Neteller, the DOJ, and the IRS

[REOdeathwagon]

Neteller, the DOJ, and the IRS

One of my practice areas is professional gambling. Many gamblers maintained an account with the e-wallet firm Neteller. Neteller served as a financial intermediary between US customers and online gambling firms. In January, the Department of Justice arrested the two founders of Neteller and charged them with multiple offenses, including money laundering. Neteller then pulled out of the US market. Neteller announced today that they are cooperating with the DOJ, and that $55 million in funds had been seized by US law enforcement.

Neteller, in one swell swoop, lost over half of its business. Ignoring whether or not such business was legal, assume you were running Neteller. The Department of Justice has arrested your two founders, has decided to fight you, and you no longer have any means to make financial transactions to the United States. What would you do? Fight the US DOJ, or make the best deal you can? It's clear from the Neteller press release that they are in negotiations with the DOJ, and that transaction records are being sent from Neteller to the DOJ.

Indeed, it's clear what's likely to happen. Neteller and the DOJ will likely come to an agreement. Neteller will announce that they will no longer do business with Americans, and they may have to pay a fine; the DOJ won't indict the company, or any of its current stockholders. The DOJ might even accept some sort of plea bargain for the two founders who were arrested. It's also certain that as part of such a deal Neteller will agree to release details of all transactions between American customers and Neteller.

What does the DOJ want with thousands of pieces of data? Well, Neteller required the customer's name, address, and for many accounts, their social security number. The details of those transactions will undoubtedly be sent to a government agency that's in the revenue collection business: the IRS.

So what does that mean for the customer who used Neteller?

If you complied with the lawyou reported all of your gambling income and your foreign bank accountsyou have nothing to worry about. But probably fewer than 5% of taxpayers report their gambling transactions as income.

First, Neteller is considered to be a foreign financial institution. If you have a foreign bank account, and have $10,000 or more in a foreign bank account(s) at any one time, you are required to file Form TD F 90-22.1 by June 30th of the following year with the Department of the Treasury and check the box at the bottom of Schedule B. If you have a foreign bank account and don't declare it, you can face civil and/or criminal penalties. Anyone who received $10,000 or more in one transaction from Neteller had a foreign bank account. I expect the Treasury Department to check their records and come after those who didn't declare their Neteller account. A few individuals may even face criminal prosecution over this, if they had extremely large transactions from Neteller.

Second, the IRS will check their records and see if individuals receiving funds from Neteller declared gambling winnings. The IRS will almost certainly target those receiving large amounts. If an individual received large amounts from Neteller, and didn't declare any gambling winnings, now is the time to amend your return, and pay the tax, interest, and penalties. It's almost always better to come forward to the IRS than to have the IRS knock on your door.

The IRS's first targets will be those with large (in dollars) transactions. But given the ability of the IRS to conduct computer matching, if you received funds from Neteller and didn't declare any gambling winnings, you might receive a "letter audit" from the IRS. ("Dear taxpayer, we've added $xxx [the amount of money you received from Neteller] to your income. If you agree, pay the tax, interest, and penalties....')

I believe that a few individuals will likely face criminal prosecution over this. If the IRS can find an online gambler who earned over $100,000 and didn't declare his gambling income (and I think the IRS will have several to choose from, and might even find someone who earned over $1 million) that individual could find himself facing jail time for tax evasion.

But what if you used Neteller for non-gambling activities? Interestingly enough, I know of one firm that paid individuals through Neteller. If you declared the income on your tax return (and can show that), there's nothing to worry about. You may have to spend some time responding to an IRS notice, but if you've paid your taxes, you're fine.

However, I believe that many (if not most) online gamblers have thought that since Neteller was based on the Isle of Man (a known tax haven), the IRS would never be able to see their records. You've just lost that gamble. It will take some time, probably several months at a minimum, for the IRS to conduct their matching of records. If you're one of those who just lost the first gamble, do you want to double-down and bet that the IRS won't find you or do you want to amend your return(s) and pay the tax that you knew you owed...and the interest and penalties?

As I've said many times, gambling income is taxable. The Tax Code isn't fair to gamblers, but the alternatives if you don't pay your taxes are worse than paying the tax that you owe. - From Russ Fox of Clayton Financial and Tax of Irvine, CA - Thursday February 8, 2007

Copyright © 2006 and 2005 by Clayton Financial and Tax

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[The Dude]

Oh barf.

I can hear the IRS "goosestepping" down Main Street USA already.

 

[winbig]

How are they going to prove NET winnings? It's impossible.

 

[REOdeathwagon]

How are they going to prove NET winnings? It's impossible.

Withdrawals - Deposits = Net winnings

I would doubt the burden of proof is on the IRS. I would think that the burden of proof falls on the taxpayer?

 

[footdr]

IRS Identifying Source of EFT transactions to Bank

My Bank advised me that they have no means of determing the source of incoming EFTs, ACH; to my Bank Account. I was told this when I questioned several of the transactions on my Bank Statement.

I was under the belief that for instance, Click2pay, was a 3rd party payer, payment processor, they told me that they are not the originating Financial Institution. So technically, they are an intermediary. I believe that they use a German Bank, we "customers" don't hold an account at that Bank.

I also know Neteller was not the Originating Financial Institution, all their transactions went through their Bank Account who then sent them to the ACH who passes them through to the Recieving Financial Institution.

DOES THAT MAKE SENSE. I am just going by what I read and questions I asked C2P and Neteller.

If they are considered Foreign Bank Accounts, then niether one was, is following international banking laws.

JUST MY THOUGHTS, MIGHT NOT BE WORTH A HILL OF BEANS

 

[REOdeathwagon]

First, Neteller is considered to be a foreign financial institution. If you have a foreign bank account, and have $10,000 or more in a foreign bank account(s) at any one time, you are required to file Form TD F 90-22.1 by June 30th of the following year with the Department of the Treasury and check the box at the bottom of Schedule B. If you have a foreign bank account and don't declare it, you can face civil and/or criminal penalties. Anyone who received $10,000 or more in one transaction from Neteller had a foreign bank account. I expect the Treasury Department to check their records and come after those who didn't declare their Neteller account. A few individuals may even face criminal prosecution over this, if they had extremely large transactions from Neteller.

