Tax Consequences of Tentative Tapie/DOJ Deal

12

On Wednesday, PocketFives brought you an article discussing a deal agreed to in principlebetween Groupe Bernard Tapie and theU.S. Department of Justice. An e-mail sent from Full Tilt’s Ray Bitar that circulated around the Web on Wednesday read in part, “My understanding is the deal provides that in exchange for an agreed upon payment by GBT, and a GBT commitment to assume responsibility for payment of ROW players, DOJ will reimburse U.S. players and settle the outstanding civil litigation with the companies comprising FTP.”

In essence, the DOJ would reimburse U.S. players directly, leading to a variety of tax implications for those receiving funds. According to poker tax expert Ann-Margaret Johnston, correctly reporting your income derived from poker would be of the utmost importance. Johnston told PocketFives, “You should always pay taxes on it no matter what, whether you take your money offline or not. The IRS could know about it if they want to know about it. It is not uncommon for the IRS and DOJ to share information.”

What could be open to interpretation, however, is what tax year your poker income should be attributed to – 2011 or 2012. Johnston (pictured) explained, “If we get the Full Tilt money by the end of the year, nothing would change in terms of what you’d do with your taxes. If we didn’t get it by the end of the year, then my opinion is that we can’t pay taxes on money we can’t get. My advice would be if you have the money before you file your tax returns, then you can put it on your 2011 taxes.”

That assumes, of course, that players see their frozen Full Tilt funds prior to the April 15th tax deadline. In a press release in late September, the DOJ asserted that the process of refunding players could take quite some time: “We cannot predict the duration of proceedings in this case, other than to state that they will last for many months at the least. We will apprise victims of the alleged fraud of future developments as appropriate.”

Regardless of the amount of income you’ve earned on Full Tilt Poker, Johnston claims it should be reported to the IRS. Johnston told us, “This is income and so the $600 earnings floor does not apply. If I pay you, as John Doe, less than $600, the IRS doesn’t say I have to give you a 1099. But, John Doe still has to pay taxes on it.”

Over on TwoPlusTwo, posters debated how the DOJ’s cashout procedure would work in practice. One member of TwoPlusTwo guessed, “I think it’s unlikely that we will actually be cashing out directly through the DOJ. IMO, the DOJ will simply oversee the money that Tapie’s group contributes, along with any released funds, in a U.S. bank account. The FTP client will reopen and we will simply make a cashout request like we used to do. FTP will then forward it to the bank overseeing the withdrawals.”

Johnston told PocketFives that a Full Tilt Poker refund coming directly from the DOJ would be “weird.” She remarked, “I think it’s awfully weird. I don’t like my check coming from the DOJ. They’ve made a stance that it’s illegal. The irony is the fact that they’re paying you out on something they’ve said is illegal.” The DOJ labeled Full Tilt a “global Ponzi scheme” that defrauded players out of hundreds of millions of dollars.

Another cashout possibility is those players with large balances on Full Tilt being issued shares of a reincarnated company. Johnston claimed that this option could actually hurt high rollers more than if they cashed out directly: “There are tax implications for getting stock. Theoretically, you earned the money gambling, so you’d pay taxes on it. Then, you’re reinvesting it. It could hurt you because there are two separate transactions.”

As PocketFives and sites like Subject: Poker and CardPlayer have reported, the deal between Tapie and the DOJ is not by any means set in stone. We’ll keep you posted on the latest news.

We’d like to than Johnston for her time with this article. Visit her website at PokerDeductions.com to learn more about poker taxes.

12 COMMENTS

    • What happens if requests for account audits (on our personal accounts) from ft/ub/ap never get answered. What manner of reconstructing results will suffice? They’ve always provided these on request in the past to prepare taxes but I’ve had no luck getting them so far for 2011?

    • I have told my clients to do their best if the sites do not give them printouts. For example, see if you can get info on the online tracking sites. Worse case, claim what came into your account for the year. We just have to do the best we can…………

    • The check coming from the refund is not a taxable event. The winning of the money in tournaments or cash games is the taxable event. If you have declared your winnings in each tax year you have little to fear. Just add up your winnings from Jan 1st to Black Friday and declare that amount. Hopefully you are already itemizing your return otherwise you are in for an unwelcome surprise.

    • Why wouldnt Tapie group put up the money for players that are owed their funds? I dont understand (and highly doubt that the DOJ would) why the DOJ would be covering for FTP. I thought the Tapie group was going to put up 200 million for 50% of the FTP company and that money would then be used to pay out players? This to me makes zero sense. The DOJ is not going to front 390 million dollars to a company they have labelled as a ponzi scheme. And then settle later? I am sure they will demand that the FTP or new owners pay these players with their own cash. Can anyone explain why the Tapie group wouldnt be covering most of these owed funds directly?

