#1
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Rakeback, taxes, and an argument for the IRS
This is not a post for those of you who intend to break the law. Trolls and your stupid comments are not appreciated here.
I have been thinking about rakeback, and I think it is not taxable income. I believe it is arguably a purchase price adjustment, much like a mail-in rebate. A discount on goods and services if reasonable and still within the boundaries of fair market value for that good or service is not taxable income. I am not a CPA, but I did consult a tax attorney on this point. I suggest to those of you that try to comply that you account separately for your rakeback and exclude it. Even if the IRS audits you and calls it income, the argument is reasonable enough to avert penalties in my opinion. This does not apply to bonuses, which are pretty clearly income IMO. |
#2
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Re: Rakeback, taxes, and an argument for the IRS
Believe whatever you want, and pay your taxes accordingly.
I consider it income - I pay on everything I take from Neteller to my checking account. Makes it pretty simple for me. Dogmeat [img]/images/graemlins/spade.gif[/img] |
#3
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Re: Rakeback, taxes, and an argument for the IRS
Rake has already been deducted from your income. Rake back is income.
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#4
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Re: Rakeback, taxes, and an argument for the IRS
If rakeback doesn't count as income, then rake doesn't count as a deduction, and you should pay tax on the full amount you made.
That is to say, if you win $10,000, but pay $6000 in rake, then your account balance only goes up by $4000. Feel free to pay tax on the full $10,000, since you think rake doesn't count. |
#5
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Re: Rakeback, taxes, and an argument for the IRS
I worked for 2nd largest CPA firm in the world.
While I am no longer in the industry and I focused on audit, from an accounting perspective as far as I can tell you really couldn't be more wrong. |
#6
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Re: Rakeback, taxes, and an argument for the IRS
Tilt,
Your understanding is wrong, in the USA, Canada (if you are taxable), and pretty much anywhere in the world where (i) GAAP is employed, and (ii) winnings are taxable. Any first year accounting student.. pretty much anywhere in the world, can and would tell you the same. It is so obvious, I think it unlikely any auditor with half a brain will let you off easy. |
#7
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Re: Rakeback, taxes, and an argument for the IRS
it is taxable.
it is possible that it is taxable at a greater rate then regular income. i will ask my tax attorney. |
#8
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Re: Rakeback, taxes, and an argument for the IRS
[ QUOTE ]
from an accounting perspective as far as I can tell you really couldn't be more wrong. [/ QUOTE ] |
#9
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Re: Rakeback, taxes, and an argument for the IRS
[ QUOTE ]
I consider it income - I pay on everything I take from Neteller to my checking account. Makes it pretty simple for me. Dogmeat [img]/images/graemlins/spade.gif[/img] [/ QUOTE ] |
#10
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Re: Rakeback, taxes, and an argument for the IRS
[ QUOTE ]
This is not a post for those of you who intend to break the law. Trolls and your stupid comments are not appreciated here. I have been thinking about rakeback, and I think it is not taxable income. I believe it is arguably a purchase price adjustment, much like a mail-in rebate. A discount on goods and services if reasonable and still within the boundaries of fair market value for that good or service is not taxable income. I am not a CPA, but I did consult a tax attorney on this point. I suggest to those of you that try to comply that you account separately for your rakeback and exclude it. Even if the IRS audits you and calls it income, the argument is reasonable enough to avert penalties in my opinion. This does not apply to bonuses, which are pretty clearly income IMO. [/ QUOTE ] Rakeback is often called rake rebate. It has all the characteristics of a rebate. I think you have an argument. That being said, it's still a risk you're taking. If you get audited, you have to convince a single IRS worker that what you're doing isn't illegal. If that fails, you have a supervisor you can appeal to. [Neither of these people is guaranteed to have a basic grasp of the actual tax code.] If that fails, you're f'd and you're going to tax court. The problem with that is that you'll be forced to spend a fortune defending yourself. P.S. Anyone saying the OP's treatment is wrong because it doesn't follow GAPP...please never talk about accounting like you know what you're doing. GAPP has absolutely nothing to do with the tax code. |
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