but loses overall to file taxes. I have brought this up to 2 big firms in South Florida who are the absolute best, and have told me the same. I do plan on asking more but those two firms are where I have several friends at.
The IRS then needs to come up with clear rules and make the process as fool proof as possible. Which is why I think it is difficult for the IRS to enforce. Since I am sure 99% of us do not understand the rules and therefore either do not file or file incorrectly, how many of us have been audited and how many of us have been fined or imprisoned? Most people in gambling LOSE which is why we have gambling establishments everywhere.
I do appreciate Van bringing it up. It is an interesting topic that will have to be addressed by our government, especially the offshore gambling, legality, and taxing. Van is bringing up the rules i.e. you speed and get a ticket. Someone will then ask well the speed limit is 55 and I went 56 do I still get a ticket. Van will come back and say ABSOLUTELY! The difference is though speeding is clear cut, the signs are posted everywhere. Gambling, offshore gambling is not. In fact it is not legal. So that is to say that all of us who are in the U.S. but are gambling online are breaking the law. Its almost like the person who sells weed should be filing taxes on the money he makes. The IRS does not care about the law, that money should be filed. Who in the world is going to file taxes on the profit they have made from weed? Probably not the best example.
I do have one other question Van (including the question a posted on my last post, if you get a chance). So you keep a journal of every bet you make offshore, correct? You could write almost anything. How do you prove that? i.e. if you bet at Pinnacle--deposit 1000 from Netteller---and it goes into your Pinnacle account and you make 30 bets a day for 10 dollars a bet. What is your proof? You download your pinny account info? What you write down in your journal is proof (eventhough you can write almost anything)? You download every online bet you make from Pinnys site?
How do you prove what you bet, win or lose, at a craps table in Vegas? I go around to craps tables and hit them for 700 at 10 tables and come away with 7000. I gotta write down every pass line bet, come, field bet I make? If you want to be completely straight laced when going to Vegas, how is it possible? What the IRS is suppose to believe what you write down? Basically what I am getting down to is what is adequate proof? A journal while part of it, can definitely not be total proof. What documents do you need to print from Party Poker, Pinnacle, Olympic etc? Is that considered proof?
Sorry I wrote so much and asked so many questions. Again I do appreciate that you brough this topic up and are reasearching the topic. This has definitely sparked my interest and I will be doing my own DD which actually started when you posted this topic.
The IRS then needs to come up with clear rules and make the process as fool proof as possible. Which is why I think it is difficult for the IRS to enforce. Since I am sure 99% of us do not understand the rules and therefore either do not file or file incorrectly, how many of us have been audited and how many of us have been fined or imprisoned? Most people in gambling LOSE which is why we have gambling establishments everywhere.
I do appreciate Van bringing it up. It is an interesting topic that will have to be addressed by our government, especially the offshore gambling, legality, and taxing. Van is bringing up the rules i.e. you speed and get a ticket. Someone will then ask well the speed limit is 55 and I went 56 do I still get a ticket. Van will come back and say ABSOLUTELY! The difference is though speeding is clear cut, the signs are posted everywhere. Gambling, offshore gambling is not. In fact it is not legal. So that is to say that all of us who are in the U.S. but are gambling online are breaking the law. Its almost like the person who sells weed should be filing taxes on the money he makes. The IRS does not care about the law, that money should be filed. Who in the world is going to file taxes on the profit they have made from weed? Probably not the best example.
I do have one other question Van (including the question a posted on my last post, if you get a chance). So you keep a journal of every bet you make offshore, correct? You could write almost anything. How do you prove that? i.e. if you bet at Pinnacle--deposit 1000 from Netteller---and it goes into your Pinnacle account and you make 30 bets a day for 10 dollars a bet. What is your proof? You download your pinny account info? What you write down in your journal is proof (eventhough you can write almost anything)? You download every online bet you make from Pinnys site?
