For Amarillo Slim, April 15th this year was much more than “Tax Day,” it was Black Friday when the Justice Department charged the owners of his favorite online poker sites PokerStars, Full Tilt, Absolute Poker and Ultimate Bet, with bank fraud and money laundering and shut them down. In addition to shutting down the websites, the US Attorney General froze Slim’s gaming bank accounts and upwards of $500 million in online poker accounts held by other US online poker players. This morning Amarillo realized that the Justice Department would likely get access to his gambling activities representing significant unreported tax dollars. Will the government likely try to go after Amarillo Slim for undeclared gambling winnings? Maybe so.
Gambling in the United States. The 2006 Unlawful Internet Gambling Enforcement Act prohibits gambling businesses from knowingly accepting bets over the Internet and prohibits banks from processing credit card payments and wire transfers related to gambling. Not surprisingly, banks were also a target on Black Friday because they purportedly enabled the gambling sites to launder money and sidestep the federal gambling laws.
What about Amarillo Slim and the IRS? IRS website Topic 419 – Gambling Income and Losses reminds that all gambling winnings must be reported. Moreover, it is likely that any US Attorney plea deal will require a “cooperation” agreement requiring Full Tilt and the other online sites to disclose its player lists with deposits, withdrawals and balances by year so that the IRS can confirm if all winnings were reported. If not, other issues might possibly include civil fraud penalties, willful failure to file, willful failure to pay, criminal tax evasion, civil penalties of up to 75%, plus interest, time in custody, and if Foreign Bank Account Reports were required and not paid, possible civil and criminal penalties under the Bank Secrecy Act.
Gambling in Texas. Online gambling may not be a crime expressly prohibited in Texas under the Texas Penal Code because there is an exception for gambling in a “private place,” like on your computer in the privacy of your home. If you are in an internet bar or other public place in Texas, it may well be a violation of Texas law in addition to the likely federal law violations mentioned above.
Tilting the Scales in Your Favor. If you were an online gambler, you may want to speak with your attorney or tax preparer to determine whether you are at risk and a response appropriate for your circumstances.