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Old 03-28-2018, 07:31 AM   #1
Loctus
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Spain's IRS taxes losing poker player €500K

Founds this on hsdb
https://www.highstakesdb.com/8614-sp...-tax-bill.aspx

Quote:
"We go back to the year 2011. I play some online poker, for fun, I'm not a gambler by any means. I lost everything, a few thousand and I stopped playing. Then I stopped. In 2016 I received a letter from the Spanish tax authority requesting more than six figures! More than half a million euros because I played poker and I lost. It seems a macabre joke, but it is not, from that moment begins a snowball that crushes you," Vallejo explained on his personal Facebook page last week.

Many countries uses(?)/used a tax system like this for online poker. Sweden, where I'm from, was one of them. Every individual pot is considered a separate gamble, and if you win it you're taxed and if you lose it you can't deduct the loss (2-2=2). Thus you can play small stakes poker for some decent volume and according to the law actually owe millions (or billions, literally, if you're isildur)

What do you think will happen to the Spanish chess master in this case? Can tax authorities retroactively remove his tax debt even though it was calculated perfectly according to the law at the time?
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Old 03-28-2018, 07:36 AM   #2
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Re: Spain's IRS taxes losing poker player €500K

i assume these politicians have some college math, statistics, and economics background. so how do we explain their nonsense tax law pre 2011?
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Old 03-28-2018, 07:53 AM   #3
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Re: Spain's IRS taxes losing poker player €500K

another reason why you should play play money.
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Old 03-28-2018, 08:06 AM   #4
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Re: Spain's IRS taxes losing poker player €500K

In a sense, his fellow Spanish poker players are quite lucky that this nonsensical, absurd thing also happened to Paco Vallejo - now the issue has gone quite viral, firstly spreading through the chess community, then being shared until it was picked up by larger news outlets and I think it is now only a matter of time since major outlets report it.

Publicity of this absurdity is definitely good for Paco and other Spanish players, but whether it will be of actual help, I quite doubt - if the Spanish Tax Authority goes all out versus someone like Messi or Ronaldo, I doubt they will care too much about their image despite the publicity in this situation.

I guess there is a difference in that in Messi and Ronaldo cases, the regulation was perfectly fine (i.e. not absurd) and going after them was in no way absurd, unlike in this situation. But still, I have my doubts.

It truly, truly sucks, as Paco is a really good guy (not even to mention all the other affected Spanish poker players). This debacle has completely derailed his professional career and had strong negative impact on his health. If the Spanish justice system would do the right thing, the decision should be obvious - however, sadly, "just" is not always found in justice systems which go strictly be the letter of the law, no matter how ridiculous that law is...
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Old 03-28-2018, 08:49 AM   #5
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Re: Spain's IRS taxes losing poker player €500K

Well, time for him to leave Spain.
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Old 03-28-2018, 10:33 AM   #6
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Re: Spain's IRS taxes losing poker player €500K

I've been told ignorance of the law is no excuse.
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Old 03-28-2018, 12:36 PM   #7
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Re: Spain's IRS taxes losing poker player €500K

I have heard of something like this before. If it is supposed to be reported and stated as you said in your OP, it is just unbelievable how they could implement such a dumb standard to poker taxes. Even getting taxed on a wager among two citizens seems very silly to me but that is what it is.
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Old 03-28-2018, 01:00 PM   #8
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Re: Spain's IRS taxes losing poker player €500K

European law (which is above the law of any country in EU) has had a verdict that poker players shouldn't pay taxes on poker. (this happened in the Netherlands, the Dutch court forced him to pay 50k+€, he denied this and went to the European court where he won his case)
Don't be an idiot and pay taxes on poker in Europe.
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Old 03-28-2018, 02:32 PM   #9
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Re: Spain's IRS taxes losing poker player €500K

I am interested in hearing more about this case, including whether or not there are many other affected persons, and what the outcome might be.
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Old 03-28-2018, 03:24 PM   #10
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Re: Spain's IRS taxes losing poker player €500K

Damn, that is the worst kind of rake....
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Old 03-28-2018, 03:41 PM   #11
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Re: Spain's IRS taxes losing poker player €500K

Its also true that everybody knew the law back then and a lot of regs refused to play until they changed the law. Others took the risk to play on tables full of fishes, printing money.