How do you prove what you bet, win or lose, at a craps table in Vegas? I go around to craps tables and hit them for 700 at 10 tables and come away with 7000. I gotta write down every pass line bet, come, field bet I make? If you want to be completely straight laced when going to Vegas, how is it possible? What the IRS is suppose to believe what you write down? Basically what I am getting down to is what is adequate proof? A journal while part of it, can definitely not be total proof. What documents do you need to print from Party Poker, Pinnacle, Olympic etc? Is that considered proof?
Sorry I wrote so much and asked so many questions. Again I do appreciate that you brough this topic up and are reasearching the topic. This has definitely sparked my interest and I will be doing my own DD which actually started when you posted this topic.
They dont even define what a session is
In my records a session is what I did at a specific book between a whithdrawl and a depsit
I i deposited at party poker to clear a 200 dollar bonus which took 4 days to clear and Im up 400 playing that is the session.
They really are quite full of shit.
In my records a session is what I did at a specific book between a whithdrawl and a depsit
I i deposited at party poker to clear a 200 dollar bonus which took 4 days to clear and Im up 400 playing that is the session.
They really are quite full of shit.
Fishhead said:
EXACTLY RIGHT.
This thread was started to explain the tax code. This was not a thread designed to spur talk about how to avoid taxes.
ITS SIMPLE. PAY YOUR TAXES. It will always be worth it in the end.
This thread was to bring to light what cost me hundreds of dollars, lots of hours, and tons of reading. MY BEST ADVICE IS TO READ EVERY WORD AND PAY YOUR TAXES.
As far as the neteller debit card goes - HERE IS YOUR DEFINITIVE ANSWER - after talking to a financial executive at Neteller and a gambling tax attorney:
1. When you make a withdrawal from neteller to your debit card, the money is transferred from neteller to a LOCAL BANK IN YOUR HOME JURISDICTION. So if you live in the USA, your money is transferred to a US BANK.
2. At the point where you have the money in the US bank - YOUR NETELLER DEBIT CARD IS LIKE ANY OTHER DEBIT CARD. The fact that your name is not on it means nothing. If there is your personal info in the magnetic stripe means nothing.
3. IF THE IRS WANTED TO OBTAIN YOUR NETELLER DEBIT CARD TRANSACTIONS THEY COULD EASILY SUBPOENA THE US BANK. Easy. Totally traceable. Not anonymous.
If you have been going hog wild on your neteller debit card thinking it was invisible - here is your heads up that it is not. ONCE AGAIN I AM NOT TELLING YOU WHAT TO DO - but use this info wisely.
1. When you make a withdrawal from neteller to your debit card, the money is transferred from neteller to a LOCAL BANK IN YOUR HOME JURISDICTION. So if you live in the USA, your money is transferred to a US BANK.
2. At the point where you have the money in the US bank - YOUR NETELLER DEBIT CARD IS LIKE ANY OTHER DEBIT CARD. The fact that your name is not on it means nothing. If there is your personal info in the magnetic stripe means nothing.
3. IF THE IRS WANTED TO OBTAIN YOUR NETELLER DEBIT CARD TRANSACTIONS THEY COULD EASILY SUBPOENA THE US BANK. Easy. Totally traceable. Not anonymous.
If you have been going hog wild on your neteller debit card thinking it was invisible - here is your heads up that it is not. ONCE AGAIN I AM NOT TELLING YOU WHAT TO DO - but use this info wisely.
Its a lot more complicated than just pay your taxes. Especially when you are talking about keeping journals of every bet and illegal activities and questions as to what is adequate proof.
Its very simple if you win the lottery or hit a big jackpot in slots. Its much more complicated with offshore books, poker, etc.
Its very simple if you win the lottery or hit a big jackpot in slots. Its much more complicated with offshore books, poker, etc.
Santo said:
I believe the UK has a similar tax treaty that Canada has with the US. So long as we are resident in Canada our US gaming winnings are part of our world income and "taxed" in Canada. So we reclaim any withholding tax from the IRS and then gaming income is not reported as taxable income in Canada.
