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.