Gambling With The IRS

March 7, 2023 by admin

Monday March 6, 2023 – The Sixteenth Amendment to the Constitution provides Congress with the “power to lay and collect taxes on incomes, from whatever source derived.” Gambling can be a fun and exciting activity. Remember, the Internal Revenue Service (IRS) recognizes winnings from casinos, lotteries, horse racing, sports betting and other gambling activities as income and subject to taxes. Gambling losses may be deductible on your federal tax return, but only up to the amount of winnings.

To claim any deductions for your gambling losses, though, it’s important to keep contemporaneous records of all your gambling activity throughout the year. Whether it’s a casino or sportsbook ticket stub, an online receipt or bank statement with the transaction listed, having documentation of your losses is essential.

Depending on where you live, additional state taxes may also apply to your gambling winnings. Some states require that you pay taxes on all your gaming revenue (not just the amount over a certain threshold), while others might not have any rules in place at all. In Illinois, where I live, the State taxes all winnings, and does not allow deductions for losses.

I have had at least one client with larges winnings – hundreds of thousands of dollars. But larger losses. The State of Illinois taxed the full amount of winnings. In this case, that meant a very large State Tax bill.

Professional gamblers (not an easy designation) may be subject to additional tax requirements. Professional gamblers are considered self-employed and must pay self-employment taxes on their winnings. They may also be required to pay estimated taxes throughout the year.

So, if you don’t keep good records and you get audited, it’s a gamble. Good Luck.

Attorney Steven A. Leahy discusses IRS taxes on Gambling on Today’s Tax Talk.

https://www.law.cornell.edu/constitution/amendmentxvi

https://www.capjournal.com/arena/finance/las-vegas-casinos-gamblers-may-get-a-surprise-irs-jackpot/article_4a468745-4db3-512a-b5d3-04568f0b8c04.html

https://ktla.com/news/nexstar-media-wire/as-march-madness-looms-so-do-sports-betting-taxes/

https://www.irs.gov/taxtopics/tc419

Steven A. Leahy is a tax attorney in Illinois. He was the host of the long-running popular Radio Show “The IRS Radio Hour” heard every Sunday evening on AM 560 The Answer. Attorney Leahy is also the author of the book “Deal With Your IRS Problems Today!” You can get a FREE copy of this important book at FreeIRSBook.com. Or Call 24/7 (312)664-6649

Taxing The Treasure Trove

March 3, 2023 by admin

Thursday March 2, 2023 – As a tax attorney, I am always interested in the unusual. Like the tax implications of catching a record-setting baseball. Or finding a shipwreck with $800 million worth of whiskey.

In 2010, a man named Ross Richardson discovered a the wreak of a passenger ship named the Westmoreland which sank in northern Lake Michigan in 1854. Along with gold valued at about $20 million, the ship contained about 280 barrels of whiskey each contain 200 bottles.

The IRS refers to these items as “Treasure Troves.” A treasure trove is typically defined as a hidden or concealed collection of valuable items that has been discovered by chance. These items are usually old or antique and have been hidden away for a significant amount of time. In some cases, treasure troves may be discovered on a property or in a building that the finder does not own. In other cases, the finder may have been actively searching for treasure using metal detectors or other means.

From a tax perspective, the discovery of a treasure trove can have several different implications. If the finder is not the legal owner of the property where the treasure trove was discovered, they may be required to pay a finder’s fee or royalty to the property owner. This fee may be subject to income tax, depending on the specific circumstances of the discovery.

If the finder is the legal owner of the property where the treasure trove was discovered, the tax implications may be different. In general, treasure troves are considered taxable income under the Internal Revenue Code. This means that the finder may be required to pay income tax on the value of the treasure trove.

The specific tax rate will depend on the finder’s income bracket and the value of the treasure trove. It is important to note that if the finder intends to sell the treasure trove, they will also be required to pay capital gains tax on any profits made from the sale.

As a tax attorney, my advice to anyone who discovers a treasure trove is to consult with a tax professional as soon as possible. Do NOT follow the old adage “Shoot, Shovel, and Shut Up.”

Attorney Steven A. Leahy explores the depths of the Treasure Trove Tax on Today’s Tax Talk.

https://nowthisnews.com/news/whiskey-recovered-from-a-170-year-old-shipwreck-could-be-worth-a-fortune

https://www.forbes.com/sites/robertwood/2023/03/01/shipwrecked-whiskey-worth-871-million-irs-tax/?sh=4ecae39f2f0c

Supreme Court Rights A Wrong

March 2, 2023 by admin

Wednesday March 1, 2023 – Back in January we did a story about The Supreme Court refusing to hear a case of excessive fines for inadvertently failing to file a timely bank disclosure form called the FBAR (Report of Foreign Bank and Financial Accounts).

