This can't happen.

The money in your full tilt account that you owned is gone. What FT didn't steal, it voluntarily forfeited to the US.

Any money we receive via remission is US government money. It's not gambling winnings, it is a government hand out. So no W2-Gs will be issued.

The fact that our winnings are gone, and the fact that the remission process is a transfer of government money to a crime victim, not us getting our money back, has all sorts of tax implications that nobody is paying attention to.

Ignore. Reading comprehension fail.

it would easy for the doj to report the total distribution to each player to the irs and ill be surprised if they don't

much like casinos report jackpots over $1200 and leave it to the winner to report losses that offset the winnings to the irs, i suspect the doj will do the same

How long did Bernie Madoff go on duping investors??? The ponzi scheme aspect of this would have kept on going and going with all the online players that fuel the games depositing over and over, waiting for that one big score.

Also, this...

Is the implication that all past tax returns that have income from FTP on them have to be amended and 2012 taxes will have this money listed as govt. remission and not anything to do with gambling winnings?

That sounds like such a mess but I guess I can see it being true. I doubt a high percentage will do that. Will the DoJ or IRS explicitly comment on this seeing as there's so many people affected?

To my reading of the situation, you would not amend your previous years' tax returns. As soon as you had control over the winnings (in the sense you could take it out of FTP), the winnings are taxable in that year, not when you repatriate it back to the US. As always, consult a tax adviser for information concerning your particular situation.

What will be interesting is what the DOJ will accept as "proof" of loss. There's been a working assumption that all one will have to do is say, "Hey, my SN is XYZ, send me the money." In order to prove you are a victim, it is possible that they will require bank statements/wire transfer receipts for deposits/withdraws and tax returns back by logs to show winnings. Just because Phil Ivey might have had $3,000,000 in his account doesn't mean that he is actually owed that money. It is quite likely that some of that was FTP money loaned to him and put in that account. Barry Greenstein certainly doesn't expect any money in his account to be sent to him.

When you add all the discounted balance sales (that has some interesting tax consequences), various stakes and multi-accounts where the name and location of the owner was faked, NVG is sure to be filled with lots of threads with accusations of scamming.

Caveats:

I'm not a CPA.
I haven't been licensed to practice law since 2008, and I never practiced tax law.

I did a quick google search, and didn't find an answer to my main question. Maybe one of the practicing lawyers can look into it.

The main question is: is a remission payment by the US government to a crime victim taxable income?

If a remission payment is taxable, then people who paid taxes on their winnings are in danger of being double taxed, and would have to consult a CPA on taking a loss for their stolen FT money.

Say you won $10,000, withdrew $2000 to pay the taxes on it, and lost the remaining $8000 on black Friday. If the government pays you $8000, and you have to pay taxes on it, then you've paid taxes on $18,000 while actually only receiving $10,000.

If you can take, for example, a casualty loss for the original $8000, then you'd be ok; you'd wind up paying tax on only $10,000:

I received 10k
I lost 8k to theft
I received 8k

Compare that to how your taxes would look if you won $10,000 in 2011, it was seized on BF, but the money you owned was returned to you by being released from seizure:

Reported income for 2011: $0
Reported income for 2012: $10,000

So our taxes are going to be a bit complicated if remission payments are taxable. It doesn't hurt us as far as I can tell; it's just accounting for everything correctly is more complex.

Really no one in this thread knows how poker taxes work in the US? It's not Balance - Deposit = Taxable Income. That's waaaaaay too easy.

In the US your taxable income is your winnings from EVERY winning "session" totaled. Your losing sessions totaled up to become a deduction. At least for federal taxes. Each state has their own rules. That is my non-professional understanding. Do not make tax decisions based on that.

This.

There is no way the DOJ will have any idea what is profit from Poker since your tax will be all your winning sessions across all sites and all live play with all losses deducted.

I won something like 6,000 last year but had like 75K in winning and 69k in deductions.

I'm assuming 75%+ of all players probably don't file correctly...

This isn't neccesarily true though. Assuming that all of the information in this blog post is accurate, for a non-professional gambler the casualty loss can only be deducted to the extent that it exceeds 10% AGI. Also those people who don't itemized deductions get further screwed.

If a crime victim is made whole the "make whole" brings with it the same characteristics as the loss regardless of it being third party source. Interesting intellectual exercise but a "no go" with the IRS. Been there, done that; common place in civil litigation. Wasn't true long before you started to practice, but in, probably, mid 1980's IRS started to assert its claims and the doctrine it well established.

I guess I should mention that is not filing as a professional gambler.

Are there instructions on how to apply to get paid yet?

not yet

haha i used to xfer back and forth upwards of a day playing 4 man HUSNGs. thats going to be a cluster**** to figure out for me let alone them lol

Yeah, my point was that the tax situation is way more complex because of the fact that remission uses government funds.

The remission portion of it isn't that complicated. For example, if I stole $500 from you, get caught and part of my sentence is to pay you back, the $500 you get back is not taxable. If I chop off your arm, get caught and am required to pay you compensatory damages, that is not taxable.

The complicated part is the proof of ownership. I didn't have an account with FTP, but I assume it was similar to PS where you needed to provide a name and address. At a minimum, they are going to require a state ID, if not a SSN for proof of identity. If you created a name and a fake address, it is going to be pretty tough to collect the money.

This article does a nice job of going over the ground.

http://pokernewsboy.com/us-poker-new...-players/12865

Are you kidding? Nothing is ever painful to the IRS. They can freeze funds whenever they want and it's up to you to prove proof that's satisfactory to them.

The IRS doesn't have to prove anything. You have to provide proof. You have to substantiate everything to them. It can be something as simple as you have more spending than income.

If you chop off my arm and a portion of the recovery is for loss of future earnings, I have a tax issue and it doesn't matter if you pay the damages, your insurer pays them or your wealthy uncle bails you out.

OP, I agree pretty well with what you have stated in your view on each of the three "fallacies", but I think you are stretching the conclusion in the title a little too far.

I don't think you can conclude that the DoJ will necessarily pay winnings, just because you have disproved one possible argument against not paying winnings. Also, while the DoJ may not report all of whatever you are paid as income, that doesn't mean that they will not make a report of some form to the IRS.

Hmm, the IRS disagrees.

http://www.irs.gov/publications/p525...link1000229507

I don't know if there is anything else to support your speculation but in the link you provided for form W-2G, of the 4 types of gambling income listed only one is for poker and that is for poker tournaments.
__________________________________________________ ____

Reportable Gambling Winnings

3. The winnings (reduced by the wager or buy-in) are more than $5,000 from a poker tournament,

Also.....
4. Poker Tournaments

File Form W-2G for each person to whom you pay more than $5,000 in winnings, reduced by the amount of the wager or buy-in, from each poker tournament you have sponsored. Winnings and losses of the participant from other poker tournaments you have sponsored during the year are not taken into account in arriving at the $5,000 amount.
__________________________________________________ _______

No other poker winnings are mentioned, such as cash games or winning, for example, a $50 SNG.

Yes, if everybody gets audited.