Yup, it does make sense footdr. Correct, NETeller is not a bank, it's a third party processor. I think that Mr. Fox's interpretation is that the IRS / DoT may consider a players NETeller account as a Foriegn Bank account. Not that we as players or the banks themselves consider NETeller a 'bank'.

Also, when you file Form TD F 90-22.1, and check the box at the bottom of Schedule B on your tax return, you are very likely to trigger an audit.

As I've said many times, gambling income is taxable. The Tax Code isn't fair to gamblers, but the alternatives if you don't pay your taxes are worse than paying the tax that you owe.

 

[Mousey]

While I do not think NETeller could be considered a foreign bank, (and I realize I am repeating myself here) given the fact that the DoJ and FBI and all those other Federal acronyms have subpoenaed a crapload of documents from NETeller and banks, I fully expect to see many, many U.S. online gamblers and affiliates to be audited by the IRS within the next year or two.

If you gamble at B&M casinos, you might want to get those end of year Win/Loss statements. And don't forget all those losing lottery tickets, either.

 

[footdr]

LEGAL DOCUMENT FOR DOJ-HOW NETELLER TRANSFERED OUR FUNDS

subpoena from the US Bank demonstrate that, from in or about March2006 up to and including in or about April 2006, a total ofapproximately $50 million was transferred from an account in thename of the Payment Company at the US Bank in the United States toan account in the name of Cardload Inc. at National Bank of Canadain Calgary, Alberta, Canada. Neteller PLC’s 2004 annual reportstates that Cardload Inc. is a wholly-owned subsidiary of Neteller
Records of automated clearinghouse (“ACH”)transactions obtained pursuant to subpoena from an automatedclearinghouse located in the United States demonstrate thatNeteller processes a significant amount of customer transactionsthrough the automated clearinghouse system, including transactionsfrom customers in Manhattan. The ACH system permits Neteller tohandle internet-based customer transactions. These records furtherdemonstrate that Neteller uses a payment service company (the“Payment Company”) to conduct its customers’ ACH transactions inthe name of the Payment Company. By doing so, Neteller PLCconceals the nature of these financial transactions. The PaymentCompany receives funds in the United States on behalf of NetellerPLC, and then transfers the funds out of the United States toaccounts controlled by Neteller PLC in Canada.b.Records of wire transfers obtained pursuant tosubpoena from a bank in the United States (the “US Bank”)demonstrate that, from in or about January 2006 up to and includingin or about March 2006, a total of approximately $98 million wastransferred by wire from an account in the name of the PaymentCompany at the US Bank in the United States to an account in thename of JSL Systems Inc. at National Bank of Canada in Calgary,Alberta, Canada. --------------------------------------------------------------------------------
Page 6
6c.Records of wire transfers obtained pursuant tosubpoena from the US Bank demonstrate that, from in or about March2006 up to and including in or about April 2006, a total ofapproximately $50 million was transferred from an account in thename of the Payment Company at the US Bank in the United States toan account in the name of Cardload Inc. at National Bank of Canadain Calgary, Alberta, Canada.

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SO IN AROUND ABOUT WAY IT SEEMS FUNDS WERE ACTUALLY PROCESSED TO OUR BANK ACCOUNTS BY A U.S. BANK. SINCE NETELLER WAS USING A U.S. BASED PAYMENT COMPANY TO PROCESS U.S. TRANSACTIONS

 

[winbig]

Withdrawals - Deposits = Net winnings

I would doubt the burden of proof is on the IRS. I would think that the burden of proof falls on the taxpayer?

Who's to say that they used Neteller solely for depositing and withdrawing?

And you're right. It's the taxpayers duty to prove otherwise...

America: Guilty until proven innocent.

 

[REOdeathwagon]

America: Guilty until proven innocent.

Sad, but true.

People gotta be informed first, then use the power of their vote. It's the only way things can ever be changed. (unlikely)

 

[GrandMaster]

Withdrawals - Deposits = Net winnings

I would doubt the burden of proof is on the IRS. I would think that the burden of proof falls on the taxpayer?

A more correct formula would be
Net winnings=Final balance+withdrawals+outgoing p2p transfers-initial balance-deposits-incoming p2p transfers+charges+amounts spent on nongambling transactions. This would have to be added up over all accounts.

The winnings would also have to be allocated to the various years, since tax rates have changed and gambling losses cannot be carried over from one year to another, but the time of financial transactions will differ from the time of the gambling winnings or losses.

Then there is a big question about bonuses. There is obviously no rule about how to treat the different kinds of bonuses, but there might be some precedent on how promotional chips in land-based casinos are treated, whether they are considered gambling income, other income or not taxable income at all (very unlikely).

As for the burden of proof, if the internal procedures are exhausted and the IRS sends a note of deficiency, you have two choices: not pay up and fight for justice in tax court, or pay up and sue in US Disctrict Court for a refund.

 

[winbig]

Then there is a big question about bonuses. There is obviously no rule about how to treat the different kinds of bonuses, but there might be some precedent on how promotional chips in land-based casinos are treated, whether they are considered gambling income, other income or not taxable income at all (very unlikely).

AFAIK, "bonuses" and comps from land based casinos aren't reported in a yearly win/loss report. I just checked mine from Harrah's, and it only included wins/losses on table games & slots. There was no mention of comps - rooms/cash/whatever. I'm assuming it's looked upon as you having a friend that gives you $20 out of the blue for no reason whatsoever. Would you claim that? I sure wouldn't

Interestingly enough, they do not track poker winnings / losses at land based casinos.

As far as online gaming *Bonuses* (Not comps) - if they are a sticky bonus, I don't think they should be counted. You never received any money from that bonus. If it was a cashable bonus, then yes, it should be included.

 

[tennis_balls]

i'm definately out of the loop on US taxes but it is my understanding that the casinos do not track winnings for table games. has this changed?

 

[winbig]

i'm definately out of the loop on US taxes but it is my understanding that the casinos do not track winnings for table games. has this changed?

Yes. Like I said earlier, when I checked my win/loss report for 2006 it showed table games as well as slots....with the exception of poker...

I can only speak for the Harrah's group. Others may be different.