Justice Gorsuch issued a rare dissenting opinion in that case. And now it makes sense. On Tuesday, the United States Supreme Court limited the IRS’s ability to impose penalties when taxpayers unintentionally make errors in reporting foreign accounts. The majority opinion was written by Justice Neil M. Gorsuch. He reasoned that the relevant legal duty is to file reports, not individual accounts.

The case concerned Alexandru Bittner, an immigrant and dual citizen who failed to disclose his foreign accounts while living overseas. Lawyers argued that the FBAR should only carry a fine of $50,000, or $10,000 per year. Not the nearly $3 million penalty initially imposed by the IRS, based on the number of accounts.

Justice Amy Coney Barrett disagreed and wrote a dissent arguing that the FBAR is an annual form requiring separate penalties for each account not reported. The ruling is important news for taxpayers who worry about FBAR penalties and adds clarity to the IRS’s authority when it comes to FBAR violations. With this ruling, SCOTUS has ensured that taxpayers will not be unfairly penalized by the IRS for unintentional FBAR mistakes. That’s a win for everyone. Thank you SCOTUS! God bless America! Now, how can we go back to the Toch case and correct that wrong?

Attorney Steven A. Leahy analyses this recent Supreme Court decision on Today’s Tax Talk.

https://www.washingtontimes.com/news/2023/feb/28/supreme-court-sides-immigrant-challenging-irs-pena/

https://www.supremecourt.gov/opinions/22pdf/21-1195_h3ci.pdf

https://vimeo.com/manage/videos/793168156

https://www.supremecourt.gov/opinions/22pdf/22-177_d0fi.pdf

IRS Missed Deadline

February 28, 2023 by admin

Monday February 27, 2023 – Remember that February 17, 2023 deadline Treasury Secretary Janet Yellen set for The Internal Revenue Service (IRS) to create a strategic plan for spending the $80 billion Congress handed them? Yeah, neither does the IRS.

The February deadline came and went and the IRS simply did not meet the deadline. The IRS has excuses: former Commissioner Charles Rettig’s term expired, there is a confirmation process for the subsequent nominee Daniel Werfel, and a friend came in from out of town. Treasury has been working with the IRS to develop a plan since last summer.

This delay raises questions about the agency’s credibility and casts doubt on its ability to efficiently spend the money. While the document is still in progress, taxpayers should expect revisions as needs change. But don’t worry. The IRS will complete it in good time- now get back to doing your return. There is a deadline you know!

Attorney Steven A. Leahy looks at the latest IRS arrogance on Today’s Tax Talk.

https://www.washingtonexaminer.com/restoring-america/faith-freedom-self-reliance/negligent-irs-gets-80-billion-but-misses-deadline-for-the-money

https://www.forbes.com/sites/howardgleckman/2023/02/22/the-irs-misses-its-deadline-for-completing-a-plan-to-spend-80-billion-in-new-money/?sh=7691e7031c2f

Do ANY Rules Apply To The IRS?

February 23, 2023 by admin

Wednesday February 22, 2023 – The Supreme Court is currently hearing an IRS case that could have a major impact on all Americans. The IRS wants to be able to access bank and other business records without notifying anyone. As it stands, the IRS has wide-reaching authority to obtain these records by simply issuing a subpoena in secret.

This case will decide if these actions violate the Fourth Amendment rights of third parties, such as customers and clients.

The Chamber of Commerce wrote in a brief that businesses must choose between two options in response to an IRS summons: “challenging the summons by filing a petition with the Tax Court or complying with the subpoena and disclosing confidential information to the IRS.” This creates a catch-22 situation, as businesses cannot challenge the summons without first complying with it, and could be penalized for not doing so in the interim.

This District Court decision in this case, Polselli v. United States Polselli v. United States, No. 19-10956, 2020 U.S. Dist. LEXIS 260543, at *1 (E.D. Mich. Nov. 16, 2020), and the 6th Circuit Appellate decision affirming the case, dangerously limits the privacy rights of individuals, weakens businesses’ ability to protect their customers’ information, and creates an environment in which businesses are forced to comply with IRS requests or face consequences.

Attorney Steven A. Leahy reviews this case and the implications should the United Supreme Court uphold it on Today’s Tax Talk.

https://www.forbes.com/sites/nicksibilla/2023/02/20/supreme-court-to-decide-if-irs-can-secretly-access-bank-records/?sh=5d31a288486c

https://scholar.google.com/scholar_case?case=1450107970258318149&q=Polselli+v.+United+States+irs&hl=en&as_sdt=400006&as_vis=1

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Gambling With The IRS

Taxing The Treasure Trove

Supreme Court Rights A Wrong

IRS Missed Deadline

Do ANY Rules Apply To The IRS?

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