Taxes on offshore winnings

[Marco]

penguinfan......bringing in 10k from out of country should raise a red flag at any banking institution.....that sum of money would require filling out forms.....

bombs......in response to your third post in this thread, about bringing it in via cash machines......if you do it this way spread it out over time...by all means don't go to the bank with it, it just provides further record of your financial activities....whether or not you choose to pay taxes on this is your choice in the end...if you're trying to keep it all then don't turn around and shove it into some bank....

if you bring it in via cash machine just treat it like spending money and keep it low key as to draw no suspicion your way....

 

[ELVIS]

agreed. treat like beer $$. entertainment budget,etc. this is again why i primarily use a local. he has a tax stamp (so he says) .

 

[yyz]

If the IRS is really interested then bring it on, I've had winning years and losing years, if they can prove any of it then they're gods because I haven't kept track of any of it and consequently they won't be able to either......

The IRS doesn't need to prove anything, though. They have what they need, and that's proof that you won.

People always say, "I'll get an equal amount of losing tickets, and show that I broke even."

That sounds great on it's face, but I remember reading a few years back about an IRS agent who handled these cases. Some guy would have two or three big hits at the track that required a W2-G and "offset" the winnings with losing tickets. The IRS guy would haul him in for questioning. He would basicaly tell the guy, "You mean to tell me that you have three winners for $12, 473, and 873 losing tickets equalling that same amount?"


"You had no other winners over that time?"


You get blown right out of the water, from what this guy wrote.


If you try to claim monies from gambling, and offset the losses, it is my understanding that the IRS demands very, very stringent bookkeeping.

 

[Marco]

yyz.....when you say "the IRS doesn't need to prove anything, though. They HAVE what they need, and that's proof that you won".......

Where is the proof that I won, if I'm not even keeping track on a daily or weekly basis of the bets I made and whether or not there are more winners than losers?? Is there an IRS agent riding on the bill of my cap as I go through my daily life???

If they come up with some idea that I'm making profits then yes, I can come up with some evidence to counter thier unproven theories.....maybe some cancelled checks wrote at a casino.....maybe some other gambling related losing tickets that may or may not originally have belonged to me, how can they prove I wasn't the original owner, as long as the dates imprinted on them don't place me in two places at one time? Also keep the tickets that reflect your gambling habits.....

If they come around and try to prove I'm making money, then all I have to do is dredge up a drawer full of losers and try to convince them that I'm not really making a profit, that if anything all the gambling would show me to be is more of a degenerate or problem gambler.....

keep the money out of the banking system as much as possible....cash is still king, and still untraceable.........

 

[Eternal]

Very interesting thread so far.......

Being that I will probably be several thousand in the black by the end of the year, I have thought about how (and if ) I will pay taxes on offshore winnings. Wanting to make it as simple as possible, I think the most honest and right way would be to only claim the amount of winnings that you have physically collected, whether its through direct bank wire, fed ex check, neteller, etc....... stuff that could be easily tracked by the feds. That way , if you do get audited, you can at least show you were making every effort to be upfront about your monetary gains. It would be unfair to have to pay taxes on winnings that are still sitting in your account that you could very well lose.........in a year where you end up in the red or if you don't collect any of your winnings ( which is what I plan to do so I can use the extra money to make even more ), don't claim anything on your taxes because you haven't actually gained anything TANGIBLE.....

Why can't congress just allow the vegas casinos to setup websites here in the states? The revenues for vegas and the government would be huge, and they would have to worry much less about people potentially hiding winnings in offshore accounts.............Just some thoughts:shrug:

 

[yyz]

I'm only telling you what I read, Marco.


You are certainly not the first guy to think you can pull the wool over the IRS' eyes.

You have to have very, very tight records of your daily play. I believe you have to claim gambling as a source of income. (Not sure, but I do believe that is what I read)

I also remember him saying that you should be ready for some top flight audits over this, too.

I don't like the sound of it anymore than the next guy. I have a co-worker who plays high limit slots. He goes through thousands of dollars a year on these things. He siad a typical day means several "wins" that get reprted to teh IRS. ($1200+ hits)

Now, you have to pay taxes on these hits. So, let's say he brings 5 dimes with him to the casino. He plays all day, and leaves out 5 dimes. BUT he has also accumutated 14 jackpots for a total of $30,000. He gets taxed on those "wins", even though it is clear he didn't win! Now, he has lost $5000 to the casino, and owes Uncle Sam another $2,100 on his "winnings". That, my friend, is unfair.

I would believe that the reason the government will only allow you to claim losses up to the amount of your winnings is, anyone could walk the track grandstand and pick up a million dollars worth of losers in a years time.

"Look Mr IRS dude!.........I lost a million dollars this year. I only make $35,000, so you can see I have no money. I'll just pay no taxes again this year. Thanks for calling."



