Posts Tagged ‘Full Tilt Poker’

Federal Judge: Offshore Online Gambling Accounts Are Reportable Foreign Financial Accounts

June 6th, 2014 No comments

A federal district court judge in California has ruled that FirePay, PartyPoker, and PokerStars online gambling accounts are subject to the foreign financial account reporting rules.

Ok, so who cares?

Any U.S. taxpayer who has or had offshore online gambling accounts. If a U.S. taxpayer’s total maximum balances in foreign financial accounts exceed $10,000 at any point during a tax year, he must file FinCEN Form 114, formerly known as the FBAR.

In the case United States v. Hom, the defendant had online gambling accounts with PokerStars, PartyPoker, and FirePay in 2006 and 2007. The defendant acknowledged that the aggregate amount of the funds in these accounts exceeded $10,000 in U.S. dollars during 2006 and 2007. But, he contended that they were not foreign financial accounts.

The judge disagreed. Because FirePay, PokerStars, and PartyPoker all functioned as banks, said the court, they fall within the scope of the definition for a reportable account. The judge granted the IRS’s motion to impose against the taxpayer FBAR penalties of $10,000 per account not reported per year.

We’ve discussed this issue before. I said:

1. It is possible Treasury could at some point view offshore online casino accounts as subject to FBAR disclosure, and

2. It is becoming more and more likely the IRS will have access to the records of offshore online casinos if and when offshore online casinos bring their operations to U.S. soil.

That was written two weeks before the Department of Justice seized the U.S. domains of Absolute Poker, Full Tilt Poker, and PokerStars on April 15, 2011.

As for (1):

Our judicial branch is tasked with interpreting the law. Our executive branch, including the Department of Justice, is tasked with enforcing the law. Will the DOJ suddenly allocate resources to penalize taxpayers who didn’t report offshore online gambling accounts because of this one decision?

Perhaps not, unless the violation also involves a serious offense such as tax evasion or it’s simply convenient to. Which brings us to (2):

I had suspected the federal government might obtain access to the records of offshore online gambling companies sometime in the future. Turns out I was correct, just for the wrong reason: Full Tilt Poker and PokerStars agreed to maintain all records relating to its business in the United States in connection with their domain seizures in 2011.

In order to retrieve funds on their offshore online gambling accounts that were frozen by the Department of Justice, some U.S. taxpayers had to provide their social security numbers. It’s clear the government can easily look into whether these U.S. taxpayers with larger balances filed FBARs. The questions remains of whether they will.

As Russ Fox notes, this is one court decision in one district. A federal district court decision is mandatory authority only on some lower specialized courts in that particular district. This case was decided in the Northern District of California. The court is headquartered in San Francisco and covers fifteen northern California counties.

If Mr. Hom appeals to United States Court of Appeals for the Ninth Circuit and the Ninth Circuit affirms the lower court’s decision, then the decision is mandatory authority on all district courts within the Ninth Circuit.

In all districts other than Northern California, the case is merely persuasive authority for now. This means all the other district courts may follow the decision but do not have to.

How should implicated U.S. taxpayers respond to the decision?

As I’ve said before, I don’t see the downside to playing it safe and filing the Form 114 going forward.

For taxpayers with prior years at issue, there are some options to consider. One is by coming forward through the IRS Offshore Voluntary Disclosure Program. This option may not be most appropriate for all taxpayers, as each taxpayer’s particular situation is different. A taxpayer should consult a tax professional to discuss specific facts and circumstances.

We’ll see if Hom decides to appeal or if the DOJ issues a statement on this…

Full Tilt Money Soon, with a Tax Bill?

January 22nd, 2014 No comments

According to the Poker Player’s Alliance, the Department of Justice has approved the release of $82 million in funds to approximately 30,000 U.S. players who submitted a petition for remission for their Full Tilt Poker funds seized on April 15, 2011. Nearly three years after seizure, the funds (or a portion of) may be finally returned.

Do players have to pay federal and state taxes on the funds received? It depends.

Consider this scenario I described a couple of years ago:

Let’s say 2010 was the first year I played on Full Tilt, initially depositing $100. During the year, I played four “sessions.” I had two winning sessions of $25 and $75, and two losing sessions of $30 and $60. Throughout the year, I successfully withdrew $50 from my Full Tilt account. On my 2010 tax return, I claimed $100 in gambling winnings and $90 in gambling losses. Note that the $50 withdrawal has no impact on my tax consequences for the 2010 year.