 

[GrandMaster]

AFAIK, "bonuses" and comps from land based casinos aren't reported in a yearly win/loss report. I just checked mine from Harrah's, and it only included wins/losses on table games & slots. There was no mention of comps - rooms/cash/whatever. I'm assuming it's looked upon as you having a friend that gives you $20 out of the blue for no reason whatsoever. Would you claim that? I sure wouldn't

I doubt that the IRS would take such a charitable view in the case of a professional bonus hunter.

 

[winbig]

I doubt that the IRS would take such a charitable view in the case of a professional bonus hunter.

Quite ironic...the IRS/DoJ labeling players as "Bonus abusers".

But seriously, if a player cannot cash out a bonus, how can it be counted as a win or loss? Seems like a wash to me.

 

[EasyRhino]

A bonus-hustler is going to have winning sessions. And the winning sessions are going to be for greater amounts than the losing sessions.

Therefore, taxes.

Besides, IRS say that taxes are supposed to be paid on winnings per session, not net over a year (although losses per session can also be deducted). It's ridiculously complicated, and can only be done accurately by keeping a log.

I'd much rather just ignore the subject completely on my 1040 form, and also not pay tax on the winnings, too.

 

[winbig]

Besides, IRS say that taxes are supposed to be paid on winnings per session, not net over a year

What's the difference?

 

[REOdeathwagon]

Russ Fox, E.A. is a tax practitioner enrolled to practice before the Internal Revenue Service. Russ, has some other posts relevant to this subject on his blog (which is great -by the way). I have copied and pasted some of the articles and links. Instead of butchering his posts with my interpretation of them. Russ, is also a poker player and is the co-author of Why You Lose at Poker

Why You Keep a Gambling Log :

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The Tax Court reviewed the case of a couple that enjoyed playing the slots in Atlantic City. The IRS thought that the couple were winners; the couple alleged that they lost. What would the Tax Court say?

Terri and Austin Hartsook won $230,825 playing slot machines in 1999 and $293,750 in 2000. They claimed gambling losses (as an itemized deduction) of the same amounts. The IRS allowed at trial $76,314 of losses in 1999 and $55,750 in 2000. According to the Hartsooks, the IRS disallowed all gambling losses at Harrah's.

The Hartsooks received numerous W-2G's from Harrah's. The Hartsooks used a formula to calculate their losses:

"As we understand the way in which petitioners calculated their claimed gambling losses at Harrahs, petitioners multiplied the number of minutes between gambling winnings at a $100 slot machine or a $25 slot machine, as reflected on the respective Harrahs substitute Forms W-2G with respect to Aug. 13 and 14 and Sept. 4, 1999, by the amount that they estimated they would have been able to wager within a minute in such a $100 slot machine or such a $25 slot machine if they had played two coins at one time. Mr. Hartsock testified that he would have been able to wager within a minute $1,200, give or take $200, in a $100 slot machine and $300 in a $25 slot machine. Mr. Hartsock testified that petitioners reduced the amount so calculated to reflect that they would not have been constantly wagering in slot machines that they were playing because they would have stopped wagering to light up cigarettes, get drinks, or talk with others."


There's a problem with this. "[The Court is] unwilling to rely on Mr. Hartsocks self-serving and uncorroborated testimony and the self-serving and uncorroborated workpapers that petitioners prepared in order to establish that they incurred gambling losses at Harrahs on certain dates during 1999." Additionally, they didn't have any evidence to show gambling losses in 2000.

What should they have had? A contemporaneous logbook would have been a good start. If they belonged to Harrah's slot club, they should have gotten a printout of their wins and losses. (Of course, they'd also have to claim the gambling wins that were not shown on W-2G's.) In any case, not only did they lose on the gambling losses, the Court upheld a negligence penalty.

So the next time you play the slots, we hope all you do is win (so you don't have to worry about the losses). But if you do lose, write it down correctly in a logbook and you should be protected if the IRS knocks on your door. 2007 by Russell Fox, E.A., All Rights Reserved.

Case: Hartsook v. Commissioner

It's Unfair, but Tough :

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Today the Tax Court decided two cases where the Court basically said, you're right, the law is unfair, but toughyou have to obey it.

The first case involves a gambler who wanted to net her wins and losses. If you're a regular reader of this blog, you know that only professional gamblers can do this. In this case, both the IRS and the taxpayer agree that the wife lost more than she won. However, the amount she wonsome $13,400will have to be included as income (Other Income, line 21). As the taxpayer is retired, this caused some social security income to be taxable and that a credit for qualified retirement savings was eliminated. The taxpayer was allowed to deduct her gambling losses as an itemized deduction. The Court noted,


"Petitioners are [non-professional gamblers], and their only entitlement to the deduction for their gambling losses is the manner in which respondent determined it as an itemized deduction. Petitioners have cited no authority, and indeed there is no authority to support their argument that unrelated income and credits are immune from the effects of the manner in which respondent treated their gambling winnings and losses." 2007 by Russell Fox, E.A., All Rights Reserved.

Case: Spencer and Egerton v. Commissioner

 

[REOdeathwagon]

Besides, IRS say that taxes are supposed to be paid on winnings per session, not net over a year

What's the difference?

For instance a detailed log for poker it would include: date, table #, limit / stakes, buy in, rebuys, hours played in the session, won lost amount? I would assume, possibly more?

http://www.twoplustwo.com/magazine/current/Fox0207.html
Myth #7. - I can lump my play on the Internet for a full day (or week, month, or year) as a session.
Unless there are specific rules stating otherwise, the tax treatment of the virtual world is the same as the brick and mortar world. I have previously written on the definition of a session ((link: URL Not Found / Outdated. Theres no way that play for a year, month, or week will pass the IRS smell test. Indeed, I do not believe that defining a session as a day will be accepted unless youre playing for a full, continual 24-hour period. 2007 by Russell Fox, E.A., All Rights Reserved.

 

[footdr]

PAY TAXES PER SESSION?

That might work in Nevada, because on big slot wins, they deduct the taxes.

How in the world could you possibly pay taxes for winning online when playing online is:

l. illegal(according to Fed government)Dear IRS here is the tax for the money I won illegally by illegally transfering money to offshore casinos. Since I play almost everyday, can you send me Tax deposit forms so I can transfer the taxes from my Bank Account"

2. you might win,that session, but if your deposits to the casino still equal more than you have won,you still have a loss.

