Serious tax problem.. Need advice.
 

I've played poker semi professionally for the past 5 years.. Yesterday I received a large notice from the IRS detailing that I owe them $60,000 from the year of 2001 only. I have no idea how they came up w/ this amount, seeing as how I haven't filed a tax report of any kind. I have nowhere near enough to my name to pay this off as I have lost/spent tons on my many vices, and I also fear there may be more charges coming now from the years of 2002-2004. Does anyone know what the best possible option is to deal w/ this?

People have recommended the following to me:

1) Declare bankruptcy, I'm unsure if this works though. Some things that I've read say yes, some say no. Does anyone know?

2) Attempt to make a deal w/ the IRS. What kind of deals does the IRS make? Am I able to bargain down the amount I will pay, or perhaps make a small monthly payment?

3) Flee to Canada. Is it at all possible to get out of this by moving to Canada? How do tax laws work for internet poker? Do you pay taxes where you live, or where you are a citizen?

If anyone has any answers to these questions, or any suggestions of any kind I'd GREATLY appreciate it.

Thanks.

Re: Serious tax problem.. Need advice.
 

See, 20-year old internet poker pro that constantly wonders in the Zoo why he has to pay taxes on his winnings, that's why you decalre and pay taxes on your winnings.

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As for your specific question, if you want to continue living outside the confines of your local federal pound-me-in-the-ass prision, you're going to have to pay off your debt plus interest plus penalties. You'll likely be able to work out a payment plan with the IRS where your wages get directly garnished. Of course, they'll expect you to live off pittance for the next 10-15 years, but that was the decision you made four year ago to not pay your taxes.

Re: Serious tax problem.. Need advice.
 

I am by no means qualified to answer your questions but I think more info is need for someone who is.

Did you file any tax returns from 2001 onward? Did you have any other income besides poker? Did you report it? What are you living on? What is your life style (3 car garage with a boat in the back yard or a cheap apartment with a old clunker)?

Re: Serious tax problem.. Need advice.
 

Well, needless to say I realize this .. Either way, all I can do now is find the best option to deal w/ the problem at hand. So any suggestions would be appreciated.

Thanks.

Re: Serious tax problem.. Need advice.
 

Disclaimer: I am not an expert.

The IRS does not want to put you in prison. They want to make sure that they get their share of your earnings. They can help you pay in installments, or come to some sort of compromise. However, you need to take action. If you ignore their communication you will be in bad shape. They are able to freeze your bank accounts, seize your assets, etc. I recommend hiring a professional (Tax Attorney, CPA, Enrolled Agent) as soon as possible, before things get even worse. Good luck

Re: Serious tax problem.. Need advice.
 

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I recommend hiring a professional (Tax Attorney, CPA, Enrolled Agent) as soon as possible, before things get even worse. Good luck

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The best advice you've probably already gotten and will continue to get. Nobody here is an expert (well, that I know of) and a situation like this requires the advice of someone who has dealt with this before.

Re: Serious tax problem.. Need advice.
 

Here are the sad but true answers to those questions..
Poker was my only income, and I have never filed a tax return on it. My current lifestyle is living in an apartment and driving a used car.

Re: Serious tax problem.. Need advice.
 

My biggest question is probably.. Does declaring bankruptcy get you out of tax debts?

Re: Serious tax problem.. Need advice.
 

It depends upon the situation. The law is complicated here. My guess is because you did not file taxes, bankruptcy will not erase your debt. But I am not certain. Hire a pro

Re: Serious tax problem.. Need advice.
 

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3) Flee to Canada. Is it at all possible to get out of this by moving to Canada? How do tax laws work for internet poker? Do you pay taxes where you live, or where you are a citizen?


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How is this going to help you? You just can't run away and not pay your taxes. This is pretty serious. Your best bet is to get yourself an attorney and work out some deal with the IRS.