:shrug:

 

[redsfann]

Whats being lost in this whole thread of good debate is the fact that OFFSHORE GAMBLING IS ILLEGAL!!!

Let me say that again.....

OFFSHORE GAMBLING IS ILLEGAL!

The idea that you guys are debating paying taxes on illegal activites is mind blowing to me. Its sort of like a drug dealer calling the IRS and saying, "Dudes, I made 20,000 selling pot this year, how much do I owe you?"


Look, if you really have this much cash owed to you by an offshore account, I'd collect it in increments of 1,000 dollars or so, via Western Union-- look at the fees as a part of keeping your illegal activites from the eyes of the law-- invest 50 bucks on a decent lockbox for your house and keep the cash in there to be brought out when going to the casino or horse track; taking the little lady out for an expensive dinner or even things like trips to the grocery store or filling up that gas guzzlin' SUV parked in your driveway.

In short, DO NOT attempt to let the US Gov't know about this money in any way, shape or form. Even if the feds claim that they aren't prosecuting small timers like those of us that use offshore bookies, you marching down to your local IRS office to declare your illegal winnings makes no sense at all to me.....

 

[yyz]

:yup

 

[lostinamerica]

To avoid being at the mercy of an IRS auditor, CONTEMPORANEOUS records of ALL wins and losses (with as much documentation as possible for such wagering) is the only safe haven for being able to claim gambling losses (legal and illegal) to the extent of gambling winnings (legal and illegal).

If you have a few big legal winners that get reported to the government, a "pigs get fed and hogs get slaughtered" approach to try would be to claim about 1/2 that amount as losses.

GL

 

[Marco]

This would be in reference to what redsfann wrote regarding the illegal status of offshore gambling.....

So, if I take others advice, and decide to report my income from gambling, namely offshore sports gambling......given the fact that offshore gambling is illegal......what channels do I bring it in through as to not leave a paper or electronic trail that leads to some sportsbook out on some tropical island......thereby tipping the feds to the fact that this money was gained from the illegal act of offshore betting......?????

Are they going to be happy that I have decided to pay taxes on this windfall......or more apt to treat it like drug money and try to confiscate the whole sum???? Like redsfann stated that if a pot dealer made 20k and asked how much tax he now owed.....I always thought it was flaky that the government created this "drug stamp" and prosecuted people for not having it when the product itself was illegal.......like if a drug dealer spent money and bought this magical stamp, he'd be untouchable to prosecutors???

If I claim I won it at a casino over the course of a year and then they find these transactions from San Jose or Montego Bay, then what???? Am I supposed to be upfront and honest and just tell them where it exactly came from and expect to get away with just paying taxes on the income????

Eternal.....agree with you, no way in hell I would even begin to contemplate thinking about paying taxes on money I haven't collected......bottom line: if it's not in my pocket and if it's not profit then I'm not going to pay taxes on it, period. Plain and simple....

....and as Eternal asked about why congress can't allow vegas to post thier own version of a web based sportsbook? Simple, outdated, moralistic based laws that lead to massive government spending criminalizing consensual crimes that would provide a substantial increase in the tax fund if legalized, controlled and regulated properly........prohibition didn't work with alcohol, and sorry to say the feds haven't grasped or even come anywhere near realizing the fact that prohibition has not worked and will not work with the issues of gambling, drugs, and prostitution.....

They still pump billions upon billions upon billions of dollars into trying to quash these issues and centuries later they still haven't gotten so much as a clue......

 

[auspice]

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[Penguinfan]

Let me be clear as this thread is turning in the wrong direction. You must pay tax on all income in the United States, there is a spot on the return for gambling winnings, it does not ask what kind of gambling winnings they are, just that they are gambling winnings. If you claim off-shore winnings and try to offset it with offshore losses, then yes you are turning yourself in basically because offshore wagering is illegal. Now if for some reason you do not want to pay the taxes that is all well and good, HOWEVER if for some reason you get busted for off-shore gambling (highly unlikely) and your account shows a profit, guess what, the minute you get your ass bailed out of jail there will be a gentleman in a suit with a business card that says IRS on it and he will go into great detail about taxes owed, fines, late fees and penalties. My pesonal opinion is to pay the taxes an dnot ever worry about it agian. Yes this puts us in a bad spot, just like the slot players YYZ mentioned, we will pay taxes on winnings, but have a real hard time offsetting it with losses since what we do is illegal, sucks, but that is the cold hard facts.

 

[Marco]

penguinfan....just because some of us have posted opinions suggesting one not pay taxes on this matter doesn't mean the thread is going in the wrong direction.....in fact some interesting points have been brought up for discussion.....

Yes, I understand your point about just paying the taxes on it and all will be fine.......

If our ancestors who came over on the Mayflower would have thought that way this great (at times) country would have never come to be, the American revolution and the constitution would have never happened, and we would all be stuck paying homage to the queen of England and be stuck with whatever crummy laws the throne declared us to follow, and more than likely be subjected to some bigoted religious intolerances and have no choice in the matter.....