At the beginning of 2011, my Full Tilt balance was $60 (initial deposit of $100, less $50 withdrawal, plus net winnings of $10). Before Black Friday, I played another four sessions. I had two winning sessions of $60 and $70, and two losing sessions of $30 and $50. I also withdrew another $50 before Black Friday, so my frozen account balance on Black Friday was $60 ($60 at the beginning of the year, less $50 withdrawal, plus $50 net winnings).

For the 2011 tax year, are any of my gambling winnings or losses reportable? As I said above, any gambling winnings that were successfully withdrawn would be considered taxable income because they were actually received. In my situation, however, that wasn’t the case. Why?

The $50 withdrawal in 2011 was not attributable to the 2011 gambling activity, but to the $100 deposit I made in 2010. To arrive at this result, I applied an accounting method called “First-in first-out” (FIFO), which is often used to determine the cost basis of securities sold. Before making the 2011 withdrawal, I had recovered only $50 of the $100 initial deposit made in 2010. Since the 2011 withdrawal was less than or equal to the remaining portion of the 2010 deposit, none of the $50 withdrawn in 2011 was attributable to the gambling activity in 2011. Therefore, due to a lack of constructive receipt of the 2011 gambling winnings, I would not report any gambling winnings or losses in 2011 attributable to Full Tilt. In addition, I would not report the $60 frozen balance as a loss because it was not considered permanent as of the close of the 2011 tax year.

I must note that there is no direct legal precedent that explicitly says to use FIFO when ascertaining the tax consequences in the context of Black Friday. Considering FIFO is sometimes used for computing the gain on securities purchased at different times, an activity arguably similar to gambling activity, it seems like a reasonable method to me. Some may say there’s no difference between gambling and investing in securities. In both cases, one deposits a specified sum and at some future time either cashes out or loses the entire investment once the sum becomes worthless.

Now suppose I receive from the claims administrator, Garden City Group, only $50 of the $60 that was in my Full Tilt account on April 14, 2011. In 2011, I didn’t claim any taxable gambling winnings or losses on Full Tilt Poker because the company didn’t have the money to pay the balances in player’s accounts. During the year, I had winning sessions totaling $130, and losing sessions totaling $80, for a net of $50.

$10 of the $50 received from the claims administrator should be attributed to the initial 2011 balance in the account; taxes were paid on those winnings in 2010. The remaining $40 is attributable to the $50 “net” winnings from the year, and taxable in 2014.

What about the remaining $10 I am never going to receive? Here are two options to consider for the 2014 tax year:

  1. Reduce the gross gambling winnings from $130 to $120, resulting in net gambling winnings of $40 for 2011, instead of the $50 on the site. The theory is that since I never constructively (or actually) received the $10, then it was never income to me.
  2. Claim the $50 net winnings, but also claim the $10 not received as a casualty loss.

For recreational gamblers, there is a $100 deductible for casualty losses, and a casualty loss is deductible only to the extent it exceeds 10% of the taxpayer’s adjusted gross income.

So I couldn’t claim my $10 as a casualty loss since it is less than the $100 deductible.

Professional gamblers, however, may be able to claim a casualty loss on Schedule C, and avoid the casualty loss limitations that recreational gamblers face. If I were a professional, then I could possibly claim the full $10 as a casualty loss.

Garden City Group is expected to release additional details here in less than twenty-four hours, at which point we can further assess the implications.

One question I’m wondering above all: Will Garden City Group issue a 1099-MISC or another tax form in connection with the return of funds to players? If so, I hope GCG does not simply report on the form the total amount received.

As seen in the scenario above, the amount received could include some combination of both winnings and deposits. Of course, only the former is taxable income.

Disclaimer: This blog discusses tax concepts generally, and does not address anyone’s specific tax situation. Consult a tax professional to discuss particular facts and circumstances.

PokerStars and Full Tilt Poker Settle Civil Suits

July 31st, 2012 No comments

Last September, the likelihood that customers would retrieve their frozen funds from the online poker site Full Tilt Poker was grim at best. At the time, the Department of Justice alleged that the site was $330 million short in funds owed to its players.

Fast-forward to today. The Department of Justice announced it has entered into settlement agreements with Full Tilt Poker and PokerStars, two of the three online poker companies accused of money laundering in a civil forfeiture complaint unveiled in April 2011.