FWIW, I'm canadian and I just finished filing my 04 taxes. I paid taxes on my poker winnings, stocks profit as well as my regular job. When I finally finished I felt like a daggar had just stabbed my heart. I've paid more in taxes some people make in a year. [img]/images/graemlins/mad.gif[/img]

The tax laws regarding internet gambling is still sketchy here in canada. I decided to pay it all because I'm trying to avoid a potential problem like the one you described. Also because I've made so much I want to be able to sleep at night. My potential earnings in poker is a lot higher than what it is now and I don't want to get myself in any situation which will take me away from this , ie going to jail. This would hurt me and my family much more than the amount of taxes that I'm paying.
Moral of the story, pay your taxes!! You can't hide from the government. Unless of course you play B&M poker in canada and hide your money under a mattress.

Re: Serious tax problem.. Need advice.
 

Bankruptcy is most unlikely to get you out of your situation. As a poster above said, it's complicated, but the general rule is income taxes where returns were not filed are not dischargeable. If you want your eyes to glaze over, read 11 U.S.C. Section 523(a).

Next point: Just because the IRS says you owe $60,000 doesn't mean that you actually do. When confronted with an unfiled return, the IRS will make some assumptions in order to file one for you. They *always* make ridiculous assumptions about your income and filing status that are not in your favor which inflate the amount due. Much of the time their "calculations" are based on a whole lot of nothing.

Your best bet, if you have any money available at all, is to get yourself to a tax pro. No joke. I wouldn't be at all surprised to see your pro suggest getting everything filed and then try for an "Offer in Compromise" to settle all the debt for less than you owe.

Don't procrastinate on this one -- if you just let it go, it won't be long before the debt is 6 figures and the IRS rarely forgets.

Re: Serious tax problem.. Need advice.
 

Hire a tax professional, figure out what you really owe, come up with a payment plan w/ the IRS.

Re: Serious tax problem.. Need advice.
 

Get a lawyer.

Re: Serious tax problem.. Need advice.
 

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3) Flee to Canada. Is it at all possible to get out of this by moving to Canada? How do tax laws work for internet poker? Do you pay taxes where you live, or where you are a citizen?


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How is this going to help you? You just can't run away and not pay your taxes. This is pretty serious. Your best bet is to get yourself an attorney and work out some deal with the IRS.

FWIW, I'm canadian and I just finished filing my 04 taxes. I paid taxes on my poker winnings, stocks profit as well as my regular job. When I finally finished I felt like a daggar had just stabbed my heart. I've paid more in taxes some people make in a year. [img]/images/graemlins/mad.gif[/img]

The tax laws regarding internet gambling is still sketchy here in canada. I decided to pay it all because I'm trying to avoid a potential problem like the one you described. Also because I've made so much I want to be able to sleep at night. My potential earnings in poker is a lot higher than what it is now and I don't want to get myself in any situation which will take me away from this , ie going to jail. This would hurt me and my family much more than the amount of taxes that I'm paying.
Moral of the story, pay your taxes!! You can't hide from the government. Unless of course you play B&M poker in canada and hide your money under a mattress.

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I feel confident that you are one of the only people paying taxes on internet gambling earnings in Canada...

Re: Serious tax problem.. Need advice.
 

I made a post about this a while ago.

Borrow the money from someone and send it to them. ASAP. Argue about it later.

If that sounds impossible, just wait until you see where this goes. Make it possible. They will add to that bill exponentially until every last dollar is in their pocket. They will not be accepting a small monthly payment. They will demand more per month than you can afford.

I couldn't tell from your post if you have regular employment. You have to be extremely poor to strike a deal. If you are gainfully employed and have the potential to pay the bill, you will be paying the bill.

Oh, yeah, almost forgot. Go see a lawyer or a tax professional [img]/images/graemlins/smile.gif[/img]

Best,
Pinga

Re: Serious tax problem.. Need advice.
 

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I feel confident that you are one of the only people paying taxes on internet gambling earnings in Canada...