The law was absurd but I dubt he didn't knew about it. Anyway good luck to him.
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Old 03-28-2018, 03:43 PM   #12
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Re: Spain's IRS taxes losing poker player €500K

This is an issue in the US as well (for State taxes, not federal), in the approx 13 states that don't let you deduct 100% of your losses from your winnings. There are well-documented cases of net losers on the year being sent tax bills of 6-figures owing, going to court and invariably losing. Tax laws, as written, aren't fair whatsoever, but courts have had little difficulty in applying the laws as they currently exist on the books -- they're pretty black and white, fairness notwithstanding.
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Old 03-28-2018, 04:07 PM   #13
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Re: Spain's IRS taxes losing poker player €500K

Why is this issue becoming public now when it sounds like it should have affected tens of thousands of people every year for at least the last seven years?
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Old 03-28-2018, 04:10 PM   #14
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Re: Spain's IRS taxes losing poker player €500K

What if a 19 year old kid grinded a million hands of small stakes poker over a year and broke even, and then sends that HH database to the tax authority? He will literally owe millions of dollars. This needs to happen.

Some old spanish grinder who doesn't give a **** need to dig up a old database from pre-2011 and send that **** in. For real. Play enough hands over 2007-2011 or so and it'll literally be a 10 million dollar tax bill they have to send him
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Old 03-28-2018, 04:48 PM   #15
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Re: Spain's IRS taxes losing poker player €500K

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Originally Posted by NickMPK View Post
Why is this issue becoming public now when it sounds like it should have affected tens of thousands of people every year for at least the last seven years?
I don't know the exact timeframes, but this only affects players that played immediately after Spain closed the market and regulated poker. The law back then was ludicrous, which is now becoming obvious. They changed it shortly (don't ask me exactly how long) after. As things are now, they are OK as far as I understand it - but not optimal because players are still being taxed, even if only on winnings
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Old 03-28-2018, 07:33 PM   #16
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Re: Spain's IRS taxes losing poker player €500K

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Originally Posted by mttplayer View Post
another reason why you should play play money.
imagine owing 500k in play money that you can't come up with.
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Old 03-28-2018, 08:09 PM   #17
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Re: Spain's IRS taxes losing poker player €500K

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Originally Posted by p2ryan View Post
i assume these politicians have some college math, statistics, and economics background. so how do we explain their nonsense tax law pre 2011?
That's a pretty terrible assumption. While some might exist, I've yet to hear of a jurisdiction that has a requirement for college education to run for office.
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Old 03-28-2018, 08:11 PM   #18
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Re: Spain's IRS taxes losing poker player €500K

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Originally Posted by ATrainBoston View Post
I am interested in hearing more about this case, including whether or not there are many other affected persons, and what the outcome might be.
The article is in dutch (not allowed to post links)


Interesting i did re-read, and apparently its because
Isle of Man (the head office of Pokerstars) Isn't in the EU!
So in that way they found a loop, in this way he couldn't be taxed on something that wasn't from the EU.

And in the EU law, lawyers can use this case for future cases.
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Old 03-28-2018, 11:33 PM   #19
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Re: Spain's IRS taxes losing poker player €500K

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Originally Posted by Monorail View Post
This is an issue in the US as well (for State taxes, not federal), in the approx 13 states that don't let you deduct 100% of your losses from your winnings. There are well-documented cases of net losers on the year being sent tax bills of 6-figures owing, going to court and invariably losing. Tax laws, as written, aren't fair whatsoever, but courts have had little difficulty in applying the laws as they currently exist on the books -- they're pretty black and white, fairness notwithstanding.
Actually, it could be an issue for U.S. federal taxes as well for some people. Beginning this year, a married recreational poker player won't be able to offset any winning "sessions" with losses until he has accumulated over $24,000 in itemized deductions. And if he doesn't own a house with a mortgage in a high property tax state, that pretty much means he's ****ed.
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Old 03-29-2018, 12:26 AM   #20
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Re: Spain's IRS taxes losing poker player €500K