The mechanics of the agreements are a bit complex. Full Tilt has agreed to forfeit its assets to the DOJ in exchange for settling the forfeiture and civil money laundering claims against the company. PokerStars, meanwhile, has agreed to forfeit $547 million to the DOJ and to reimburse non-U.S. Full Tilt customers the approximately $184 million owed to them. In exchange, PokerStars settles its forfeiture and civil money laundering claims and will acquire the forfeited Full Tilt assets.

It’s quite remarkable that one company accused of money laundering (PokerStars) obtained DOJ approval to acquire the assets of its formerly primary competitor (Full Tilt), which also happened to be accused of similar conduct (to a more egregious degree) in the same civil complaint.

Several reasons come to mind why the DOJ would sign off on this. The most critical reason, to me, relates to a rather significant component to the deal that I’ve yet to mention: The DOJ has agreed to enable U.S. Full Tilt customers to retrieve their balances by submitting a claim to the government. The government plans to use the funds collected from PokerStars to make the payouts.

To this point, few details have emerged regarding the DOJ payout process. What we do know is that victims of a judicial forfeiture can make a claim for lost funds by submitting a “petition for remission.” A sample form looks like this.

I think the DOJ is waiting to release payout details because it first must receive the funds from PokerStars to make the payouts. According to the agreement, PokerStars must transfer $225 million to the U.S. Marshals Service within six business days of the court’s entry of the Stipulation and Order. Six business days from today is August 8. Because $225 million is enough to cover the alleged $150 million owed to U.S. Full Tilt customers, we could see a follow-up DOJ press release addressing player payouts as soon as next week. But that’s pure speculation.

I doubt players will simply be permitted to log into their Full Tilt account and request a withdrawal because a petition must first be submitted to the DOJ and approved by the Attorney General through the Asset Forfeiture and Money Laundering Section.

This leaves the following open-ended questions:

  • Will the DOJ implement a screening process for each petition (e.g. tax compliance)? If so, will the level of scrutiny, if any, depend on the amount claimed?
  • If a petition is approved, how will the DOJ verify the person submitting a petition is in fact the person who controlled the account claimed on Full Tilt?

Keep in mind Full Tilt and PokerStars are represented by reputable law firms. I’d be beyond shocked if these questions haven’t already been asked and answered by the parties involved. But I’m not privy to that information, so I, like the rest of us, must wait to find out.

Poker and Taxes: 2011 Year in Review

January 8th, 2012 No comments

2011 was anything but a boring year in the poker world. With tax season approaching, it’s time to review some noteworthy events during the year that may impact items on a poker player’s 2011 U.S. income tax return.

Mayo Decision

In general, the tax code is very harsh towards gamblers. In January, however, the U.S. Tax Court issued a pro-gambler decision. In Mayo v. Commissioner, the court held that a professional gambler may deduct “ordinary and necessary” business expenses beyond the extent of a taxpayer’s “net” gambling winnings.

Here’s a simple example to illustrate. Suppose during 2011 I had $50,000 of gambling winnings, $70,000 of gambling losses, and $20,000 of ordinary and necessary business expenses incurred in connection with my gambling activity. Section 165(d) of the Internal Revenue Code limits the deductibility of my gambling losses to $50,000, producing “net” gambling winnings of $0. Because of Mayo, I may further deduct the $20,000 of business expenses, producing a $20,000 business loss, which may be applied against other income.

If there was any concern over the IRS appealing the decision, it’s now gone. In a recent Action on Decision, the IRS explicitly acquiesced to the tax court’s Mayo opinion. Victory for professional gamblers.

For more comprehensive commentary on the case, click here.

Black Friday

On April 15, the Department of Justice seized the internet domains of Absolute Poker, Full Tilt Poker, and PokerStars. At the time, players’ funds on each of these sites were also frozen and inaccessible. To date, only PokerStars has repaid its customers. Absolute Poker is in bankruptcy, and may or may not repay customers. Full Tilt has agreed to forfeit its assets to the U.S. Department of Justice, and French investment firm Groupe Bernard Tapie is currently in the process of purchasing the assets from the DOJ. It has been reported that the DOJ will repay Full Tilt’s U.S. customers, but nothing has been finalized.

With 2011 behind us and a lot of uncertainty remaining, it’s no surprise the number one tax question on poker players’ minds is how to treat the frozen funds on their tax returns. Of course, PokerStars customers have been fully repaid, so the tax treatment of its customers’ gambling winnings is no different this year. With respect to Absolute Poker and Full Tilt accounts, however, the current state of affairs warrants careful consideration of a couple of tax principles.