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you'll be wrong on this.

Re: Serious tax problem.. Need advice.
 

The law in Canada is not sketchy. You must pay tax on your income. If poker is your source of income ie. your primary source of income you must pay the appropriate income tax. However in Canada unlike the U.S. gambling winnings are not taxable, so if you just play on the side your poker winnings are not taxable even if they dwarf your primary source of income.

Re: Serious tax problem.. Need advice.
 

So i am canadian and my life for last year goes as follows.

1) Worked a job from Feb to July 40 hours a week got fired
2) in august started to make some money online while returning to my old job part time. worked on average 20 hours a week
3) won around 4000 US playing ring games + a 13000 dollar trip to australia. this was completely lucky and i have never moneyed and rarely play tournaments.

This year my hours in poker played will dwarf my work hours BUT i also got excepted into teachers college and am attending that in september. so poker is a hobby and not a life choice for me.

How do i assess if i should pay taxes on poker or not??

Re: Serious tax problem.. Need advice.
 

Income taxes are non-dischargeable in bankruptcy. You can file an Offer In Compromise form 656.You will need a tax specialist for this. You can get them online. This is their speciality. Try Tax Relief.They will charge somewhere between $4000-$8000 . Once it is filed with IRS all collection efforts will cease until offer is accepted or rejected( up to 18months).You may encounter other problems since online gambling is illegal in USA.

Re: Serious tax problem.. Need advice.
 

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...that I owe them $60,000 from the year of 2001 ...

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what was your income, roughly? (over $100k?, over $50?) did it go up much in subsequent years? $60k is HIGH, but like someone said they just made it up. but still is it anywhere close?

Re: Serious tax problem.. Need advice.
 

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3) Flee to Canada. Is it at all possible to get out of this by moving to Canada? How do tax laws work for internet poker? Do you pay taxes where you live, or where you are a citizen?


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lol

Re: Serious tax problem.. Need advice.
 

Hire a lawyer / CPA. Not to discredit anyone's advice here, but you really need an expert's advice about your current situation.

Re: Serious tax problem.. Need advice.
 

Do not ignore this. It will only get worse if you do.

Hire a professional to help you.

More specifically, hire a lawyer with experience in dealing with the IRS. When you face potential criminal charges nothing less will do. Other experts may also be helpful but you need a lawyer to keep you out of jail.

Bankruptcy will probably not protect you from the IRS in this situation. Ask the lawyer because he knows both the law and more about your exact situation.

Re: Serious tax problem.. Need advice.
 

Hiding income from the IRS is fraud, criminally punisable, non-discharable in bankruptcy.

You have a big problem.

I'd consider a life underground. 12 million illegal aliens can't be wrong!

Re: Serious tax problem.. Need advice.
 

Any idea how they would even know you gamble? If you have not filed, how do they know anything about your financial situation?

Re: Serious tax problem.. Need advice.
 

The government knows alot more than you would think. He uses a U.S. bank I assume. That is most likely the way.

Re: Serious tax problem.. Need advice.
 

How did the IRS arrive at this $60,000 number they say you owe them?

Whether you played live or online there can't have been any reports made to the IRS about how much money you were making, unless you won a large tournment in a casino. Did they base this just on looking at transfers made to your checking account throughout 2001?

Re: Serious tax problem.. Need advice.
 

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You may encounter other problems since online gambling is illegal in USA.

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ummm - NO

Re: Serious tax problem.. Need advice.
 

Do you have to pay taxes if you just play small time and poker is not even close to your main source of income?

Re: Serious tax problem.. Need advice.
 

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Do you have to pay taxes if you just play small time and poker is not even close to your main source of income?

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By the letter of the law, yes. Realistically, the risk is very low if have a regular job and pay taxes and don't report a few hundred or couple of thousand in poker income.

Paul

Re: Serious tax problem.. Need advice.
 

OK, thanks.

