Who Reports Their Winnings As Income?

[Oski]

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I played HE with a guy a casino one time who asked a lawyer about reducing the amount of taxes he had to pay on his winnings. The lawyer told him to withdraw a bunch of money from an ATM every time he went to the casino and keep a receipt for it. With cash payouts, there is no way the IRS could prove that you DIDN'T lose the money gambling.

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That seems a bit sketchy/urban legendish. Lawyers get disbarred for recommeding illegal actions to thier clients. Not to mention in tax court, the burden of proof for a lot things are with the taxpayer not the irs.

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Nothing illegal here. The lawyer merely stated that the client should take out a large amount of money and keep a receipt. What the client does from there is left to the imagination.

[SinCityGuy]

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He told me that he was now obligated to pay the IRS about $500 per month for years – this guy was very bitter.

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It never ceases to amaze me how people who break the law and get caught are bitter.

[BusterStacks]

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I played HE with a guy a casino one time who asked a lawyer about reducing the amount of taxes he had to pay on his winnings. The lawyer told him to withdraw a bunch of money from an ATM every time he went to the casino and keep a receipt for it. With cash payouts, there is no way the IRS could prove that you DIDN'T lose the money gambling.

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This is by far the best option in terms of risk/reward ratio. Don't dodge the taxman unless you want to live your whole life that way. If the interest catches up to you in 5 years like it did to my uncle, you can owe nearly double what you tried to avoid. Not to mention long term concerns such as retirement and insurance, which will be accounted for by your income.

[TorontoCFE]

It makes me shake my head when people think the risk of getting caught are 0. Contrary to what many people think, the government watchdogs are not stupid. They have seen and know more about money laundering and tax evasion than you do.

I have spent a good deal of time investigating these things freelance - I'm not going to jeopardize my license and government security clearance, but I can assure you that
directly depositing into your bank account will be uncovered 100% of the time you are investigated. Now the chance you are audited may be close 1-2% and small $ amounts may be lower risk so you can weigh the odds of breaking the law for yourself - only you can decide whether the 20% or so of your win is worth a potential vacation on Uncle Sam.

There are much "better" ways of evading taxes and laundering money than you have suggested. You're going to need luck on your side.

[TorontoCFE]

Actually, they don't have to prove you lost the money gambling.

First they may wonder why you kept gamlbing if you always lost (assuming you don't report a reasonable win rate).
Then they would perform a net worth and income analysis to see how you could afford your lifestyle given substantial, recurring loses.

A good investigator uncovers this scheme about 70-80% of the time in my experience.

[TorontoCFE]

"As for taxes, long live "gambling-winnings are tax-free" Canada "

It is half-true statements like this that make me certain there there will always be a need for accountants.