3. what is the definition of "Session"? a day, week, year. Playing online is quite different from occassionally playing in vegas.

4. If audited, they would find that a large percentage of people playing for a year or more would show a loss or break even. I have been playing for 2 years. I have never deducted the losses but in the long run they probably outweigh the wins, I NEVER HIT THE JACKPOT. So I would not be subject to paying taxes on lost money. Those people winning jackpots and transfering large amounts are the ones that should be worried, because the RED FLAG will go up.

5.How many people who occassionly win in vegas, claim in on their taxes. The casinos do not keep track of people playing slots or blackjack that win a couple of thousand, unless they hit a jackpot, right, and then you have to sign a tax form.

6. There are no written IRS guidelines regarding ONLINE GAMBLING losses or wins, or how to report them, obviously, since the government thinks federal law prohibited it even though no law in your state prohibits it

Submitting the information to the IRS when you have not won a substantial amount of money will do nothing more than incriminate yourself and raise a RED FLAG for audit.

Lets face it, they are not able to collect taxes from all the money won at landbased casinos. To bad they don't realize that it would be easier for them to keep tabs on online winnings since most all transactions go through an individuals bank account.

 

[footdr]

PAY TAXES PER SESSION?

That might work in Nevada, because on big slot wins, they deduct the taxes.

How in the world could you possibly pay taxes for winning online when playing online is:

l. illegal(according to Fed government)Dear IRS here is the tax for the money I won illegally by illegally transfering money to offshore casinos. Since I play almost everyday, can you send me Tax deposit forms so I can transfer the taxes from my Bank Account"

2. you might win,that session, but if your deposits to the casino still equal more than you have won,you still have a loss.

3. what is the definition of "Session"? a day, week, year. Playing online is quite different from occassionally playing in vegas.

4. If audited, they would find that a large percentage of people playing for a year or more would show a loss or break even. I have been playing for 2 years. I have never deducted the losses but in the long run they probably outweigh the wins, I NEVER HIT THE JACKPOT. So I would not be subject to paying taxes on lost money. Those people winning jackpots and transfering large amounts are the ones that should be worried, because the RED FLAG will go up.

5.How many people who occassionly win in vegas, claim in on their taxes. The casinos do not keep track of people playing slots or blackjack that win a couple of thousand, unless they hit a jackpot, right, and then you have to sign a tax form.

6. There are no written IRS guidelines regarding ONLINE GAMBLING losses or wins, or how to report them, obviously, since the government thinks federal law prohibited it even though no law in your state prohibits it

Submitting the information to the IRS when you have not won a substantial amount of money will do nothing more than incriminate yourself and raise a RED FLAG for audit.

Lets face it, they are not able to collect taxes from all the money won at landbased casinos. To bad they don't realize that it would be easier for them to keep tabs on online winnings since most all transactions go through an individuals bank account.

 

[REOdeathwagon]

3. what is the definition of "Session"? a day, week, year. Playing online is quite different from occassionally playing in vegas.

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Myth #7. - I can lump my play on the Internet for a full day (or week, month, or year) as a session.

Unless there are specific rules stating otherwise, the tax treatment of the virtual world is the same as the brick and mortar world. I have previously written on the definition of a session. Theres no way that play for a year, month, or week will pass the IRS smell test. Indeed, I do not believe that defining a session as a day will be accepted unless youre playing for a full, continual 24-hour period. 2007 by Russell Fox, E.A., All Rights Reserved.

The above is for poker, I do not know if it would pertain to casino games? If you go through the link, I think you can find Mr.Fox definition of a session.

4. If audited, they would find that a large percentage of people playing for a year or more would show a loss or break even. I have been playing for 2 years. I have never deducted the losses but in the long run they probably outweigh the wins, I NEVER HIT THE JACKPOT. So I would not be subject to paying taxes on lost money. Those people winning jackpots and transfering large amounts are the ones that should be worried, because the RED FLAG will go up.

I do not think they would go after losers or marginal winners, the financial incentive is just not there for the IRS. They would go after the jackpot winners. After you win a jackpot is not the time to start covering your ass.

5.How many people who occassionly win in vegas, claim in on their taxes. The casinos do not keep track of people playing slots or blackjack that win a couple of thousand, unless they hit a jackpot, right, and then you have to sign a tax form.

If you complied with the lawyou reported all of your gambling income and your foreign bank accountsyou have nothing to worry about. But probably fewer than 5% of taxpayers report their gambling transactions as income.

When you hit that jackpot and sign the form, with no records to cover your ass, on losses, now you pay the full tax on winnings = IRS wins. Instead of paying your true tax liability and being able to deduct your losses.

6. There are no written IRS guidelines regarding ONLINE GAMBLING losses or wins, or how to report them, obviously, since the government thinks federal law prohibited it even though no law in your state prohibits it

Unless there are specific rules stating otherwise, the tax treatment of the virtual world is the same as the brick and mortar world.

Gambling is gambling. Income is income. Al capone didn't go to jail for bootlegging or murder, he went to jail for not paying his income tax.

Submitting the information to the IRS when you have not won a substantial amount of money will do nothing more than incriminate yourself and raise a RED FLAG for audit.

If you do file Form TD F 90-22.1, and check the box at the bottom of Schedule B. You are very likely to instigate an audit. If you don't, you may face civil and/or criminal penalties for not declaring a foreign bank account(s)? Damned if you do, damned if you don't.

Today the Tax Court decided two cases where the Court basically said, you're right, the law is unfair, but toughyou have to obey it.

The U.S. Tax Code is complex. Its unfair to gamblers. Parts of it are just plain stupid. But its the law. And when you break the law, there are consequences. Its a whole lot easier to pay your taxes now than to wait for the IRS to find you and pay taxes, interest, penalties, and possibly find your way to prison. 2007 by Russell Fox, E.A., All Rights Reserved.

 

[footdr]

STILL HAVE QUESTIONS RE: FOREIGN BANK ACCOUNT

Neteller and the like are payment processors same as Paypal. They facilitate e-commerce payment transactions. They process the transactions through their bank affiliate who we have no access to. Their bank apparently then transfers the transactions to the ACH on their behalf. So I do not know how a payment processor can be considered a bank or financial institution.