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Originally Posted by DC2LV View Post
Actually, it could be an issue for U.S. federal taxes as well for some people. Beginning this year, a married recreational poker player won't be able to offset any winning "sessions" with losses until he has accumulated over $24,000 in itemized deductions. And if he doesn't own a house with a mortgage in a high property tax state, that pretty much means he's ****ed.
Another change is that the itemized deduction for the state and local income taxes and property taxes, in the aggregate, is now limited to $10,000. So the high property tax states are not going to be able to deduct all of their property taxes. I would guess that a lot of people, myself included, paid at least some of their 2018 property taxes in 2017 so that they could deduct it on their 2017 tax return before running into the $10,000 limitation in 2018. In order to be deductible in 2017, the 2018 property taxes had to be assessed by the locality before the end of 2017, so most people probably wouldn't have been able to pay and deduct all of the 2018 property tax in 2017. So, anyway, people in high tax states aren't going to have deductions in excess of $24,000 too much faster than people in lower tax states due to the $10,000 limitation on those types of deductions.


But the issue you raise isn't nearly as big a deal as the issue being discussed earlier in this thread. If your itemized deductions are more than the standard deduction because of gambling losses, but otherwise you would have taken the standard deduction, then the result is you effectively lose the $24,000 standard deduction (or a portion of it). Or if you take the standard deduction, then you can't deduct gambling losses; in this case your gambling loss deduction must be less than $24,000 or otherwise you would itemize. Therefore, the most you can lose out on is a $24,000 deduction.

$24,000 * 37% (max marginal tax rate) = $8,880. So at most, in the worst case scenario (which is not too likely), this costs you you $8,880 in extra taxes that you wouldn't have to pay if you would itemize deductions even in the absence of any gambling activity or if, get this, you could just report net gambling winnings as income rather having to report gross winnings as income and having the option to deduct losses if you choose to itemize your deductions.

The result in the above paragraph is only if you are at the highest marginal rate and have no other itemized deductions besides gambling losses. (Or works out basically that way if you have $23,999 of deductible gambling losses.) Seems unlikely you would be in the highest marginal bracket and have no other itemized deductions, but possible.

If you have at least $10,000 of state income taxes and property taxes that you can use as itemized deductions also, then you're losing out on $14,000 of deductions, so $14,000 * 37% = $5,180 at worst

If you have at least $10,000 of state income taxes and property taxes and $10,000 of deductible mortgage interest, then you're losing out on $4,000 of deductions, so $4,000 * 37% = $1,480 at worst.

If you have $24,000 or more of itemized deductions other than gambling losses, then it doesn't matter. (With respect to this issue anyway; the artificially inflated AGI due to this reporting system can phase out certain deductions and other tax benefits for you if it gets too high.)





The new $10,000 limit on deductions for state and local income tax and property tax, in the aggregate, was a real kick for certain states (NY, NJ, CA, etc.)

I heard some states or localities have been working on (or in some cases may have even had proposed) bills that would allow taxpayers to make charitable donations to a state/local fund instead of paying the state/local taxes. Charitable donations are still fully deductible on the federal tax return without the $10,000 limit. People may have other ideas for workarounds also. I haven't been following what state governments or agencies have been working on or considering for this.



EDIT:

BTW, the 37% bracket is for income over $500,000 ($600,000 for married couples filing jointly), so most people will have a lower marginal rate.

Last edited by Lego05; 03-29-2018 at 12:55 AM.
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Old 03-29-2018, 01:10 AM   #21
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Re: Spain's IRS taxes losing poker player €500K

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Originally Posted by p2ryan View Post
i assume these politicians have some college math, statistics, and economics background. so how do we explain their nonsense tax law pre 2011?
Ya there's a US lawmaker who ran for US president that is a neurosurgeon that also thinks the Earth is 5,000 years old. Don't assume anything when it comes to these idiots.
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Old 03-29-2018, 09:15 AM   #22
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Re: Spain's IRS taxes losing poker player €500K

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Originally Posted by Lego05 View Post
Another change is that the itemized deduction for the state and local income taxes and property taxes, in the aggregate, is now limited to $10,000. So the high property tax states are not going to be able to deduct all of their property taxes. I would guess that a lot of people, myself included, paid at least some of their 2018 property taxes in 2017 so that they could deduct it on their 2017 tax return before running into the $10,000 limitation in 2018. In order to be deductible in 2017, the 2018 property taxes had to be assessed by the locality before the end of 2017, so most people probably wouldn't have been able to pay and deduct all of the 2018 property tax in 2017. So, anyway, people in high tax states aren't going to have deductions in excess of $24,000 too much faster than people in lower tax states due to the $10,000 limitation on those types of deductions.