 

[yyz]

If our ancestors who came over on the Mayflower would have thought that way this great (at times) country would have never come to be, the American revolution and the constitution would have never happened, and we would all be stuck paying homage to the queen of England and be stuck with whatever crummy laws the throne declared us to follow, and more than likely be subjected to some bigoted religious intolerances and have no choice in the matter.....

........but you could wager freely on sports.

 

[Eternal]

Let me see if I got this right. Using yyz's example:

Now, you have to pay taxes on these hits. So, let's say he brings 5 dimes with him to the casino. He plays all day, and leaves out 5 dimes. BUT he has also accumutated 14 jackpots for a total of $30,000. He gets taxed on those "wins", even though it is clear he didn't win! Now, he has lost $5000 to the casino, and owes Uncle Sam another $2,100 on his "winnings".

How do professional handicappers make any money if this is true?

If over a course of a year you have wins that amount to $600,000 and losses that amount to 500,000, leaving a net earnings of $100,000. So now, if you have to pay taxes on "total winnings" the tax amount on 600k would excede the 100k in profits, therefore gaining you no money...............

However if you look at the law as turfgrass posted:

You can deduct gambling losses only if you itemize deductions. Claim your gambling losses as a miscellaneous deduction on Schedule A Form 1040, line 27. However, the amount of losses you deduct cannot be more than the amount of gambling income you have reported on your return

This would indicate that I would be able to claim my 600,000 in winnings while deducting 500,000 in losses leaving only 100,000 for a tax liablity........both of these things can't be true..........

Of course this is all in context of having all of your bets in Vegas, not offshore, where the casinos you've placed all your bets would have a record of your wins/losses....right? never been there so I don't know.........

As far as "hiding" betting income from the gov't with offshores, I would think if you received payouts via Western Union and kept the amount to a few hundred a time, and not more than a few grand a year, I don't think the feds will be pounding down your door. I'm sure the government knows there is, has been, and always will be millions of people who make a few extra thousand a year "under the table" and don't report that income on there taxes........and all of that is pennies compared to the multi-millionaires and corporations that hide monies in banks all over the world............the feds have bigger fish to catch....

 

[Red & Black]

Professional gamblers/handicappers get around this by claiming all their winnings and losses on a Schedule C. The downside is that they have to pay self-employment taxes on their total winnings, and they cannot show a net loss. This way, the professionals are able to deduct some additional expenses that they wouldn't normally get to deduct if they only claimed their expenses on their itemized deductions.

 

[Marco]

Someone mentioned about money coming in through neteller from an offshore source to one's bank account and the thought that that act may draw a suspicious activity report out......

Regarding this thought....how does neteller work, as far as listing the import end of the transaction? If someone moves money through neteller does the end party to the transaction know where the money originated from......obviously it would look better if the money was transferred as some payment for something bought on e-bay into ones bank account, than to say it come from some offshore casino......

I wouldn't trust some bank teller or official to just look at an offshore gambling transaction as some casual pastime, .....I would guess thier reaction would be more like the "isn't this illegal....immoral....we better report this"...?????

Neteller is based in Canada??? How much control do the feds have with foreign based records if that is the case? (maybe this is a stupid question in light of our invasionistic policies?)........and going back to the original question.....Is there any way of telling the bank, if they question the transaction, that the funds come from some e-bay transaction or that you sold some furniture to someone on the coast and decided neteller was the best option?

How safe is neteller, say if one was to move a large amount of money into neteller, then draw it out in small incraments over time.....does the import trail exist?

 

[yyz]

Eternal,

My buddy does claim the losses, too. What I am saying is, the IRS should take the whole picture into play.

I think the slot machines should not spit out any coins until you are ready to quit. If I win $20,000 and piss it right back, what is there to pay taxes on?:shrug:

But, the way they are set up, any hit over $1,200 requires a W2-G tax witholding form. Now, if a guy is sitting at a $100 machine, even a smal hit would crack that mark! My friend has watched players hit 100 of these forms in a half a days time!

It's a joke.....

 

[auspice]

Marco

"Neteller is based in Canada??? How much control do the feds have with foreign based records if that is the case?"
_________

The IRS has no control over foreign based records. They do however have control over you. They can demand you sign a statement giving them permission to send and ask for any relevant records from Neteller. to be sent directly to them. In the event you refuse, an assessment can be made for some ridiculous amount .

 

[TBONEZ0295]

Thanks for all the input guys. Yet another possiblity might be using my Neteller debit card to withdraw the money in smaller increments, like 500 a pop, from cash machines. Only problem is I am stuck with a bunch of cash to put in the bank, not sure which is worse.

just my 2 cents , but I say just keep it simple.............

stay under 10,000 in withdraws at a time and buy a safe most local office supply stores carry them. Have it delivered if you can , ours took 3 men to get up my stairs and into my walk in closet.