Clearly I could have a credit card issued by Citi Bank and yet not have a bank account at Citi Bank. Tax forms do not require us to list Citi Bank under Bank Accounts if we have a Credit Card issued by Citi Bank, do they?

Given that Neteller and Firepay and Citadel and Click2pay, issue funds for our deposits prior to receiving funds from our bank account, I would logically think they would be better categorized as electronic charge/credit companies.

They simply process payments between bank to merchant and merchant to bank.

If you look up Financial institutions and Banks you won't find these companies. Look up Payment Processors/ecommerce and you will find them there.

Right now, I am more worried about getting my money out of Click2pay now that I know it is a WIRE TRANSFER versus the normal EFT/ACH. I am trying to decide if $2800 is worth the risk, since the FED is putting more emphasis on watching international wire transfers according to the breaking news(florida banks). I can't figure out why wire transfer can be successful for Click2pay and EFT is not. They don't have any problem getting the money out of my Bank Account via eft, why can't they send it back by the same method?
Searched but can't find the answer to that question anywhere.

 

[REOdeathwagon]

# 1 - Because they are foreign based financial companies. They are regulated by the FSA (which seems to be a UK version of the FDIC). They recieve, hold, and transfer, and credit funds worldwide for their (American) account holders. All of the aforementioned account options can be done in multiple currencies. The IRS has always been concerned about American citizens that have foreign based bank accounts (before the internet, foreign based financial companies were usually banks). This has more to do with possible tax shelters, than online gaming. NETeller is based in the Isle of Man, this country(?) is considered an offshore tax haven.


#2 - I have never had a Click2Pay account, so this is just speculation on my part. Click2Pays customer service always seemed to be rated poor. Even before this sudden increase in business that just came their way. Now these customer service agents are 200% busier than they have ever been. Try calling them on the phone (they probably won't answer). If you can manage to get a csr on the phone, or email, or live chat, bite your tongue and be as courteous as you possibly can be. And see what Click2Pay recommends as the quickest way to recieve your funds. With $2800, I would be less concerned about fees. I would more concerned about recieving the funds as soon as possible. Things are changing very quickly in this market. Wire transfer, or paper check sent by FedEx might possibly be your best options right now. I personally would be more concerned about getting my $$ quickly than the Florida bs mentioned in the other thread, or fees.

If my reply does not help your problem with Click2Pay, and you cannot seem to get help on Casinomeister. A poster that has been around in threads recently is GrandMaster, click on the link in his signature, and see if you can research your answer on his fine forum? Or possibly try 2+2.com > Internet forum? Good Luck with Click2Pay and your $2800.


FWIW, duplicate posts in different threads will usually just slow a response down, not speed it up. The Big Boss Man himself already mentioned this last week.

 

[GrandMaster]

Form TD F 90-22.1 is for all foreign financial accounts, which in my opinion would include Neteller. On the positive side, you only have to file TD F 90-22.1 if you had more than $10000 in your foreign accounts at any time.

The taxation of gambling winning in the US quite complicated, because winnings (not defined precisely) count as income, but losses up to the amount of your winnings can only be deducted as itemized deductions, so if you don't itemize, you lose out. Even if you do itemize, you may still lose, because you AGI may be higher.

 

[silcnlayc]

5.How many people who occassionly win in vegas, claim in on their taxes.

Any single win over $1199 will trigger a W-G Form which a copy is sent to IRS regardless of the amount of bet. For horse racing, anything over $600 on a $1 bet will trigger a W-G Form.

If you do not claim any winnings and the IRS has a W-G form filed under your name..you will be audited and a hefty fine will be imposed. Nothing to fool with, for the IRS has no time frame in which they can come back to you and audit you on gambling winnings. I play it safe...I claim everything that is required but I get to write off every penny too by requesting a copy of play for the year from the casinos and the track for my records.

Don't fool with the man is the saying..for once fooled he goes for the jugular...

 

[Addisyn]

I am going to jail. Simple as that I think. My husband will freak out if we get audited so it is best I just sit in jail and rot for my sins.

For the first time in my adult life I fear my own government. Damn that is so sad. If I wasn't so mad I might worry.

You are so right CM they are "goosestepping" down Mainstreet USA as we speak!

 

[lots0]

For the first time in my adult life I fear my own government. Damn that is so sad. If I wasn't so mad I might worry.

Damn sad to say, but I am beginning to understand how the people of Berlin Germany felt in 1935.

 

[kengam]

The DOJ and the IRS are separate entities and are not supposed to share information with each other.

 

[winbig]

The DOJ and the IRS are separate entities and are not supposed to share information with each other.

And you actually believe that they don't?

 

[Tester]

Agencies will not sahre information on a mass level, if disallowed by the law.
The interests of the various agencies are not always the same.

I think we need someone with more knowledge about the law the the practice.

The DOJ and the IRS are separate entities and are not supposed to share information with each other.

And you actually believe that they don't?

 

[winbig]

Agencies will not sahre information on a mass level, if disallowed by the law.
The interests of the various agencies are not always the same.

I think we need someone with more knowledge about the law the the practice.

They're above the law. Recent events show this. They'll share info with whomever they want. Have you ever hard of a loophole? Shit like this happens everyday. Welcome to the USA.

 

[Tester]

They're above the law. Recent events show this. They'll share info with whomever they want. Have you ever hard of a loophole? Shit like this happens everyday. Welcome to the USA.

But the interests of various parties in the agencies are not alwasy the same. the specific guys handling this case at the DOJ may have higher priorities than helping the IRS.

Besides, they are not always ignoring the law. Sometimes they do abidce the law.

 

[REOdeathwagon]

The DOJ and the IRS are separate entities and are not supposed to share information with each other.

Tax Myth #9.

The IRS doesnt share information with state tax agencies.

Absolutely false.

The IRS and state tax agencies actively share information. As far as I know the only state that does not share information with the IRS is Nevada. You can find a description of the information sharing program here (link:

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.

Tax Myth #12.

The IRS cant share information from my tax return with other government agencies because of the Silver Platter doctrine.

Another falsehood.

