Gnomes and tax question

LALDAAS · #1 03-30-2005, 05:25 PM

I was looking to have my roomate be my gnome for bonus whoring. He doesnt play nor have the disire to.

For my question I told him I would cut him on the action. He seemed to have no problem with this.

However he did ask a respectable question, what about taxes?

Good question, I didnt have an answer. Using his name and I crank out enough in bonuses and hopefully profit during the bonus period, would he have to report this on his taxes?

I would assume yes? Is there a sum that you dont have to report?

I dont want to screw him?

LALDAAS · #2 03-31-2005, 10:38 AM

bump

kinda hoping of some advice here.

How about if I transfer the funds from his account to mine after clearing of the bonus.

Should I not be asking this question here on this forum or even this site?

Is it frowned upon if so I will delete it.

TheMetetron · #3 03-31-2005, 10:41 AM

The way I would do it is to transfer your cut from his Neteller account to yours after you are done. Then, he just claims what he cashes out, you claim the rest.

LALDAAS · #4 03-31-2005, 11:07 AM

Thanks I was hoping if i transfered before cashing out he wouldnt have to report it.

TheMetetron · #5 03-31-2005, 11:20 AM

[ QUOTE ]
Thanks I was hoping if i transfered before cashing out he wouldnt have to report it.

[/ QUOTE ]

Yeah, I'm not entirely sure how legit it is for your friend, but you should be okay. But the whole thing isn't legit, so there isn't too much else you should be worried about.

LALDAAS · #6 03-31-2005, 11:44 AM

I hear ya, Im not trying to dodge the tax man, just dont want him to have to owe anything at my expense.

Chadt74 · #7 03-31-2005, 01:10 PM

"The way I would do it is to transfer your cut from his Neteller account to yours after you are done. Then, he just claims what he cashes out, you claim the rest."

Sorry, but this is horrible advice. If you sign up with his name the income is his and he has to report it.

sorry for the Caps use but THE IRS DOES NOT CARE ABOUT WHEN YOU CASH OUT FROM NETELLER OR YOUR POKER/CASINO SITE. WHEN YOU GET THE BONUS OR WINNINGS THAT IS INOCOME NO MATTER WHERE IT IS.

If you have more income than your roommate you might also be guilty of tax evasion you would basically be using your roommate as a 'shell company' to pay less taxes see http://www.irs.gov/compliance/enforcement/article/0,,id=129070,00.html. Slightly different than the first example but if the IRS ever comes knocking good luck explaining this to them.

Also if you transfer more than $11K from your roommate to you, your ROOMMATE has to pay gift tax (in most cases). http://www.irs.gov/businesses/small/article/0,,id=108139,00.html

This is what you should do...

1 - have your roommate prepare his taxes as if there was no poker winnings
2 - add in poker winnings
3 - you "pay" the difference of what his taxes are by leaving this amount in his account.

For example your roommate makes $40K a year and would get back say $200 from the IRS. If you whored $6k this year and his income is now $46K and he will only get back $50 you owe him $150 in taxes.

If you don’t want to wait till the end of the year, find out what his effective rate is and on every bonus/winning you pay him that amount. So if his tax rate is 30% and you whore a bonus + winnings of $300 you would take $210 (300 less 30%).

TheMetetron · #8 03-31-2005, 01:42 PM

So you are suggesting not adding the income to your taxes? Or are you suggesting taxing it twice?

octop · #9 03-31-2005, 01:43 PM

What would be wrong with doing interaccount transfers (for example from one party account to another) and then cash out from your neteller account
It is your income and not his
How is this any different than if you played at a B&M casino and he lent you 1000 dollars which you turn into 3000. you have to pay taxes on 2000 not him.

Chadt74 · #10 03-31-2005, 02:25 PM

"So you are suggesting not adding the income to your taxes? Or are you suggesting taxing it twice? "

No I am saying that if you have Hero and roommate, roommate puts the winnings/whoring on his taxes and transfers the NET amount of winnings/whoring to Hero. Hero does not pay taxes on cash gifts. NET = Gross amount of winnings/whoring less taxes.

"What would be wrong with doing interaccount transfers (for example from one party account to another) and then cash out from your neteller account"

The problem is that the winnings are earned under the roommate's account and thus taxable to him; that is what a paper/audit trail shows. Remember when you take cash out of an account has NOTHING to do with when/who earned it.

Look either way you are cheating someone, I'd say cheat the casino/poker room who is offshore and play it by the book to the IRS. You have to remember Hero is assuming the identity of Roommate when he does this and if Roommate does not file the income the IRS can screw roommate and then roommate can turn on Hero and say I never authorized this and Hero is now guilty of Identity fraud.

Please feel free to do what you want, but for all parties involved Roommate should claim the income and Hero should just take the cash gift from him. This way Roommate is not evading any taxes owed and Hero can not be accused of Identity theft i.e. if Roommate claims the taxes he obviously knew about this and there is nothing illegal about Roommate giving a cash gift to Hero (under $11K untaxable).