+ Reply to Thread
Results 1 to 10 of 10
  1. #1
    Join Date
    Oct 2017
    Posts
    6

    Exclamation Bankruptcy and Online Gambling

    What is the name of your state (only U.S. law)? MO

    We had a consult with an attorney to see about filing bankruptcy due to amount of cc debt and me losing my job due to illness. As I was filling out the paperwork needed to file, I realized that I will have to show my separate checking account statements that show I have been gambling online. I did not think it was illegal because I was able to use my debit card. I have a few winnings 5000, 4500, that were transferred to my account. Searching the net I see now I am in big trouble, for gambling and not reporting as income. How much trouble am I in and will I go to prison? IRS? Should I just shoot myself now?? We were not behind on any bills when we talked to the attorney, we were planning ahead since my unemployment runs out in Dec and husbands income is not enough to cover all bills. I need advice urgently!

    thank you for your help


  2. #2
    Join Date
    Jul 2017
    Posts
    726
    Quote Originally Posted by sassiekc View Post
    What is the name of your state (only U.S. law)? MO

    How much trouble am I in and will I go to prison? IRS? Should I just shoot myself now??
    What you should do is discuss this with your lawyer. As to the IRS, gambling winnings are income, but you may also deduct from that your losses up to the amount you won. So if your losses were at least as much as you won there would be no taxable income from this. If there is income to report on prior returns you will want to amend the returns to report the net income from the gambling for each year. As for criminal charges for online gambling, unless you were heavily involved in it I donít see that as very likely. In short, this isnít something Iíd panic about.


  3. #3
    Join Date
    Aug 2015
    Location
    Phoenix, AZ
    Posts
    4,239
    I suggest that you immediately file amended tax returns for the year or years in which you had gambling winnnings.

    I don't think you have to show the source, only the amounts, so you might not have to be concerned about the legality.

    You can deduct losses against the winnings. You apparently have documentation if you are ever asked.

    See the following from the IRS website:

    https://www.irs.gov/taxtopics/tc400/tc419

    If your state has an income tax you will also have to file amended state tax returns.

    Understand that you'll have additional tax to pay unless your losses equal or exceed your winnings. If there is additional tax, you may also have some penalties.


    Last edited by adjusterjack; 10-08-2017 at 12:45 PM.
  4. #4
    Join Date
    Feb 2007
    Posts
    21,211
    Note, that you had that income the year you won it, not the year you cashed out. You can deduct any losses against that only in the same year (you can't claim a loss over the amount you won nor can you carry it over).

    Note, now that you have the winnings in an account (whether they are a net loss or gain) it's an asset and part of your bankruptcy (if you go that route) and you must declare that (even if they are still in an account waiting to be cashed out).


  5. #5
    Join Date
    Oct 2017
    Posts
    6
    Thank you for all the quick replies!

    I know I will have to amend my tax returns and add as income, I did lose a lot more than won. As far as the IRS not knowing where the gambling was done (as the online casino did't provide a W2-G) but my bank statements show international deposits and incoming wire transfers...so they will know....so illegal there.

    Will we be able to continue with the bankruptcy and the stay once filed and do the amending at the same time?

    Will the court look at this as a means for dismissal since I was using income? Our bills were always paid on time for 30 years but I'm sure they will say I should have paid our debts instead of gambling...????

    We are not behind on any debts, we had good income up until I had to leave my job of 14 years due to illness. We are projecting forward knowing I will not have the extra income to live on once the monthly bills are paid.

    I'm just really scared!!

    thank all of you for your help!


  6. #6
    Join Date
    Jul 2017
    Posts
    726
    Quote Originally Posted by sassiekc View Post

    Will the court look at this as a means for dismissal since I was using income? Our bills were always paid on time for 30 years but I'm sure they will say I should have paid our debts instead of gambling...????
    You may amend the returns and do the bankruptcy too. If you lost more in gambling during the year than you won, you won’t owe any additional tax and won’t have any penalties either. In that situation it may not be worth even amending the returns. If you do owe additional tax, however, then the timing of filing the amended return and filing the bankruptcy petition may matter. In general income tax debts are only dischargeable in bankruptcy if your petition is filed more than three years after the return was filed AND more than 240 days after the tax was assessed. So for any additional tax owed on returns that were filed more than three years ago you would want to file the amended return and get it assessed at least 240 days before filing the bankruptcy petition in order to get that additional tax discharged, too. Of course your timing on filing may be influenced by things other than just any tax owed, but this is worth remembering if it is important to be able to discharge tax owed on older returns.

    The gambling won’t be cause to deny you a discharge. Plenty of people who have racked up debt due to gambling problems/addiction have filed bankruptcy and obtained a discharge of their debts. In your case, the gambling has not put you into debt that you could not afford while you had your job, so this is not even a case where the gambling is what drove your debt problems. Here, the problem is that you lost your job, like millions of other people who have had to file bankruptcy over the years.

    One of the keys to coming out of this financially better off, though, is to stop the gambling going forward. You can put your money to much better use, I’m sure, than losing it to a casino (whether a brick and mortar casino or an online casino). Online casinos are particularly bad as they are often overseas with little or no regulation and many of them have the games rigged so they are little better than a scam.

    Another important key is to develop a plan for savings and investment of part of your income once you get another job. You want to have funds available should something happen to drop your income, like another job loss, to help you through that dip in income. And you want to work on retirement savings, too. Too many Americans have very little in savings to help them through retirement and Social Security will not give you enough to sustain the lifestyle you are used to. Indeed, Social Security was never meant to be the sole source of income for retired persons and it is a struggle for a lot of people that have only Social Security to meet even basic needs.