As noted above, the IRS routinely shares information with state tax agencies. In Garner v. United States (424 U.S. 648 (1976)) the Court held that the occupation listed on a tax return can be shared. If you are foolish enough to list your occupation on your tax return as illegal drug dealer, the IRS can forward your name to other law enforcement agencies.

The U.S. Tax Code is complex. Its unfair to gamblers. Parts of it are just plain stupid. But its the law. And when you break the law, there are consequences. Its a whole lot easier to pay your taxes now than to wait for the IRS to find you and pay taxes, interest, penalties, and possibly find your way to prison.

FROM : Tax Myths for the Poker Player

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[footdr]

DUE TO 911 THE FEDS HAVE CARD BLANCHE

Wire taps, busting into your home with no warrant, and keeping "secret" files on citizens, is all legal now. BUT, the statutes that allow this, that were enacted after 911; were implemented to allow the government to "investigate terrorists" when they have probable cause to believe a Citizen is connected to terrorist groups.

PROBABLE CAUSE IS THE WAY LAW ENFORCEMENT GETS AWAY WITH DEPRIVING US OF DUE PROCESS AND OUR CIVIL RIGHTS.

And the Banks Secrecy Act allows them access to our personal financial accounts, without subpeona or warrant.

The U.S. Supreme Court is chipping away at our constitutional rights!

The Laws are constantly being amended by the Fed and State government to make it easier for the prosecution to convict and harder for citizens to defend themselves. "driving while intoxicated" laws are a good example. Basically, they now need no real proof to arrest you. EVEN IF YOUR BREATH TEST(that you can't refuse, because that is an additional charge/penalty)is below the Legal Limit of .08. Theycan still arrest for probable cause.
So, If you are .08 or above the Law says you are LEGALLY intoxicated BUT if you are .under .08 IT DOESNT PROVE YOU ARE NOT INTOXICATED. The test is required for evidence making it easier on the prosecution. Wow they have their cake and eat it to. Plus, they take your license on the spot, before you have a chance to defend yourself in court, and even if you did not appear to be driving in an intoxicated manner and were mearly stopped for minor traffic offense, Blood Shot Eyes, Smell of Alcohal on your PERSON, equals enough to arrest you. I HAVE HAD IT WITH THIS POLICE STATE. I know it is better than many Countries but the Government has over stepped its bounds and the Constitution is HISTORY. Having a couple of drinks at dinner , etc. does not=Drunk Driving. I've followed many a DRUNK driver to get their license plate number and phone the police. Believe me, there was no question that they were either drunk or on drugs. Unfortunately, the police never responded soon enough to my calls and most of them got away by running stops signs, high speed, running up on sidewalks(Im not kidding) I couldnt keep up with them. I call the police with the license plate of a REAL. DRUNK, dangerous driver and they do nothing. Just one of the 100's of unjust laws.

So, I would have to say WE HAVE NO RIGHTS and clearly are guilty until proven innocent!

 

[Mousey]

Tax Myth #12.

The IRS cant share information from my tax return with other government agencies because of the Silver Platter doctrine.

Another falsehood.

As noted above, the IRS routinely shares information with state tax agencies. In Garner v. United States (424 U.S. 648 (1976)) the Court held that the occupation listed on a tax return can be shared. If you are foolish enough to list your occupation on your tax return as illegal drug dealer, the IRS can forward your name to other law enforcement agencies.

Does anyone remember the case a couple of years ago of a fellow who filed his online winnings on his income tax, and then later was arrested for illegal gambling, but in the end only fined something like $500 (heaven only knows what he spent on lawyers and court fees) ? I can't remember any further specifics to help me google for the article.

 

[USOS]

Wire taps, busting into your home with no warrant, and keeping "secret" files on citizens, is all legal now. BUT, the statutes that allow this, that were enacted after 911; were implemented to allow the government to "investigate terrorists" when they have probable cause to believe a Citizen is connected to terrorist groups.

Among the worst seven provisions of the bill are the following.
1. The FBI can secretly enter someone's home or office, search the premises, and leave without notifying the owner. In theory, this would be supervised by a court. However, the notification of the secret search "may be delayed" indefinitely (Section 213). This is, of course, a complete violation of the Fourth Amendment, which prohibits "fishing expeditions" and guarantees the right of the people to be "secure in their persons, houses, papers, and effects, against unreasonable searches and seizures." All the federal government must do to suspend your Fourth Amendment rights is accuse you of terrorism.

2. Any U.S. attorney or state attorney general can order the installation of the FBI's Carnivore surveillance system. As reported before, this system records all e-mail correspondence and the addresses of Web pages visited by a specific target. Previously, there were legal restrictions on Carnivore and other Internet surveillance techniques (Section 216). Even more troubling, Fox News has reported that the FBI plans to go beyond the authorization of the new bill and change the very architecture of the Internet. The FBI wants to route all net traffic through central servers for monitoring. While this will require the voluntary compliance of the major ISPs, most experts agree that they will quickly cave into these demands for fear of appearing uncooperative or unpatriotic.

3. An accused terrorist who is a foreign citizen can be held for an unspecified series of "periods of up to six months" with the attorney general's approval. He doesn't have to be charged and he may be denied access to an attorney (Section 412). In effect, this provision suspends any due process provisions of the Constitution, especially the Fifth Amendment which states that "no person [shall] be deprived of life, liberty, or property without due process of law." While the provision of this bill only applies to foreigners, it sets a dangerous precedent and could easily be used in the future against U.S. citizens accused of domestic terrorism.

4. Foreigners who enter the U.S. on a visa will be subjected to biometric technology, such as fingerprint readers or iris scanners. This will become part of an "integrated entry and exit data system" (Section 414). My fear is that eventually all Americans will be forced to submit to this technology. This bill will put the infrastructure in place. In will then be a simple step to require all citizens to participate in this system. Failure to do so may result in the inability to travel or even to buy and sell merchandise or property.

5. Without a court order, the FBI can require telephone companies and Internet service providers to turn over customer records. All they have to do is claim that the "records sought are relevant to an authorized investigation to protect against international terrorism." Worse, the company contacted may not "disclose to any person" that the FBI is doing an investigation (Section 505). The bill of rights was written to protect citizens from exactly this kind of abuse. This provision of the new law completely throws out the presumption of innocence doctrine that is central to our system of justice. Now anyone can be treated as a criminal if they are merely accused of a crime.