  1. Constructive Receipt

As I discussed back in April, the doctrine of constructive receipt sometimes requires cash method taxpayers to include an item in income even if no cash, services, or property are actually received in hand during that year. When are some of those times? A taxpayer has constructive receipt of income in the taxable year during which it is:

  • credited to the taxpayer’s account;
  • set apart for the taxpayer; or
  • otherwise made available such that the taxpayer may draw upon it during the taxable year if notice of intention to withdraw had been given.

Now, if an online casino maintains segregated accounts for each customer, as in the case of PokerStars, then it’s pretty clear that constructive receipt is triggered when a customer earns winnings on the site, and not when the funds are actually withdrawn. But what if an online casino pays its customers through a general operating account? Further, what if that casino’s operating account balance is far less than the total amount owed to players? According to the amended civil complaint filed against Full Tilt Poker, that was precisely the case: At the end of March 2011, Full Tilt owed $390 million to its players but had less than $60 million in its bank accounts. Does constructive receipt still apply?

I would argue that it doesn’t. Constructive receipt does not apply if the taxpayer’s control of its receipt is subject to substantial restrictions or limitations. Gambling winnings in Full Tilt accounts on April 15, 2011 were, in my view, subject to substantial limitations because Full Tilt didn’t have the money to pay the balances. With the Department of Justice alleging in a press release that Full Tilt was operating a “massive Ponzi scheme” against its own players, it would be rather inconsistent for the IRS to then assert that winnings in Full Tilt player accounts not actually received in 2011 are still taxable.

Although we have less evidence to make the same case for winnings in Absolute Poker player accounts, a pending bankruptcy without the return of player funds seems like a strong argument for no constructive receipt.

  1. Claiming a Loss for Unpaid Funds

May a poker player write off unpaid Full Tilt and Absolute Poker funds? For 2011, the answer is no. I covered this issue in detail back in May. What has changed? Now there’s a pending sale of Full Tilt assets by the DOJ to Groupe Bernard Tapie. It seems more likely players will be repaid.

Ultimately, because it’s still possible Absolute Poker and Full Tilt will pay its players back, no loss may be realized. I suspect sometime in 2012 we’ll learn the final fate of unpaid accounts.

  1. Possible IRS Examination of Online Poker Players

Back in April, I explored the possibility of the IRS examining U.S. customers of Absolute Poker, Full Tilt Poker, or PokerStars. To my knowledge, the IRS has not pursued these individuals.

With reports that the DOJ may handle the repayment process of Full Tilt funds to U.S. players, it’s not far-fetched to speculate that some tax examination process will take place. Players may have to apply to the DOJ to obtain unpaid funds. The DOJ or IRS may very well take a look at applications of taxpayers claiming significant balances, perhaps $10,000 or greater.

Another possible alternative is the DOJ offering an amnesty program to poker players who have unpaid balances and are not in compliance with U.S. tax laws. We’ve seen similar programs far greater in scope. In 2011, for example, U.S. taxpayers with certain unreported foreign financial accounts may have came forward under the 2011 Offshore Voluntary Disclosure Initiative.

World Series of Poker

In November, Pius Heinz took home $8,715,638 after capturing the 2011 World Series of Poker Main Event bracelet. And I say “took home” in the literal sense. Because Mr. Heinz was a resident of Germany, he was able to take advantage of the U.S.-Germany Tax Treaty, which exempts from U.S. income tax gambling winnings earned in the U.S. by German residents.

For a complete breakdown of how much tax each of the Main Event’s final nine players had to pay, be sure to check out Russ Fox’s article.

Legislative Developments

In December, the Department of Justice released a memorandum opinion taking the position that the Wire Act applies only to sports wagering. Not exactly a tax event, but an event worth mentioning nonetheless. Although the opinion itself addresses only online state lotteries, states now have been shown a green light for intrastate online gaming. Although player liquidity issues remain for online poker under an intrastate regime, state compacts combining player pools is a realistic possibility. Because of the opinion, legislative developments for U.S. online gaming in 2012 became far more interesting.


I must remind all readers that it is impossible to offer comprehensive tax advice on the internet. Information I write on this blog is not legal advice, and is not intended to address anyone’s particular tax situation. Should you seek such advice, consult with a tax professional to discuss your facts and circumstances.

