Penalty for poker tax evasion?

[fat_nutz]

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)

[cardcounter0]

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.

[J.R.]

If you understate your income, you can be liable for interest and penalties under the income tax laws and general criminal statutes. Abatement of interest is rare since the government believes it is entitled to an interest charge for the taxpayer's use of government funds. But penalties can be abated under a broader set of circumstances.

The most common penalties are the "accuracy-related" penalties of negligence and substantial understatement of income. These penalties equal 20% of the portion of the tax underpayment cased by the taxpayer's error. The penalty for civil fraud is more severe: it equals 75% of the tax underpayment.

In addition to the civil sanctions discussed above, a tax evader can be convicted of tax evasion under IRC 7201, provided the government can prove, beyond a reasonable doubt: (1) willfulness on the part of the taxpayers, (2) the existence of a tax deficiency and (3) an affirmative act by the taxpayers constituting an evasion or attempted evasion of tax.

The tax evasion statute imposes the most severe sanctions of any tax offense described in the Code. Taxpayers convicted of tax evasion are subject to a fine and imprisonment for not more than 5 years, or both, plus the costs of prosecution. The maximum fine is $100,000 ($500,000 for a corporation), but 18 USC sec. 3571, a general statute on fines as punishment, raises the maximum for individuals to $250,000 and allows a fine exceeding this dollar ceiling up to twice the pecuniary gain from the offense.

FWIW, Criminal cases require extensive and investigations since the government must establish guilt beyond a reasonable doubt; consequently, the IRS and Justice Department will generally pursue more aggravated cases that involve deliberate omissions, false statements, destruction of records, and bribery.

[drewjustdrew]

That's all well and good, but can't he just tell them his nickname is Fat_Nuts, and be forgiven?

[J.R.]

only if he spells it "fat_nutz"

[4thstreetpete]

I'm pretty sure you get the death penalty. Happened to a friend of mine.

[Jonny]

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.

[drewjustdrew]

[ 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?

[fluff]

[ 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.

[KingDan]

What about transfers through netteller? Do they get reported?
Because there were difficulties in creating my own, my dad lets me use his, so I wouldn't want to screw him over.