6. Without a court order, credit reporting agencies must disclose to the FBI any information that agents request in connection with a terrorist investigation. The agencies may not disclose to the subject that the FBI is snooping in their file (Section 505). Again, there is no presumption of innocence and the suspect is denied his due process rights. This gives government agents the authority to spy on anyone's financial activities. All they have to do is make the accusation of terrorism and the door swings wide open.

7. The current definition of terrorism is expanded to include biochemical attacks and computer hacking. Some current computer crimes such as hacking a U.S. government system or breaking into and damaging any Internet-connected computer are also covered (Section 808). While these are no doubt crimes and should be prosecuted, by classifying them as "terrorist activities," suspects are subject to having their rights radically curtailed, as I have outlined above. If convicted, they are subjected to extremely stiff penalties. Prison terms range between five and 20 years (Section 814).

More specifically, Section 203 (Authority to Share Criminal Investigative Information) allows information gathered in criminal proceedings to be shared with intelligence agencies, including but not limited to the CIA in effect, say critics, creating a political secret police. No court order is necessary for law enforcement to provide untested information gleaned from otherwise secret grand-jury proceedings, and the information is not limited to the person being investigated.

Furthermore, this section allows law enforcement to share intercepted telephone and Internet conversations with intelligence agencies. No court order is necessary to authorize the sharing of this information, and the CIA is not prohibited from giving this information to foreign-intelligence operations in effect, say critics, creating an international political secret police.

The concern here is about the third branch of government. One of the overarching problems that pervades so many of these provisions is reduction of the role of judicial oversight. The executive branch is running roughshod over both of the other branches of government. I find it very bothersome that the government is going to have more widespread access to e-mail and Websites and that information can be shared with other law-enforcement and even intelligence agencies. So, again, we're going to have the CIA in the business of spying on Americans something that certainly hasn't gone on since the 1970s when the illegal investigations of thousands of Americans under Operation CHAOS, and the spying carried out by the CIA and National Security Agency against U.S. activists and opponents of the war in Southeast Asia.

Nor do the invasion-of-privacy provisions of the new law end with law enforcement illegally searching homes and offices. Under Section 216 of the USA PATRIOT Act (Modification of Authorities Relating to Use of Pen Registers and Trap and Trace Devices), investigators freely can obtain access to "dialing, routing and signaling information."

While the bill provides no definition of "dialing, routing and signaling information," the ACLU says this means they even would "apply law-enforcement efforts to determine what Websites a person visits." The police need only certify the information they are in search of is "relevant to an ongoing criminal investigation."

This does not meet probable-cause standards that a crime has occurred, is occurring or will occur. Furthermore, regardless of whether a judge believes the request is without merit, the order must be given to the requesting law-enforcement agency, a veritable rubber stamp and potential carte blanche for fishing exhibitions.

Additionally, under Section 216, law enforcement now will have unbridled access to Internet communications. The contents of e-mail messages are supposed to be separated from the e-mail addresses, which presumably is what interests law enforcement. To conduct this process of separation, however, Congress is relying on the FBI to separate the content from the addresses and disregard the communications.

In other words, the presumption is that law enforcement is only interested in who is being communicated with and not what is said, which critics say is unlikely. Citing political implications they note this is the same FBI that during the Clinton administration could not adequately explain how hundreds of personal FBI files of Clinton political opponents found their way from the FBI to the Clinton White House.

And these are just a few of the provisions and problems. While critics doubt it will help in the tracking of would-be terrorists, the certainty is that homes and places of business will be searched without prior notice. And telephone and Internet communications will be recorded and shared among law-enforcement and intelligence agencies, all in the name of making America safe from terrorism.

 

[jetset]

That is absolutely chilling - sounds like the old USSR.

 

[USOS]

That is absolutely chilling - sounds like the old USSR.

1. The FBI can secretly enter someone's home or office, search the premises, and leave without notifying the owner. In theory, this would be supervised by a court. However, the notification of the secret search "may be delayed" indefinitely (Section 213).

And the capper for #1 is that the court supervision is overseen by a "Secret Court" that may grant "retroactive" warrants. i.e. warrants after the fact of the search...not that it'd matter anyway since there is no provision for FISA to notify you anyway so if they don't want you to know...you won't..

In a highly restricted room inside the Department of Justice Building in Washington D.C. resides a federal court that meets in complete secrecy. Even though the rulings this secret court issues may result in criminal charges, convictions and prison sentences for US citizens, their writs and rulings are permanently sealed from review by those accused of crimes and from any substantive civilian review. This is the Foreign Intelligence Surveillance Court (FISC), which considers surveillance and physical search orders from the Department of Justice and US intelligence agencies. During the 20-year tenure of the FISC the court has received over 10,000 applications for covert surveillance and physical searches. To date, not a single application has been denied.

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[REOdeathwagon]

A couple more articles on the NETeller debacle from Russell Fox's website. The tax information is outdated, but still informative, and could possibly help forum members.

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More on Neteller Posted by Russ on Wednesday March 21, 2007 at 7:15am.

Neteller, the beleaguered Isle of Man financial intermediary firm whose two founders were arrested on money laundering charges in the United States, announced that they have come to an agreement with the US Attorney's Office for the Southern District of New York (where the potential prosecution will take place). While it's very unlikely the agreement with the DOJ will be made public, Neteller's press release notes that:

* Within the next 75 days (by June 4th) they will announce a plan for the return of funds of their American customers;

* A consulting firm, Outdated URL (Invalid), will, according to the press release, "...provide a report to the USAO on the Groups current financial condition."

* Neteller "is continuing to cooperate with the USAOs investigation, under the advice of its legal advisers and in accordance with court orders in the Isle of Man"

So what does this mean for a Neteller customer?

1. Neteller is cooperating with the US Attorney's Office (the Department of Justice). What is the DOJ interested in? Money laundering, of course. Large accounts with activity. Individuals (and entities) that haven't reported their foreign bank accounts. Individuals and entities that haven't filed tax returns on income earned overseas.

2. If you have a Neteller account, and you had $10,000 in it at any time during 2006, you should make sure that you mark the box on Schedule B of your tax return that indicates you have a foreign bank account. The IRS will likely, by year-end, have balance information on every Neteller account. You also need to file Form TD F 90-22.1 with the Department of the Treasury (not the IRS) by June 30, 2007.