IRS Circular 230 Notice:

To ensure compliance with requirements imposed by the IRS, I inform you that any U.S. federal tax advice contained in this blog is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter that is contained in this blog.

Full Tilt Poker Ponzi Scheme?

September 21st, 2011 3 comments

Yesterday, the news of the Department of Justice amending its complaint against the Poker Companies to add three individual defendants made national headlines. Read the official press release from the U.S. Attorney’s Office here, and the amended complaint here. Preet Bharara, the U.S. Attorney for the Southern District of New York, asserts that Full Tilt Poker was “a global Ponzi scheme.”

The new allegations add much fuel to the already massive fire that has been burning Full Tilt Poker since Black Friday. Players still haven’t received any of their frozen monies back. It has not appeared as unlikely to happen as it does now. Authorities claim that Full Tilt was $330 million short in funds owed to players in March.

I’ve written before about possible tax consequences for U.S players who don’t receive their funds back. With the Ponzi scheme allegations surfacing, additional tax consequences may arise. In light of the Madoff investment scandal, the IRS created rules for taxpayers who experienced Ponzi scheme losses.

Whether or not players with Full Tilt balances qualify for Ponzi scheme losses is not immediately clear. Russ Fox agrees. Indeed, Full Tilt may not have been engaged in a Ponzi Scheme. Remember, we’re talking about allegations. So, let’s not jump to conclusions. I’ll be sure to revisit these issues when we learn more facts.

DOJ (Finally) Reaches Agreement with Absolute Poker

May 12th, 2011 No comments

The deafening silence has ended.  Yesterday, the Department of Justice issued a press release announcing an agreement entered into with Absolute Poker to facilitate the return of funds to U.S. players.  Read the actual agreement here.  The announcement comes just less than a month after the DOJ seized the U.S. domains of Absolute Poker, Full Tilt Poker, and PokerStars.

Unlike the agreements the DOJ reached with Full Tilt Poker and PokerStars, this agreement does not expressly allow for Absolute Poker to utilize its U.S. domain to facilitate the return of player funds.  Instead, the U.S. Attorney’s Office provides “all necessary assurances” to third-party entities engaged with Absolute Poker that these third-party entities may work with Absolute Poker to facilitate the return of funds to U.S. players.  Because the U.S. domain of Absolute Poker has not been restored, it appears that players will not be able to request withdrawal of funds directly through Absolute Poker, but instead via some third-party site.  Whether or not this structure makes it more or less likely Absolute Poker players will ever see their funds returned, I cannot say.  I suspect poker bloggers Grange95, Billrini, or F-Train to weigh in on this issue in the near future with quality insight.  These gentlemen possess as strong an understanding of the online poker industry as anybody.

One common aspect among all three agreements is the “Records Preservation” clause.  It is paragraph 3 in the Absolute Poker agreement.  The wording of this paragraph is unsurprisingly identical (besides the name of the companies, of course) in all three agreements.  Last night, I discussed various possible purposes of this paragraph with @AgentMarco on the live QuadJacks radio show.  In my opinion, there are two primary purposes:

  • 1) The DOJ doesn’t want the companies to start shredding documents that may contain incriminating evidence pertaining to the allegations in the indictments;
  • 2) The DOJ wants to leave open the possibility of handing these records over to the IRS.

Regarding #2, I explored the likelihood of this possibility at length by comparing the Poker Company case to a recent tax evasion case involving a giant offshore bank and many of its account holders.  My stance on the issue hasn’t changed since then, not that much time has passed.  While I haven’t heard of any online poker players recently receiving audit letters from the IRS, it’s still probably too soon to expect any that relate to the indictments.

As I say time and time again, the IRS typically treats taxpayers far more favorably when they voluntarily come forward to declare previously unreported income as compared to the IRS making that discovery.  Keep in mind that just because frozen online poker funds have not yet been withdrawn does not necessarily mean the funds are not considered income that tax should have already been paid on.  If a taxpayer has frozen funds that should have been reported as income in prior years, he/she should strongly consider consulting a tax professional experienced in the area to discuss particular facts and circumstances.

The UBS Case and Potential IRS Examination of Online Poker Company Records

April 23rd, 2011 No comments

One of the many popular questions currently circulating the pokerverse:  Is it possible the Department of Justice internet domain seizures of Full Tilt Poker, PokerStars, and Absolute Poker will result in IRS audits of poker players who were using these sites?

