What is the best way to avoid taxes?

[cardcounter0]

You are correct, if you were a type "C" corporation. This tax can be avoided by making a subchapter S election, since S corporations are not subject to the tax.

A personal holding company is a regular "C" corporation that derives 60 percent or more of its earnings through passive income (interest, dividends, rents, royalties, etc.), where more than 50 percent of the value of the stock is owned by five or fewer individuals.

So if your "S" Corp took its net winnings and declared a dividend, and instead of paying it to you, you paid it to another corporation (a personal holding company) to shelter the income further, you would be hit with the special double tax.

Also note, that poker winnings are not "passive" income, so even if you were a "C" type corp, it wouldn't trigger this tax.

This really isn't a "scheme". It is a legit way of doing business and paying taxes. If I sold apples from a push cart on the corner, I could just do it and pay the high income tax rate on my earnings -- or I could make myself an "S" corporation, pay myself a small salary, deduct my business expenses, declare a dividend, and save on my taxes.

Almost every small business owner does it just this way.

[RollaJ]

What if I spend cash for auto needs, rent, groceries, dinners movies etc. and instead of using my work paycheck for these things, that stays in the bank and can be invested .....hmmm that should work. I used to use a (big)rubberband till I realized how pissed Id be if there was a fire [img]/images/graemlins/shocked.gif[/img]

[Ulysses]

If you're really intent on not paying the taxes, your option of selling to a friend for 90 cents on the dollar is VASTLY superior to your other options. Every other option leaves an electronic and/or paper trail that is very easy to trace. The other option mentioned in the thread, offshore bank acct, is also pretty bad IMO - especially post 9/11, there is VERY heavy scrutiny of offshore bank accts.

If you have a trusted friend in Canada (or wherever else they don't have to pay taxes), there is an even better method than Neteller transfers for cash. Play $5000+100 PokerStars SNGs. The fee is only 2% and you are totally legit as far as the IRS is concerned. This keeps you safe from the IRS getting your transfer info from Neteller and using that against you (which could easily happen).

But here's the best option. My income from poker relative to other income of mine isn't significant enough for me to deal with this - I just report it all and pay the extra taxes. However, for someone like you, I think this is your best plan:

Cashout through any means and LOG AND REPORT all of those winnings. Neteller, check, whatever. LOG ALL YOUR ONLINE WINNINGS. OK, so let's say you win 5k one session, lose 2k another, and win 2k another session. That leaves you w/ 7k in winnings and 2k in losses. Now, you cash 5k to your bank. In your records, you have 7k in winnings, 2k in losses. Now withdraw 5k cash. The next day, deposit 1k cash. Log a 4k casino loss in your records. Now, all of a sudden, you have 7k in winnings v. 6k in losses to deduct for net income of 1k. You get the idea. This, IMO, is by far the best strategy and frankly is pretty much what most of the full-time B&M pros I know do.

Note that many options (get a check, deposit at a check cashing place) are not only traceable, but if you are found out you will face SEVERE tax evasion penalties - far more than if you just didn't pay and plead ignorance. In that respect, the more effort you put into hiding the trail, the worse the likely consequences if found out.

[Lost Wages]

[ QUOTE ]
selling neteller money for 90 cents on the dollar for cash or paypal money

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Not a good idea. Now you are not only commiting tax fraud but also conspiracy to commit tax fraud and money laundering. For the former you can probably work out a deal to pay the tax + interest + penalty. For the latter two you are looking at serious federal prison time.

Lost Wages

[Ulysses]

[ QUOTE ]
[ QUOTE ]
selling neteller money for 90 cents on the dollar for cash or paypal money

[/ QUOTE ]

Not a good idea. Now you are not only commiting tax fraud but also conspiracy to commit tax fraud and money laundering. For the former you can probably work out a deal to pay the tax + interest + penalty. For the latter two you are looking at serious federal prison time.


[/ QUOTE ]

This is more or less correct, though some of these concerns are probably a little overstated if you were to do this scheme w/ a good friend of yours in Canada. However, for this reason, the whole HU SNG dumping scheme is better as far as schemes go. You still face similar potential problems, but it will be harder to trace or prove. Of course, if your friend decides to turn you in, it won't really matter which of these methods you use.

Again let me reiterate that the tax fraud/evasion problems are a real risk in any of the methods mentioned in your initial poll. A number of people on this board seem to have a feeling that their Neteller account is somehow hidden and especially ATM transactions from there can't be seen by the IRS. That's just not true and it's actually quite easy to link your Neteller debit card transactions to you. This, of course, is assuming that your Neteller account actually has your personal information on it. If you have somehow set up a Neteller account w/ fake information and a debit card, then you are pretty much in the free and clear.

[ArchAngel71857]

That being said, what is the best way to avoid taxes?

Don't pay them. Then when you get caught, hire a lawyer and use all your money to pay his/her legal fees.

Walaa, no taxes.

-AA

[GWB]

[ QUOTE ]
That being said, what is the best way to avoid taxes?

Don't pay them. Then when you get caught, hire a lawyer and use all your money to pay his/her legal fees.

Walaa, no taxes.

-AA

[/ QUOTE ]

Vote for Edwards, by the time the IRS catches up to you, he will have the lawyers in control of everything - and you will have the money to pay his trial lawyer buddies.

[harrv]

I have a couple of questions for you guys.

First, what exactly should I pay taxes on? I play at Party Poker and so far I've made two deposits and one withdrawl. I deposited a total of $1167 (500+667) before I stopped bleeding money and started making some. I've only withdrawn $500 so far. The way I see it, until I've withdrawn more than I've deposited there is no net profit to be taxed, correct? For example, if I were to take one more withdrawl of $667 this year, I'd be even and I wouldn't do anything unusual on my taxes. Right? Any withdrawls after that (this calendar year) are taxed?

Second question. I live in Utah where gambling on the Internet is illegal. If this stuff is so easy for the IRS to track, should I also be worried about the local cops knocking on my door? I read in the newspaper that there hasn't been much enforcement of that law in the last ten years or so, but with the increased popularity and visibility of poker, I wonder if that could change.

[csuf_gambler]

[ QUOTE ]
I have a couple of questions for you guys.

First, what exactly should I pay taxes on? I play at Party Poker and so far I've made two deposits and one withdrawl. I deposited a total of $1167 (500+667) before I stopped bleeding money and started making some. I've only withdrawn $500 so far. The way I see it, until I've withdrawn more than I've deposited there is no net profit to be taxed, correct? For example, if I were to take one more withdrawl of $667 this year, I'd be even and I wouldn't do anything unusual on my taxes. Right? Any withdrawls after that (this calendar year) are taxed?

Second question. I live in Utah where gambling on the Internet is illegal. If this stuff is so easy for the IRS to track, should I also be worried about the local cops knocking on my door? I read in the newspaper that there hasn't been much enforcement of that law in the last ten years or so, but with the increased popularity and visibility of poker, I wonder if that could change.

[/ QUOTE ]

dont worry bout it bra. the money you and i are making is way too small to be worrying about such symantics as taxes.

[berya]

"Now, you cash 5k to your bank. In your records, you have 7k in winnings, 2k in losses. Now withdraw 5k cash. The next day, deposit 1k cash. Log a 4k casino loss in your records."

Actually this is what my account suggested. Of course he is not a gambling expert by any means. He then said that it would be even better if you take the money out of the account right in the casino and save those receipts to deduct. Of course if you up 100,000 for the year and you only have to pay about 13,500 from that then it's a no brainer. I was under the impression it would be twice that.