3. If prior to 2006 you had $10,000 at Neteller and you didn't file the TD F 90-22.1, you should consider filing it today, attaching a note that says you weren't aware of the law requiring notification of a foreign bank account. The penalty for not filing the form is $10,000 (minimum), and it's a felonyyou can go to prison for this. Do realize you are likely going to have your tax return audited, but if you're choosing between an audit and jail time, I know which one I'd choose.

4. A client asked me over the weekend when I thought he'd see his Neteller funds. I told him late Summer or Fall. I think a July to September time frame is a reasonable estimate.

So the Neteller saga continues, but the ending is clear. American customers will almost certainly see their funds this year, and the DOJ (and later, the Treasury Department and the IRS) will see Neteller's records this Spring or Summer.

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Neteller and Constructive Receipt
Posted by Russ on Tuesday March 27, 2007 at 8:39pm.

As the saga of Neteller, the Isle of Man based financial intermediary, drags on, I've gotten many questions regarding the money that's tied up. For those who are unaware, some of the Neteller money was seized by the US government as it was moving over the wires between Neteller's banks and customers' banks, and some is sitting in customer accounts at Neteller. All of it, though, remains out-of-reach of American customers of Neteller. So the question is, do customers of Neteller have to pay tax on gambling proceeds won in 2006 that are stuck at Neteller?

Yes.

When an American must pay tax on income is governed by the doctrine of "constructive receipt." Suppose you gamble on an online poker site, and you win $1000. However, right when you win that money the poker site goes out of business, and you never collect a penny of the $1000. You've never had access to the moneyyou never were able to use it. You didn't have constructive receipt of the money.

Now suppose you win $1000 on December 31, 2006, and the money is immediately put in your account. On January 16, 2007, you withdrew the money into Neteller. You immediately requested Neteller to transfer the money into your American bank account. On January 17th that money was either seized or is stuck at Neteller.

That individual has $1000 of gambling income in 2006. The gambler could have withdrew the money on January 1, 2007 or he could have gambled with it on January 1. He had constructive receipt of the money. That he was unlucky in that the money was seized or stuck at Neteller is unfortunate. He or she must pay tax on the $1000.

So what should an individual do who has significant funds stuck at Netellerso significant that he may not be able to pay what he owes in taxes? Talk to a professional tax advisor now; don't wait until April 10th. Most tax preparers are very busy between now and April 17th. We're not (in general) going to be able to give you specific advice if you wait until the very last minute.

Realize that you owe the money. Find out what your total tax is (including your state income tax, if applicable). Determine what you can afford to pay. Options include going on extension and installment plans. But not filing a tax return (or at least an extension) by April 17th will subject you to the failure to file penalty!

The phrase caveat emptor (let the buyer beware) applies to many offshore entities. The IRS considers online gambling to be just another tax avoidance scheme,

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. They're not going to be very sympathetic to taxpayers using a financial intermediary that serviced offshore online gambling firms.

 

[Mousey]

I'm tacking this on here as I didn't want to start yet another thread...

Did the NETeller Two go back to court (or get another delay) yesterday? Or is that today??

 

[soflat]

I'm tacking this on here as I didn't want to start yet another thread...

Did the NETeller Two go back to court (or get another delay) yesterday? Or is that today??

I haven't seen the exact date of their next court appearance. The news reports following the May 16 hearing said there was a 2 week extension, but didn't give the actual date and there hasn't been anything reported since as far as I can see. One story I recall said it would be the first week of June.

 

[jetset]

Update

NETELLER FOUNDERS STILL UNTRIED

Sixth continuance pushes trial date back another month

Neteller founders Stephen Lawrence and John Lefebvre will remain untried for a further month, according to a statement this week by the public information officer for the US District Attorney's Office in New York, where both men are on massive $5 million bail and restricted to movement within the state.

The Neteller duo, both Canadian citizens, were arrested by federal agents whilst on US soil back in January this year, subsequently released on heavy bail and have since been the subject of repeated continuances. Their arrest sparked the withdrawal of the Isle of Man based Neteller from the US market, freezing US player accounts, a situation that persists today.

No further details were available as we went to press, but the latest delay will mean the trial of the two men is unlikely to take place before the end of June...and there could be further delays when that date is reached.

 

[Mousey]

Good god... if the DoJ doesn't have enough to prosecute, let the two go. This is insane....

My suspicion is that the DoJ just want to keep Stephen Lawrence and John Lefebvre under lock and key till they (DoJ) kill as much online gambling as possible, and then, end up charging Lawrence and Lefebvre with something comparatively minor and letting them go.

 

[Peacefrog]

Earlier records then?

You are talking about 2006 but what about the years before 2006?

2004....2005..

Will neteller give out that data as well? I think there is many ppl in the USA that haven't reported their casino wins thoose years..

 

[w8n4win]

Didn't the IRS help the DOJ or the FBI (whoever it was) put Al Capone in prison?

 

[Mousey]

I'm not sure what to think about this...

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is basically about a judge ruling against e-Gold --I guess I'd forgotten or never knew that the US had frozen and seized funds there, too-- however down in the next to last paragraph it says:

In the recent NETeller founders case, the $50+ million in frozen US client funds was eventually stamped as released by the DOJ after a plea agreement with the defendants.

Oh? Really? I love mysterious comments with no real info. Not! (And I am still stumped as to how the US continues to hold the men hostage, with no trial, and meanwhile both parties seem to be using US customers and their money as a bargaining chip.)

Anyway, JetSet, maybe you can contact this Mark Herpel guy and find out what the devil he's talking about.

 

[jetset]

Done. Awaiting his clarification.

 

[jetset]

The guy made an honest mistake, which he has corrected:

QUOTE:
Dear Brian,

My apologies, this sentence was a very serious blunder on my part. I have several pending criminal actions we've been following and writing about...that sentence was just a mistake.

That paragraph was removed earlier today. Again, that was a bad mistake on my part as the company NETeller has come to an arrangement NOT the defendants.

I appreciate your letter, however it was fixed earlier today. All the best to you.

Thanks again.

Mark Herpel

UNQUOTE