    • Ahh, here it is ….”the DOJ would reimburse U.S. players directly…It is not uncommon for the IRS and DOJ to share information.”…..the DOJ asserted that the process of refunding players could take quite some time: “We cannot predict the duration of proceedings in this case, other than to state that they will last for many months at the least”…

      1) Now we see the truth coming out ….the IRS wants to ensure it has a handle on all players to ensure they are getting their tax from you ….
      2) Why in reality would it take many months to pay out players once it is agreed? Surely it is a simple matter of ascertaining who is owed what and how much, which the FT database would have, and sending out the cheques (2-3 weeks max)

      On a side note, we don’t pay tax on our casual gambling winnings in Australia, be it horses, poker, or other. Professional gamblers are a different issue, but they then can also claim a portion of their losses.

      Thankfully i don’t live in the land of the free. Where they subsidise the obscenely rich with lower taxes and bailouts meanwhile the majority experience greater and greater financial hardship.

      I always liked the story of robin hood stealing from the rich to help the poor. Seems like America reversed this story robbing the poor to pay the rich….and the poor take it? Until every city rises up in protest, voice and presence, those in power will continue to fleece the sheep…”if” you let them.

      America reminds me more and more of hollywood (all make believe – say one thing do another).
      You are only truly free if you do what “they” tell you to do, AND when they tell you to do it. They say “the law is the law”.

      Never forget that everything Hitler did in Germany was legal. Martin Luther King, Jr. quotes

      The only power any government has is the power to crack down on criminals. Well, when there aren’t enough criminals, one makes them. One declares so many things to be a crime that it becomes impossible for men to live without breaking laws. Ayn Rand quotes

      Enjoy and good luck….

    • Ahh, here it is ….”the DOJ would reimburse U.S. players directly…It is not uncommon for the IRS and DOJ to share information.”…..the DOJ asserted that the process of refunding players could take quite some time: “We cannot predict the duration of proceedings in this case, other than to state that they will last for many months at the least”…

      1) Now we see the truth coming out ….the IRS wants to ensure it has a handle on all players to ensure they are getting their tax from you ….
      2) Why in reality would it take many months to pay out players once it is agreed? Surely it is a simple matter of ascertaining who is owed what and how much, which the FT database would have, and sending out the cheques (2-3 weeks max)

      On a side note, we don’t pay tax on our casual gambling winnings in Australia, be it horses, poker, or other. Professional gamblers are a different issue, but they then can also claim a portion of their losses.

      Thankfully i don’t live in the land of the free. Where they subsidise the obscenely rich with lower taxes and bailouts meanwhile the majority experience greater and greater financial hardship.

      I always liked the story of robin hood stealing from the rich to help the poor. Seems like America reversed this story robbing the poor to pay the rich….and the poor take it? Until every city rises up in protest, voice and presence, those in power will continue to fleece the sheep…”if” you let them.

      America reminds me more and more of hollywood (all make believe – say one thing do another).
      You are only truly free if you do what “they” tell you to do, AND when they tell you to do it. They say “the law is the law”.

      Never forget that everything Hitler did in Germany was legal. Martin Luther King, Jr. quotes

      The only power any government has is the power to crack down on criminals. Well, when there aren’t enough criminals, one makes them. One declares so many things to be a crime that it becomes impossible for men to live without breaking laws. Ayn Rand quotes

      Enjoy and good luck….

      Hey man, just wanted to say that the quotes you found here serve their purpose and highlight how enlightened you are.
      Keep up the good work.

    • What if I have moved from the US to New Zealand (a country that doesn’t tax gambling). I moved before BF, but once it hit, they switched my address details back to the old US address that I had and obviously can’t get in touch with the support of FTP so there isn’t a way for me to switch my contact details. I’d rather just keep it in my account and decide how much i’d like to withdraw via neteller in New Zealand. Any ideas on this?

    • I am pretty sure you will still get taxed because the income earn’t is in the period whilst you lived in the states. With the DOJ wanting to hand out player payments, payment of tax will be unavoidable anyway. That said, hope to get your money back, pay the tax, relax, and then decide if you want to move to another country as many have done moving to Canada, Costa Rica, etc.

      Thanks RJ Legit, not sure about enlightened, just saying what is pretty obvious really. ps love your sleeping avatar; poker is like that somedays.

      Cheers.