The simple answer:  Of course it is possible.

But that reply is far from enough to satisfy my curiosity.  As I recently discussed, the fact that FTP and PS agreed with the DOJ to, among other things, maintain all U.S. related business records only strengthens the possibility.  But to what extent?

I conveyed these points on Twitter shortly after reading the agreements.  This caught the attention of Alexander Ripps, a legal analyst in Washington, DC for the independent gambling market analysis firm Gambling Compliance.  He pondered how closely the settlement between the Department of Justice and UBS bank in 2009 may parallel the agreements reached by the DOJ with Full Tilt Poker and PokerStars, particularly in terms of making available customer information to the government (and hence possible audits for tax evasion).  Great question.

The UBS U.S. Tax Evasion Controversy

A brief background discussion about the UBS U.S. tax evasion controversy is first necessary.  UBS is a Swiss-based financial services firm.  It’s one of the giants.  In July 2008, UBS was accused by a U.S. Senate panel of assisting U.S. residents with committing tax evasion by shielding assets in offshore accounts.

In February 2009, as a result of the ongoing Department of Justice investigation of UBS’s U.S. cross-border business, UBS agreed to pay $780 million to the U.S. government in fines, penalties, interest and restitution.  A substantial portion of the $780 million represented U.S. taxes that UBS failed to withhold on the accounts.  UBS also entered into a deferred prosecution agreement on charges of conspiring to defraud the U.S.  As part of the agreement, UBS agreed to immediately provide the U.S. government with the identities of and account information for certain United States customers of UBS’s cross-border business.

The UBS case was purely one of tax evasion.  Back in 2000, UBS entered into an agreement with the Internal Revenue Service requiring the bank to report to the IRS income of its U.S. clients holding U.S. securities in UBS accounts.  UBS also agreed to withhold income taxes from United States clients who directed investment activities in foreign securities from the United States.  Ultimately, UBS failed to deliver on these promises to the IRS, and paid the price.  As did several UBS account holders.

The day after UBS entered into the deferred prosecution agreement with the DOJ, the U.S. government sued UBS to compel disclosure of the identities of up to 52,000 UBS U.S. customers.  After some jostling between the U.S. government and Swiss lawmakers, a final deal was reached in June 2010 to provide to the DOJ and IRS the identities of thousands of Americans accused of tax evasion.  Further investigations commenced, and many U.S. taxpayers were caught.  To make examples of these tax evaders, the IRS has listed the identities and corresponding ramifications for several previous UBS bank account holders.

Comparing the Primary Purposes of the UBS and Poker Company Investigations

Again, the driving force behind the Department of Justice’s investigations of UBS was alleged tax evasion; UBS broke its promises to the IRS.  Alleged tax evasion is NOT the driving force behind the recent indictments of the poker companies and their associated payment processors; the offshore poker companies did not enter into agreements with the IRS to withhold income tax from online poker players.

Instead, the case against the poker companies and their associated payment processors is for alleged bank fraud and money laundering.  Eleven individuals are charged with setting up sham companies to shield the nature of their financial transactions.

The purpose of evaluating these driving forces is to obtain a clearer sense of the DOJ’s intentions with the Poker Company case going forward.  Here, the DOJ didn’t commence investigations in order to punish tax evaders.  This point is further highlighted by the fact that, as far as we know, the DOJ hasn’t yet proceeded to obtain the identities of U.S. poker player accounts.  In the UBS case, however, the DOJ took such action the day after UBS entered into the deferred prosecution agreement.  The Poker Company case is to make examples of money launderers.

Also noteworthy:  In the UBS case, the DOJ knew that some account holders committed tax evasion because the evidence was there at the bank level.  Here, however, there is no evidence of tax evasion by U.S. online poker players on the surface.  It could take far more effort to locate tax evaders in this case.

Concluding Thoughts

To this point, the only indication that the DOJ may be interested in making tax evasion inquiries is the “Records Preservation” paragraph in both of the agreements with Full Tilt Poker and PokerStars, requiring them to maintain their U.S. related business records.  On the one hand, this aspect of the agreements leaves the door open for the IRS to also get involved.  On the other hand, it’s very possible the paragraph is merely a “just in case someday we feel like investigating” provision.  Ultimately, the extent of record review for tax evasion may require more manpower than the IRS can afford to commit.

We shall see.

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