Paying taxes on Poker Winnings...

One thing I don't get is the fact that the US Gov't continually asserts that online poker for Real Money is not legal and never will be...

Yet they want its citizens to, first, acknowledge that they activly participate in an activity they deem to be "not legal"
and, second, to pay taxes on the
"illegal" activity.

My question would be: What is to stop good ol' Uncle Sam from locking you up
the very second you go to him to report your "illegal" income (that you earned by
participating in the activity of Online poker play for Real $$$ that they deem to be illegal)?

Whats it you got to say for yourself, Uncle Sam?

"Ohh...It's illegal...yea, but we still want to tax it...yeah..."

That's like the Gov't saying that selling Crack on the streets is illegal, but, oh yea,
all Drug-dealers cometh forth and please pay taxes on you sale of illegal drugs...
(OK,
not even close to being the same thing, but I am just trying to make a point here...lol).

Is it just me or are things really screwed up at this point.

IMO, if the US Gov't wants to collect tax revenues on Online Poker play (specifically the small minority of players who are significant money winners) then why don't they
acknowledge its legitimacy and its legality. Until they do that, how can they collect taxes on it?

Did they tax alcohol during prohibition? No. Who would be nuts enough
to come forth and say they were making moonshine in their bathtub in their basements - nobody would!

(I'm NOT saying that this is a defense for NOT paying your taxes, I'm just trying to illustrate a point...)

...I bet you that there are a lot of poker players in fear of reporting their income b/c
of the Gov't's stance on Online poker.

If I ever become a big money winner w/ Online poker, I am simply moving to Canada or the UK or somewhere else...

Hope I'm not alone in thinking this.

Joe M.

[livinitup0]

Al Capone went to jail for tax evasion, not rackateering, murder or anything else.
Plus the coffee houses in Amsterdam still have to pay taxes on it's "ggodies" they sell, but the official stance from the government is that it is illegal.
In illinois I saw on the news that our state governemnt actually has cigarette cellophanes with the illinois stamp and a pot leaf on it. If you sell only with these cellophanes, they cannot get you for tax evasion. (seriously this isnt a joke) Its just so that when they bust you they can get you on tax evasion, saying "he could have filed on that 20 pounds!"

State and Federal governments are far from perfect....or rational, fair, honest..ect. for that matter.

[Ed Miller]

You should read the history of Al Capone.

I just did a little reading on "the fall of" Al Capone...

I found an overview/summary only, so if you would like to "educate" me w/ a few specifics
I would be grateful... [img]/images/graemlins/cool.gif[/img]

It said that new tax laws enacted in 1927 allowed the Fed. Gov't to pursue Al on the charge of tax evasion...and that the "Untouchables" (
Eliot Ness and his "hand picked" team of incorruptable US Treasury agents (lol...sounds cool)
were able to
find receipts linking Capone to illegal gambling income and evasion of taxes on that income.

That last line is what I don't get...how can one pay taxes on illegal income?
This statement is illogical.

Who cares if said person is paying taxes on "illegal income!?!?!?!?!" If they
have the income, then they are going to jail for having it in the first place! It's (however they got the money) illegal?!?!
Why do they have to NOT pay taxes on the income to merit a jail sentence? lol

OH, and I forgot to say that by the Federal Gov't's collecting of the taxes on
said income source, aren't they acknowledging its legitimacy by virtue of this fact alone?

[Ed Miller]

[ QUOTE ]
OH, and I forgot to say that by the Federal Gov't's collecting of the taxes on
said income source, aren't they acknowledging its legitimacy by virtue of this fact alone?

[/ QUOTE ]

That's not how they see it.

[broiler]

The part that you are missing in the Al Capone case is that the gov't didn't have to prove that the source of the income was illegal. All that that gov't proved was that Capone had income that he did not report and that he willingly refused to pay taxes on that income. Everyone knew that the source of the income was illegal activities, but the source of the income was not a factor in the decision of the court.

[lozen]

I do believe your tax records are confidential. If you were a contract killer and put that on your tax return with earnings and expensee they could not use that agsinst you in a court of law. Though they could let the GOVT know you derived your income from illegal purposes and than try and catch you. That's the tax law here in Canada. Our privacy l;aws are a little tougher though .

[pzhon]

[ QUOTE ]

That last line is what I don't get...how can one pay taxes on illegal income?
This statement is illogical.


[/ QUOTE ]
IRS: "Illegal income, such as stolen or embezzled money, must be included in your gross income."
It's not illogical. Illegal does not mean the laws ignores it.

This is not to say poker winnings are illegal. It is very different to run an unlicensed casino than to gamble in one.

[jackblack73]

[ QUOTE ]

That last line is what I don't get...how can one pay taxes on illegal income?
This statement is illogical.


[/ QUOTE ]
Would you rather the government reward illegal behavior by not taxing it? I think that's much more illogical.

Moreover, it provides law enforcement with another avenue in which to prosecute. As with Capone, they simply were unable to gather enough evidence against him with regard to his other illegal activities.