Rawpimple said:I do have one other question Van (including the question a posted on my last post, if you get a chance). So you keep a journal of every bet you make offshore, correct? You could write almost anything. How do you prove that? i.e. if you bet at Pinnacle--deposit 1000 from Netteller---and it goes into your Pinnacle account and you make 30 bets a day for 10 dollars a bet. What is your proof? You download your pinny account info? What you write down in your journal is proof (eventhough you can write almost anything)? You download every online bet you make from Pinnys site?
How do you prove what you bet, win or lose, at a craps table in Vegas? I go around to craps tables and hit them for 700 at 10 tables and come away with 7000. I gotta write down every pass line bet, come, field bet I make? If you want to be completely straight laced when going to Vegas, how is it possible? What the IRS is suppose to believe what you write down? Basically what I am getting down to is what is adequate proof? A journal while part of it, can definitely not be total proof. What documents do you need to print from Party Poker, Pinnacle, Olympic etc? Is that considered proof?
Sorry I wrote so much and asked so many questions. Again I do appreciate that you brough this topic up and are reasearching the topic. This has definitely sparked my interest and I will be doing my own DD which actually started when you posted this topic.
Great questions rawpimple. Here is the deal.
For your offshore wagering, the IRS is going to attempt to get a total of your in's and out's to your bank account. Once they have that, they will compare it to your gambling journal. Lets say in your gambling journal you have an overall stated loss for the year of 100k but your bank account has a net of +50K for the year from neteller movements (assuming there is no other gambling except neteller), the IRS is going to question this. On the other hand, if your gambling journal matches your banking ins and outs that is all that can be expected of you.
Right now - at Pinnacle - you can go to "review account" and then to "all transactions by month posted" and get all of your wagers back to 2001. Once you have the monthly report on your screen you can cut and paste the info into excel. YOU NOW HAVE A JOURNAL!! Also, one email to partypoker and pokerstars will get you the same thing - with all of your play, and your banking credits and debits listed. Mansion is the absolute best - you put in the dates of your report and hit "export file" and it brings it to a spreadsheet with every detail of the wager you could ever need. WSEX and WWTS responded within 24 hours with their reports. Matchbook has everything online. Cris and Olympic were the worst of the bunch. It took multiple emails to Olympic and their response was that they could not provide the information. I got the info I needed from those 2 (i barely ever play there) from my neteller account. Neteller and firepay allow you to run a report for the year. All other small books will give you this information too. EVEN IF YOUR DOWNLOADED JOURNAL IS 10,000 LINES LONG IN EXCEL KEEP IT!! It will impress anyone in an audit.
As far as a casino - the IRS is going to try to match your banking transactions with your journal - just like sportsbetting. So when you go to the casino, make a journal entry that you went to the bank that morning and cashed a 5k check. There will be a bank record of that check. As far as your journal - they are not looking for every bet - they are looking for a session total. THE IRS HAS NOT DEFINED A SESSION - so that is kind of funny - but it is at the very least a day at the casino. Now if you say you lost the 5k you took out at the casino - and the next day deposit 15k in your bank in cash - they are going to ask where that money came from. JUST BE HONEST.
Overall the burden of proof is on you - the taxpayer. If you go in to the irs with pages and pages of journals and documents, they will only be able to question INCONSISTENCY. I am not a tax judge, but if you are following the IRS requirements of keeping a journal, and your bets are at pinnacle - I cant see how they could question them if there are no inconsistencies. ONCE AGAIN - just be honest and do the best you can. Even if you havent kept a journal for 2005 you can go back and recreate it now.
GL
Rawpimple said:
Thats why I made this thread. It is somewhat complicated - but what is expected of you is not vague.
When I suggest "pay your taxes" I am suggesting that you do DD and that you do your best. IF you make no attempt to do DD, make efforts to avoid paying, and make stupid assumptions about the tax code which are factually false you are going down the wrong road.