Re: Serious tax problem.. Need advice.
 

My question is...how much have you made in poker winnings over these years? There are two ways to file gambling winnings to the IRS. As a professional gambler and separtely from winning and losses on a normal form. The latter really punishes you. As a result, the IRS may have figured out the 60,000 dollars via the latter of the two options. I think I read this at onlinepokerfaq.com, but I don't remember.

Re: Serious tax problem.. Need advice.
 

free advice from a public forum mmmmmm.... with the irs sniffing up your butt mmmmm.... ya you better take the advice and get the hell out of Dodge! cause you are a marked man! go into a cash business and live with a roomate so no bills are in your name.

Re: Serious tax problem.. Need advice.
 

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The law in Canada is not sketchy... so if you just play on the side your poker winnings are not taxable even if they dwarf your primary source of income.

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The law is not sketchy.. even if you played on the side, it is taxable. The question is whether your gambling profits are: a. income, or b. windfall.

Re: Serious tax problem.. Need advice.
 

Sometimes it is in your favour to consider your poker earnings as business income. In Canada, business income is deductible against all other income. That means that if you happen to have alosing year and have other income from employment or property, you now have a deduction to allow you to reduce the taxes you pay on your other income. Of course, reporting losses greatly increases your chance of an audit, but if you are on sound tax ground, then you gain a nice way to lessen the pain of losses at the tables. Even if you report a win, then don't forget that if you are in the business of poker, then you get to deduct a portion of your rent/mortgage related to the space used to play poker in (if online). That might wipe out the tax liability for small winners and eep you on the right side of the law.

The quick and dirty tax advice I have been throwing out to clients in terms of tax strategies (in case anyone is unsure how reporting does not mean the government will take 1/2 your money) All numbers are rough:

If your sole source of income is poker:
1. If you lost for the year, report it anyways - you can then create a loss that can be used to offset not only poker but OTHER INCOME in future years.
2. If you won:
The 1st 10k or so is taxfree (by way of personal exemptions) so there is no harm in reporting it and you build a track record.
3. The next 40k you declare and pay about 20% tax on it.
earnings reported - 50k, tax - 10K.
4. The next 30k you earn - set up a CCPC (private corporation) with yourself, spouse and kids as shareholders.
You then pay yourself, spouse and kids up to 10k each (all taxfree). the balance you pay out as salry to yourself, making sure you put up to 18% into an RRSP.
Earnings - 80k. Total Tax (with spouse and 1 kid)- 7k plus about 5k in payroll taxes that you will get the benefit of in the form of pension and employment insurance.
5. Above 80k - add in loans from your poker corporation to you, increase the dividends to your spouse and kids and work on tax shelters. Regular por tax advice required.
Tax will be 20-30% on the amount over 80k.

The cost of paying taxes doesn't have to be high - you can esaily earn 100k and pay less than 10k in tax. Worth the peace of mind to me.

That being said, I'm advising a guy now who isn't going to pay tax on 50k of the 100k he eanred last year. We're arguing tht since it came from a few big tourny wins and he is a regualr ring palyer and not tourny player, it is taxfree since he is in the business of ring poker and not tourney poker.
The issue is still "cluody" enough to go both ways.
You just don't want to be on the wrong side of it when it brightens up. They can go after you retroactively.

Re: Serious tax problem.. Need advice.
 

THAT IS NOT REALISTIC

1. you can't ever drive a car, much less own one (you could get pulled over)

2. you can't ever own a house or anything substantial. (sure you can rent under someone elses name.. but how long will that last?)

3. you can't ever have a job that isn't under the table. (you could keep up poker.. but what if that fails?)

4. you can never have another bank account or credit card or anything along those lines including retirement, stocks, social security, insurance (health and otherwise)

5. something bad could happen. ie. you get arrested for a bar fight, or you are in some kind of accident where you go to the hospital.


eventually something WILL happen to you... and you WILL get caught