But the issue you raise isn't nearly as big a deal as the issue being discussed earlier in this thread. If your itemized deductions are more than the standard deduction because of gambling losses, but otherwise you would have taken the standard deduction, then the result is you effectively lose the $24,000 standard deduction (or a portion of it). Or if you take the standard deduction, then you can't deduct gambling losses; in this case your gambling loss deduction must be less than $24,000 or otherwise you would itemize. Therefore, the most you can lose out on is a $24,000 deduction.

$24,000 * 37% (max marginal tax rate) = $8,880. So at most, in the worst case scenario (which is not too likely), this costs you you $8,880 in extra taxes that you wouldn't have to pay if you would itemize deductions even in the absence of any gambling activity or if, get this, you could just report net gambling winnings as income rather having to report gross winnings as income and having the option to deduct losses if you choose to itemize your deductions.

The result in the above paragraph is only if you are at the highest marginal rate and have no other itemized deductions besides gambling losses. (Or works out basically that way if you have $23,999 of deductible gambling losses.) Seems unlikely you would be in the highest marginal bracket and have no other itemized deductions, but possible.

If you have at least $10,000 of state income taxes and property taxes that you can use as itemized deductions also, then you're losing out on $14,000 of deductions, so $14,000 * 37% = $5,180 at worst

If you have at least $10,000 of state income taxes and property taxes and $10,000 of deductible mortgage interest, then you're losing out on $4,000 of deductions, so $4,000 * 37% = $1,480 at worst.

If you have $24,000 or more of itemized deductions other than gambling losses, then it doesn't matter. (With respect to this issue anyway; the artificially inflated AGI due to this reporting system can phase out certain deductions and other tax benefits for you if it gets too high.)





The new $10,000 limit on deductions for state and local income tax and property tax, in the aggregate, was a real kick for certain states (NY, NJ, CA, etc.)

I heard some states or localities have been working on (or in some cases may have even had proposed) bills that would allow taxpayers to make charitable donations to a state/local fund instead of paying the state/local taxes. Charitable donations are still fully deductible on the federal tax return without the $10,000 limit. People may have other ideas for workarounds also. I haven't been following what state governments or agencies have been working on or considering for this.

EDIT:

BTW, the 37% bracket is for income over $500,000 ($600,000 for married couples filing jointly), so most people will have a lower marginal rate.
All good points.
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Old 03-29-2018, 09:17 AM   #23
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Re: Spain's IRS taxes losing poker player €500K

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Originally Posted by Wentin Well View Post
As things are now, they are OK as far as I understand it - but not optimal because players are still being taxed, even if only on winnings
The lack of deductions issue can still more or less be there.

They might be allowed to tax national gambling incomes but maybe not the other EU gambling incomes (isn't this the case in Italy, if they go to play elsewhere in EU?) but it isn't legal to play at other sites from Spain when not regulated by Spain (nor from Italy, similarly, but according to what I read, it is legal in France but it isn't legal to offer games for them, when not blessed by France).
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Old 03-29-2018, 11:38 AM   #24
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Re: Spain's IRS taxes losing poker player €500K

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Originally Posted by orbea View Post
Its also true that everybody knew the law back then and a lot of regs refused to play until they changed the law. Others took the risk to play on tables full of fishes, printing money.

The law was absurd but I dubt he didn't knew about it. Anyway good luck to him.
This. Anybody who read the Spanish tax code knew that it was the gross that got taxed, not the net, and took corresponding measures.
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Old 03-29-2018, 01:28 PM   #25
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Re: Spain's IRS taxes losing poker player €500K

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Originally Posted by Loctus View Post
Founds this on hsdb
https://www.highstakesdb.com/8614-sp...-tax-bill.aspx




Many countries uses(?)/used a tax system like this for online poker. Sweden, where I'm from, was one of them. Every individual pot is considered a separate gamble, and if you win it you're taxed and if you lose it you can't deduct the loss (2-2=2). Thus you can play small stakes poker for some decent volume and according to the law actually owe millions (or billions, literally, if you're isildur)

What do you think will happen to the Spanish chess master in this case? Can tax authorities retroactively remove his tax debt even though it was calculated perfectly according to the law at the time?
Just had an idea for a Spanish poker forum...
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