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#1
02-02-2005, 02:15 PM
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Penalty for poker tax evasion?
I have read the tax code section on tax evasion--penalties in the hundreds of thousands of dollars range, jail time in the 5 year range... but I'm wondering what sort of penalty a relatively small-time poker player might face for not reporting poker income... I amagine it isn't that bad.
Has anyone been audited and faced this unfortunate circumstance? What was the penalty? (specifically, I'm wondering what the penalty would be for someone who didn't report, say, $20k in poker earnings for a year) 
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#2
02-02-2005, 02:59 PM
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Re: Penalty for poker tax evasion?
Yes, there is a special new clause in the tax code. If you evade taxes on income derived from poker, instead of the standard penalities, you just have to write "I'm sorry I didn't pay taxes on all my income." 100 times on a blackboard, and they send you home with a note to your mother.
Not paying taxes on 20k of income, is not paying taxes on 20k of income. It doesn't matter if it was from poker, your job, your second job, money you found on the street, money you made dealing drugs, or money you got robbing a bank. 20k of income is 20k of income, and the IRS wants it's share of taxes. Now 20k isn't enough to get Federal Housing in the Pen with your new roommate Bubba, but after penalities, fees, interest, fines, interest on the penalities and fees and fines, and an extra $1000 fee plopped on top of that, you will forever wish you had paid the 28% or whatever you owed on that 20k in the first place. Or not. If they don't catch you, you are ahead 28% of 20k. If they do catch you, try to have around 10k extra in reserve over the 20k, you will probably need it.
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#4
02-03-2005, 07:17 PM
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Re: Penalty for poker tax evasion?
[ QUOTE ]
The chance of being audited is what, 2%? Would this be worth the risk in not reporting 20K. I think so, if there is no jail time. [/ QUOTE ] Is this 2% accurate? Or is that a figure: a. Pulled out of your ass b. Based on the entire population of taxpayers I would guess the answer is a, but may be close to b. What are the chances that the extra 20,000 if removed from online accounts or used for purchases would cause a flag with the IRS?
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#5
02-03-2005, 08:37 PM
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Re: Penalty for poker tax evasion?
[ QUOTE ]
[ QUOTE ] The chance of being audited is what, 2%? Would this be worth the risk in not reporting 20K. I think so, if there is no jail time. [/ QUOTE ] Is this 2% accurate? Or is that a figure: a. Pulled out of your ass b. Based on the entire population of taxpayers I would guess the answer is a, but may be close to b. What are the chances that the extra 20,000 if removed from online accounts or used for purchases would cause a flag with the IRS? [/ QUOTE ] Link Someone feel free to post the EV calculation for omitting $20k. Assume that you will not be charged with evasion, and thus will not go to Federal, pound-me-in-the-$#@ prison, which is hard to put an exact -EV number on.
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#8
02-03-2005, 09:47 PM
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Another Overlooked Factor.
If you do get caught skipping on 20k with that 2% chance, or whatever, the rate is --
You then have a 100% chance of getting the fine tooth comb every year for the rest of your taxpaying life (which is a little bit longer than your actual life). This perpetual extra scrutiny is even more fun when you are trying scrap together funds to pay off interest on penalities from previous years.
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#10
02-14-2005, 12:22 PM
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Re: Another Overlooked Factor.
You pay tax at whatever your marginal rate is. There's no discount for college students. But if you have no other income, a lot of it would be taxed at the lowest rate.
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