Fallacy # 1: "The DOJ will only pay deposits because the money made was from illegal gambling"
View - First off, online poker bets are not illegal, only the bank transactions and processing, and disguising of the transactions are illegal therefore, proceeds made from the act of winning are not illegal proceeds. Second off, the difference between a balance and a deposit, is not necessarily winnings, net proceeds or profit/loss. Other things go into a balance such as player to player transfers, staking, and rake back which is arguably a cash payment from a third party who's deposit transaction itself is independently isolated from the act of winning cash. I know gambling profits and losses are not supposed to be netted against each other and that is a different topic, however a balance itself regardless of the effect of playing poker, is itself a cummulation and product of multiple withdrawals, top-up deposits, lending, and receiving stake-back deposits etc not necessarily from the act of playing.

Fallacy #2 "the money you receive from fulltilt will be taxable"
View - This is not true even on the basic levels of taxation. Winnings may be taxable but the deposits are not. If you deposit $1000 and have a $900 bankroll, you do not owe taxes on the $900 fulltilt will send you as there are no profits, net proceeds. I'd venture to say the majority of players are in the red, and therefore their balances reflect remaining untaxable salvage lower than their initial deposit.

Fallacy #3 "the DOJ will report you to the IRS"
View If you think about it, trying to use the argument in view #1, as to determine the actual nature of taxable profit from an account history would be a total nightmare for the DOJ. In order to do this, they would have to determine net sums of deposits and withdrawals and all account activity year to date. They can't simply use you most recent deposit, take the difference from your balance and tax you on the difference. This is because that would omit withdrawals in between. If you deposit 1000, withdraw 500, get your roll to 1500, you are taxed on 500 in profits according to the logic of balance - deposit. In fact you are up 1000, so in order for the IRS to determine that, they would have to go back and look at all withdrawal history, and doing so would expose over one million users who have withdrawal proceeds that never got taxed. Finally, they could not tax just your winnings because say you deposit 500, lose 350, deposit 500 more. you have 650 in there, now is that 150 more that your most recent deposit and therefor taxable, of course not, you are in the red. Say you win 50, you are now up on your most recent deposit however still down money but then you get into the sticky situation where you taxably cannot deduct losses against gambling winnings and net the effects out so you have a lose-lose situation for the IRS to make a logical conclusion as to what is actually taxable profit. Now to make matters more complicated, what if the deposit history, or even most recent deposit was prior to 2011? What if the player actually reported to the IRS for 2010, how could they determine what remaining balance is yet to be taxed? They aren't going to look up player by player and determine this. If they wanted your full history, they would uncover a giant fraud of misreporting players. They are only going after disguised banking transactions here. Because Poker stars was allowed to pay all balances unreported to the IRS, it is likely the DOJ's intention is not exposing players not paying taxes.

If you take all this into thought, I'd say it is very safe to say the only action the DOJ will have time or resources to complete within timely fashion is simply refund the actual balance and leave it up to players to report profits, the way 95% of all players don't. Because frankly, 95% off all players balances are miniscule amounts in the grand scheme of the large economy and the IRS is limited in it's resources to trace about a few thousand here and there that go unreported.
Just my opinions, would love opposing viewpoints.

From the GBT fiasco we learned that a relatively small sum would pay 95% of players their full balance and they should have no problem at all. That leaves a much fewer number of players w/ larger balances. I think the DOJ will draw a line w/e it is: Under that line you get your full balance, over and you've got a 'problem', greatly over and take those quotes away.

The easiest point to make why this won't happen is that poker players are backed/get loans/etc. all the time and this is hugely complicated. I know a person with 6 figs on full tilt and literally none of it is actually their money at all. The IRS still may try to tax these people, but its going to be a huge pain in the ass for them once its explained to them the money isn't actually theirs but is some foreign dudes money, they spend all kinds of time doing this for tons of players and make no money off any of them, etc.

Plus throw into account all the people who sold off their accounts for 40 cents on the dollar or whatever, and you have a huge cluster**** of a situation.

To my knowledge FTP would have to issue 1099 forms in order for the IRS to know how much of each balance is taxable income.

Wow OP. You are onto something. I totally see why you thought this deserved its own thread.

