Am I admitting to breaking the law when I pay my taxes on winnings?

[Zetack]

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The IRS doesn't report anything to other agencies--it's not in their best interest.

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They are forbidden by law from doing so, it has nothing to do with their self interest.

[srw5n]

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in this country things are legal unless there is a law that specifically says they are not. there is no law that says that gambling online is illegal.

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Nothing could be further from the truth. Though if you are speaking exclusively of Federal law you are partially correct.

In the case of online gambling it's a gray area, but for a variety of reasons you are reasonably safe from any federal action.

[pudley4]

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No.

Gambling online isn't necessarily illegal, despite what 60 minutes says.

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there is no Federal law that says that gambling online is illegal. There are some states that have laws against gambling online - Nevada for one

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fixed.

There's a box on the 1040 form for gambling winnings (if you don't itemize it's pretty easy). You don't have to specify what kind of gambling you did. If you want to claim gambling losses, that's where it gets a lot more complicated. I've just calculated all the money I moved to my bank account in a year and subtracted what I'd deposited and entered that figure (no loss for any given year). Since the online gambling is illegal according to the DoJ, there really aren't tax codes to address it and this seemed like a good faith effort on my part to pay my taxes. If the U.S. isn't going to bother to make it legal and regulate it, that's about all we can do.

However, there is actually a far more elaborate system that the pros use to track their wins and losses from legal brick and mortar gambling (Phil Gordon addresses it somewhere on the Full Tilt site) but those tax regulations are written for a system where a player buys chips from one source, plays at one table at a time, and cashes out their chips at the same source. Even using poker tracker I don't see how anyone could apply these sort of regulations to online winnings because the B&M system works by tracking individual sessions. Online people jump from table to table, site to site, play in multiple currencies at times, get bonuses, rakeback, and all kinds of other things that don't really apply to brick and mortar play.

If someone is unlucky enough to get audited (probably more likely for those with no other source of income), they at least should have tried to pay taxes on their winnings because chances are they will have screwed something up according to the IRS and owe a penalty on whatever figure they didn't pay taxes on. But the only sure way to get screwed is try to hide the money or not pay taxes on it at all even if it IS supposed to be illegal (as Capone found out the hard way).

[jrz1972]

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Am I admitting to breaking the law when I pay my taxes on winnings?

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No, because when you pay your taxes, you're reporting "gambling winnings" and "gambling losses," not "illegal internet poker winnings" and "illegal internet poker losses." The IRS neither knows nor cares that you happened to win your money on the internet as opposed to a perfectly legal B/M casino.

[jrz1972]

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There's a box on the 1040 form for gambling winnings

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Not really. You're probably thinking of the "other income" line.

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(if you don't itemize it's pretty easy).

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It's easy whether you itemize or not.

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You don't have to specify what kind of gambling you did. If you want to claim gambling losses, that's where it gets a lot more complicated. I've just calculated all the money I moved to my bank account in a year and subtracted what I'd deposited and entered that figure (no loss for any given year).

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This is unambiguously wrong, as in it is not up for debate.

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Since the online gambling is illegal according to the DoJ, there really aren't tax codes to address it

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This is also wrong. The tax code is actually reasonably clear on how to handle gambling winnings.

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and this seemed like a good faith effort on my part to pay my taxes.

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It may be a good-faith effort, but it also shows you failed to take 45 seconds out of your life to google the topic.

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If the U.S. isn't going to bother to make it legal and regulate it, that's about all we can do.

However, there is actually a far more elaborate system that the pros use to track their wins and losses

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Everyone is supposed to track their wins and losses, whether you're a "pro" or not.

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from legal brick and mortar gambling (Phil Gordon addresses it somewhere on the Full Tilt site) but those tax regulations are written for a system where a player buys chips from one source, plays at one table at a time, and cashes out their chips at the same source. Even using poker tracker I don't see how anyone could apply these sort of regulations to online winnings because the B&M system works by tracking individual sessions.

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Um, it's like really easy to do this woth PokerTracker. Export your session stats to Excel and sort by $ won. Add your winning sessions. That's what goes in "other income" along with bonus money. Now add your losing sessions. That goes as a deduction. You're done in under 5 minutes, less if you've used Excel before.

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Online people jump from table to table, site to site, play in multiple currencies at times, get bonuses, rakeback, and all kinds of other things that don't really apply to brick and mortar play.

If someone is unlucky enough to get audited (probably more likely for those with no other source of income), they at least should have tried to pay taxes on their winnings because chances are they will have screwed something up according to the IRS

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I pay taxes on my poker income and I'm 100% sure I haven't screwed anything up. This is really very easy assuming you keep records.

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and owe a penalty on whatever figure they didn't pay taxes on. But the only sure way to get screwed is try to hide the money or not pay taxes on it at all even if it IS supposed to be illegal (as Capone found out the hard way).

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These tax threads would be a lot better if people who didn't have any idea what they were talking about would just refrain from posting and spreading bad information.

Also, welcome to the forums.

[college kid]

Good to know.

just move to Canada, its all good here, and tax free also

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if you r a drug dealer, by law u must report all income on your tax return, so u do the math. And its not illegal until they make a law saying it is.

[TStoneMBD]

the irs isnt allowed to report anything to any federal agencies so you cant be arrested for what you file. basically, in the united states, its fine if you break the law as long as you pay taxes on it.

they couldnt catch al capone for criminal activity so they put him in jail for tax evasion.

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the irs isnt allowed to report anything to any federal agencies so you cant be arrested for what you file. basically, in the united states, its fine if you break the law as long as you pay taxes on it.

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This is incorrect. Here is a link to the part of the tax code that governs the disclosure of taxpayer information to third parties:

http://www4.law.cornell.edu/uscode/h...3----000-.html

In section 6103.i.3 titled "(3) Disclosure of return information to apprise appropriate officials of criminal or terrorist activities or emergency circumstances ", you can see that it says:

(A) Possible violations of Federal criminal law
(i) In general Except as provided in paragraph (6), the Secretary may disclose in writing return information (other than taxpayer return information) which may constitute evidence of a violation of any Federal criminal law (not involving tax administration) to the extent necessary to apprise the head of the appropriate Federal agency charged with the responsibility of enforcing such law. The head of such agency may disclose such return information to officers and employees of such agency to the extent necessary to enforce such law.


Now, I should point out that this is fairly rare, as you can see here: http://www.house.gov/jct/x-63-05.pdf

But, it's important to keep in mind that the IRS can share your information with the appropriate federal agency to apprise it of a violation of federal law, so don't be too reckless when you describe your source of income.