Poker Tax – Part 1 of 3
POKER TAX. That is right. I bet you didn’t file your poker tax return on April 15th. What is a poker tax return? Well if you played in a real money poker game on line and had $10,000 in your account anytime during 2008 you probably have to file a Report of Foreign Bank and Financial Account, “FBAR” (TD F 90-22.1) by June 30 of 2009. Now, why you have to do that, is that some people believe that an account at an off shore on-line casino or poker site is a “financial account” for reporting purposes.
So what that means to you, is that you probably need to file FBAR’s for every year that you had an account(s) at any off shore poker site and in which you had more than $10,000 in your account at any time in the year. The statute of limitations is 6 years and the penalties are severe (see below). But don’t worry, it may get worse. If Sen. Levins’ recent Bill, S 506 “Stop Tax Have Abuse Act” is passed the $10,000 threshold will go away and if your off shore account has a $1.00 or more in it you will likely have to file and FBAR. Now for the penalties: The penalty for not filing an FBAR is 20% of the highest amount per year in the account. You can file the FBAR’s (and presumably amended returns if necessary for prior years) and make a voluntary disclosure or take your chances. A voluntary disclosure is a formal request to the Internal Revenue Service to waive prosecution and not impose penalties.
WARNING, you must make a full disclosure, file all unfiled FBARS and amend tax returns to pick-up any unreported income (and pay the tax and interest). Many Americans took chances and have accounts at UBS and the U.S. District Court in Washington D.C. will decide whether UBS has to turn over 52,000 names and account information. A U.S. District Court Colorado ruled that First Data Corporation must turn over information on credit card transactions it processed involving off-shore merchant accounts. The ultimate objective of enhanced FBAR enforcement measures and prosecutions is to raise income tax compliance by getting taxpayers to report off shore accounts and off shore income (including poker winnings) and to prevent terrorism and money laundering . Oh, I failed to mention that preparer penalties may apply to return preparers. How the IRS will collect data from off shore operators, and how to avoid or minimize penalties is the subject of future comments. So, now do you think that there is a poker tax? What are your thoughts?
Part 1 of 3 from Sanford I. Millar, the CFO and General Counsel for Centaurus Games and a certified specialist, taxation law State Bar of California. Mr. Millar will be a featured panel speaker at the Southern Gaming Summit on Thursday, May 7, where he will discuss the importance and qualifications for filing a Report of Foreign Bank and Financial Account (FBAR) and other federal tax compliance issues relating to the regulation of Internet gaming.