Its inconceivable Full Tilts player management software is capable of totaling deposits and withdrawals over a date range, let alone calculating the difference.
Word has it Full Tilt used old school A5 carbon copy receipt books to track all the transactions. I agree matching up the shipping container load of originals to carbon copies would require resources far beyond the scope of the DOJ.

Why not capitalise on this amazing business opportunity. With a lot of hard work you could totally make a super-duper excel spreadsheet, complete with macros and all sort of crazy high tech ****, and sell it to every poker site in the world!

Im willing to invest $3.50 to get you started on development.

Pro Tip:

Nice OP. I'm just wondering when there when the payback process will finally begin?

I like your optimism OP and hope you're right. ROW players going to get paid back I'm sure but I just have a feelin like the US government is going to stick it to us in the end like "you knew what you were doing was wrong and now it's going to cost you" when truth be told, it already has...just give us our damned money back.

That isn't the job of the AFMLS or the DOJ.

Your argument revolves around OPs #1 fallacy.

That's a whole lot of effort for an incredibly lame joke. Well done.

It isn't about whether or not you could manipulate excel to produce a desired outcome, the argument is that the desired outcome of actually what is taxable would be too complicated and sticky for the DOJ to interpret. For example, the top players probably report taxes, they probably don't deposit, or only deposit via backing transfers. Say they reported taxes for 2010 profits, then actually are down a little in 2011, is fulltilt's "excel w/macros" that spits out a massive profit since the most recent deposit a year ago going to know they don't owe any additional taxes because the player has been filing annually? The DOJ is not going to go case by case basis to determine that, and the IRS is not going to look up each person and give a number for the difference to fulltilt.

This all and they don't know how much you could have lost playing live, gambling in other games, or on other sites. They can't just assume all your gambling income was on full tilt and tax it.

This

You realize the reason you are getting any money back is because of the DOJ right? How much longer do you think FTP would've lasted had BF not happened?

The more concern players express over IRS audit, the more the DOJ will think it necessary. This should be in other thread

why would you report balance to the you are eternally -EV as a player?

To think that the DOJ won't report anything to the IRS because of logistics seems really shortsighted. It would be very easy for them to report all players with a BR above a certain threshold (5 figures? 6?) to the IRS, not as a basis for taxable income but as a check to ensure that taxes have been paid. Certainly if someone has a 6 figure balance and has not filed any poker related income over the 2007-20111 time period it would raise a lot of red flags, and something like this would be relatively easy to cross check should the IRS want to

Sure I'd imagine that players with larger balances might have a higher chance of being audited, but it's really not the DOJ's main concern.

Who is to say a player who profited at Full Tilt in a calendar year wasn't an overall loser due to poker losses at other venues?

Usually these types of claims are handled by outside vendors on gov't contracts..... The DOJ won't do any processessing.

I dont see how getting your money back would affect taxes anyway. Isn't your tax reporting liability supposed to be when you won the $$.

If so you should have reported it on last years tax return

Here's what seems likely to me: The AFMLS will require social security numbers as part of the remission application, it will verify applicant social security numbers and, in cases where the payment amount meets certain pre-defined IRS standards (which are available online, for an intro see: http://www.irs.gov/instructions/iw2g/ar02.html#d0e74), the AFMLS will issue W-2G's and let the recipients report and account for the income on their individual tax returns. In short, the AFMLS will follow the law in making gambling connected pay outs. That's my speculation.

What concerns me is if the DOJ simply gives the IRS the complete cashier transaction history for each US player who ever played on Full Tilt. After that its completely up to the IRS what they want to do with that information.

I don't think the odds of the IRS auditing someone will be affected by whether or not that person pursues getting their $$ back through the DOJ.

I assume if you have over 10k, they'll just put it in your bank account and let the auto-flagging alert the IRS to that to ensure compliance.

So if you have over 10k and don't want it deposited in your BA, they'll probably get a lot more suspicious at that point.

When the feds made a settlement deal with Neteller years ago didn't they get all of Neteller's transaction data? If so they could have easily at the time identified people who were highly likely to have made lots of money playing online poker but hadn't reported any such income. And yet I don't recall there being any flood of profitable online players getting nailed for tax evasion.