  7. #7
    Join Date
    Oct 2017
    Posts
    6
    Wow, you are so making me feel a bit better already. Few more questions if you don't mind. We are now paying an installment agreement with the IRS for 2011 & 2012. Attorney says we can get these discharged due to years old.

    If we have to amend for 2015-2016 and there are addition taxes owed to IRS would we be able to setup another installment agreement to pay them? I wouldn't expect to have them discharged. We owe, we pay.

    Once this all comes out, will the courts-IRS want to take a deeper look into past years?

    Bottom line is our attorney told us last week to stop paying our creditors and we were to file this coming Thursday....what scares me is if we stop paying and then get dismissed, we will be in worse shape than before.

    You can better believe I am done gambling! Never realized how much was going out!

    thank you again for all your help!


  8. #8
    Join Date
    Aug 2015
    Location
    Phoenix, AZ
    Posts
    4,239
    If we have to amend for 2015-2016 and there are addition taxes owed to IRS would we be able to setup another installment agreement to pay them? I wouldn't expect to have them discharged. We owe, we pay.
    Look, stop fretting and speculating and just do the amended returns and get it over with. Once you figure out how much you owe, if anything, you then can address paying for it.

    Once this all comes out, will the courts-IRS want to take a deeper look into past years?
    Highly unlikely.

    I have friends in the same boat. Their taxes have been a mess since 2011 and are working on getting their bankruptcy filed. Each time they finish a current tax return it just gets added to their payment plan.


  9. #9
    Join Date
    Jul 2017
    Posts
    726
    Quote Originally Posted by sassiekc View Post
    Wow, you are so making me feel a bit better already. Few more questions if you don't mind. We are now paying an installment agreement with the IRS for 2011 & 2012. Attorney says we can get these discharged due to years old.

    If we have to amend for 2015-2016 and there are addition taxes owed to IRS would we be able to setup another installment agreement to pay them? I wouldn't expect to have them discharged. We owe, we pay.
    One of the provisions of your current installment agreement is that you are supposed to keep current with future taxes. The idea here is that the IRS wants the installment agreement to be part of a process that you puts you back on track for not owing anything more in the future. So if you owe on later years, that technically defaults your agreement. The IRS wonít be happy, but you likely can either add those new years to the installment agreement you already have or the IRS will review the installment agreement and may adjust the installment agreement amount and put all the years together. The IRS will want just one agreement to cover all the years that you owe.

    But once you file bankruptcy, the installment agreement you have now will end up terminated anyway because the automatic stay imposed by the bankruptcy court will mean that the IRS cannot collect anything more on that installment agreement while the stay is in effect unless the IRS seeks relief from the automatic stay, which wonít occur when the taxes are dischargeable. Nor can the IRS go after you to collect any of the taxes on the amended returns until the automatic stay ends either.

    What this means is that if you plan to file bankruptcy this week, that filing will effectively end your current installment agreement. Once the bankruptcy is over, you will very likely be able to get a new installment agreement for the tax obligations not discharged in the bankruptcy.

    Again, the timing of this stuff is something to discuss with your attorney. But in the end you will be able to work out payment arrangements for the taxes you owe. The IRS only resorts to levies and seizures as a last resort to collect tax that is due.

    Finally, if as you say the gambling losses exceeded the winnings, then you have no income tax due for that and thus that wonít be an issue for you to worry much about.

    Quote Originally Posted by sassiekc View Post
    Once this all comes out, will the courts-IRS want to take a deeper look into past years?
    The IRS may only assess additional tax within 3 years of the due date of the return or 3 years from the date the return was actually filed, whichever is later unless you significantly underreported your income, committed fraud, or a few other more unusual circumstances apply. Note that the 3 year period is tolled while you are in bankruptcy, too. The point is that the IRS is limited in how far back it can go. Even for the years that are open, it is unlikely that your amended returns (should you need to file them) would prompt a wider review of your returns.

    Quote Originally Posted by sassiekc View Post
    Bottom line is our attorney told us last week to stop paying our creditors and we were to file this coming Thursday....what scares me is if we stop paying and then get dismissed, we will be in worse shape than before.
    Then make sure that you have a solid bankruptcy plan in place going in. What Chapter will you file, Chapter 7 or 13? Itís pretty hard to screw up most Chapter 7 bankruptcies such that the court dismisses the bankruptcy.


  10. #10
    Join Date
    Oct 2017
    Posts
    6
    Thank you so much! Sounds like it can all work out......except.....what are the chances I get prosecuted for gambling illegally online?

    We could have filed 7 but we feel guilty enough walking away from debt, so we want to at least pay what we can with a 13.

    I so appreciate the time and effort you have shown me! You are a good person!

    finger's crossed!!


+ Reply to Thread

Similar Threads

  1. Online Gambling
    By Mayres490 in forum Computers / Software & Internet Law
    Replies: 1
    Last Post: 07-07-2017, 06:03 PM
  2. Online Gambling in the US
    By Keyser SŲze in forum Other Crimes Ė Federal and State
    Replies: 1
    Last Post: 12-31-2007, 09:49 AM
  3. online gambling
    By gr2002 in forum Other Crimes Ė Federal and State
    Replies: 2
    Last Post: 08-25-2003, 03:35 PM
  4. Online gambling
    By sportsbook in forum Computers / Software & Internet Law
    Replies: 0
    Last Post: 07-27-2001, 07:18 PM
  5. Online Gambling
    By rushmore in forum Computers / Software & Internet Law
    Replies: 2
    Last Post: 07-22-2001, 12:24 AM

Tags for this Thread

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •  

© Since 1995 Advice Company, All Rights Reserved

FreeAdvice® has been providing millions of consumers with outstanding advice, free, since 1995. While not a substitute for personal advice from a licensed professional, it is available AS IS, subject to our Disclaimer and Terms & Conditions Of Use.