The hundredth tax question...

[kurosh]

Sorry but my dad ripped into me for 2 hours today so I need to clear some things up. Any links to proof would be nice too. This is my situation:

I'm 18 and currently listed as my dad's dependent.

I have a couple grand in neteller. I say the IRS has no idea what is in my neteller account. My dad claims that because I gave them my SSN, they report everything to the IRS.

I've only withdrawn about $500 from my neteller. I'm about to cash a check for $1450 from Ausvegas. I'm telling my dad to just put $2000 as my income. He says I have to put my entire gambling winnings and tax it 25%?!?!! I CAN just put the $2000 and put it as a different form of income can't I? What form of income???

My dad says that any transactions I make with my bank account, the IRS is not aware of unless they audit me. IE, when I cash my check for $1450, it's completely "safe". Is he right?


Thanks for any help!

[JasonK]

Isn't tax evasion a felony?

[snowbank]

"I CAN just put the $2000 and put it as a different form of income can't I? What form of income???

My dad says that any transactions I make with my bank account, the IRS is not aware of unless they audit me. IE, when I cash my check for $1450, it's completely "safe". Is he right?"

If you make money gambling, you have to report it as gambling income. I guess you are "safe" with anything until you get audited. But that's the whole point. If they see something that doesn't seem right, they audit you. Also, they do random audit testing too. If that's your only source of income, I don't think you will be taxed, but I could be wrong.

[duk]

[ QUOTE ]
I CAN just put the $2000 and put it as a different form of income can't I? What form of income???


[/ QUOTE ]



I think it all goes under "other income." According to the IRS, though, for gambling winnings you must include under "other income" the total winnings from only your winning sessions. You can then deduct your losses up to that amount.

If you don't mind lying (or maybe only half-lying), instead of labeling it "gambling income" you could just label it "illegal income." This avoids the session distinction. I'm not sure what happens if they audit you though. Maybe you can invoke the fifth amendment.


As for proof, the IRS website is very helpful. They have all the forms and instructions and everything else... even pages about gambling income and illegal income.

[snowbank]

'If you don't mind lying (or maybe only half-lying), instead of labeling it "gambling income" you could just label it "illegal income."'

haha. what!?!?

[dakine]

A few minutes ago, I added a post on NV&G, "Federal & State Gambling Laws." Check it out.

[duk]

You know, just pretend you made it selling drugs or doing mob hits or laundering money on the internet or something. People have said that your tax return can't be used against you as evidence of a non-tax-related crime, so that part shouldn't matter; you only have to worry about what happens when the IRS asks you about the "illegal income." And I don't know anything about how that works. I'm not saying that I'm planning on using this tactic, but it certainly would be interesting to see how it might play out.

[snowbank]

"just pretend you made it selling drugs or doing mob hits or laundering money on the internet or something. People have said that your tax return can't be used against you as evidence of a non-tax-related crime, so that part shouldn't matter"

hahaha. that's awesome. I've never heard about that before. So you can be like, ya I'm the main supplier on the East coast for cocaine, and they can't do anything about it??

[mmcd]

[ QUOTE ]
Isn't tax evasion a felony?

[/ QUOTE ]

Yeah, they will almost certainly throw the book at an 18 year old kid who didn't report his $2,000 in income properly.

If he screws around with it, WORST case scenerio, he has to pay what he would have owed had he done it properly + maybe some interest/penalties. The IRS onlys goes after people criminally in egregious cases where people "willfully evaded" their taxes. I don't think you will EVER see a teenager making a few thousand dollars prosecuted for tax evasion. They can't reasonably expect an 18 y.o. kid making $2000.00 to know the intricacies of the IRC.

[kurosh]

If I report it as gambling income, do I have to pay 25% on it? Do you guys all pay 25% on your winnings?