Sweden Goes After Poker Players…For Real

Posted on November 21, 2012 by Russ

The Swedish tax agency, Skatteverket, sent police into some poker players’ homes across Sweden on Tuesday. Under Swedish law gambling winnings within the European Economic Area are not taxed; however, gambling winnings from outside the European Economic Area are taxable. It appears that many poker players were not filing their income tax returns. While some online poker sites are not taxable, many others are. It also can get confusing with some sites: PokerStars.com is outside of the EEA while PokerStars.eu is within the EEA. PokerStars.eu wasn’t formed until 2012, so many Swedish players playing on PokerStars likely owe back taxes.

This should not have been a surprise to any Swedish players. Back in 2008 I reported on Skatteverket’s use of “spiders” to find poker players. Governments move very slowly, so the fact that it took four years for results is not surprising.

Skatteverket sent a letter to poker players; a copy of it was published in Swedish in Poker Magazine. Players were given until December 10th to respond with documentation for 2008 – 2011.

Hat Tip: Pokerfuse

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IRS Announces 2013 Standard Mileage Rates

Posted on November 21, 2012 by Russ

This morning the IRS announced the 2013 standard mileage rates. The rates are up one cent per mile from 2012 (except for charitable mileage, which is set by a statute). The new mileage rates are:

$0.565 per mile for business miles driven;
$0.24 per mile for medical or moving purposes; and
$0.14 per mile for miles driven in service of charitable organizations.

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Squeezy and Illinois

Posted on November 19, 2012 by Russ

Sometimes you can’t make this stuff up. The video (below) is a real video from Governor Quinn of Illinois:

Governor Quinn gives an excellent history of pensions but I notice there’s something missing from the video: solutions. Perhaps it’s because Illinois legislators and Governor Quinn promised that the 66% tax increase of 2011 would solve the problem. It didn’t. Illinois had $8 billion of unpaid bills when the tax increase was passed; there are $8 billion of unpaid bills today. Pensions ate up the tax increase.

There’s an editorial in the Chicago Tribune that notes that some Illinois legislators want to borrow money to pay for pensions. That’s a great solution: Let’s eliminate one debt problem by substituting another debt problem!

There is only one solution: Fundamental reform of the pension system. It’s going to be politically ugly: Democrats’ major interest group, public employee unions, will not like the results (pensions will be cut; that’s the only way out of the problem). Governor Quinn likens pensions to promises, and that they can’t be changed. Here’s a helpful hint to Illinois politicians: The taxpayers and companies that are resident in your state can leave to a far more friendly tax location. Sure, your income taxes aren’t that high (yet), but you’re sure heading in the wrong direction. If I were an executive with an Illinois-based business, I would be looking at other states. As I noted yesterday, moving a business is disruptive. Unfortunately, if you’re on a ship that’s struck an iceberg it’s time to head to the lifeboats. Illinois struck an iceberg called pensions. There’s still time to fix the hole but it’s now a more than $90 billion problem.

Chicago is a great city, and Illinois was a great place for my childhood. However, there are fifty states in the United States and Illinois appears to be following California into a cycle that will cause businesses that can leave to leave and for taxpayers to be caught in a cycle of ever-increasing taxes.

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Phoenix Woos California Businesses

Posted on November 18, 2012 by Russ

“For every action, there is an equal and opposite reaction.” That’s Sir Isaac Newton’s Third Law of Motion, something I learned in physics years ago. It’s also true about what happens when taxes increase. Options that businesses would rather not look at become things businesses start considering.

For years I’ve noted that as California increases taxes, businesses start looking at moving to Las Vegas, Denver, and Phoenix. Shock of shocks, with Proposition 30 passing in California, the Greater Phoenix Economic Council decided that now is a good time to actively pursue California businesses. Yes, Phoenix’s summer climate is brutal (just like Las Vegas), but there’s a good workforce, low taxes and regulations, and plenty of housing.

A hint to California: As you continue making the state more and more hostile to businesses, businesses are forced to react. No business wants to move (it’s expensive and disruptive), but like my business that moved last year, eventually the desert wastes of Las Vegas or Phoenix start looking really attractive.

Posted in Arizona, California | 1 Comment

I’m Glad I Didn’t Say Which Christmas

Posted on November 14, 2012 by Russ

Back at the end of July came news that the US Department of Justice had settled with PokerStars and Full Tilt Poker on civil claims, and that players would be paid back. I wrote,

When will players be repaid? If you are outside of the US (and this is determined by your residence on June 29, 2011), you likely will be repaid no later than November. If you are in the US, this remains unclear, but I’d expect you to be repaid before Christmas.

I was wrong.

I was expecting the DOJ to treat this differently from a ‘standard’ remission case, given that all the money was on hand and there was a complete list of who needed to be repaid. I was wrong: The bureaucratic procedure will be followed.

Yesterday, John Pappas, Executive Director of the Poker Players Alliance met with officials from the DOJ. A full statement from Mr. Pappas regarding the meeting is available. The gist of it is that is:

Our third objective was to get a sense of timing. Unfortunately, completion of a refund claims process is a long way away.

I now expect this to take many more months, perhaps more than one year for players to be repaid. Unfortunately, a realistic time-frame is 12 to 18 months from now. It could take less time if all the stars align, but it could take longer if something goes wrong. Poker players will be dealing with “bureaucracy at work.”

While what’s below isn’t the process, from a poker player’s perspective it might as well be. It’s definitely an example of how bureaucracy functions most of the time.

“The 2011 Purdue University Rube Goldberg machine shattered the world record for most steps ever successfully completed by such a machine. In 244 steps the ‘Time Machine’ traces the history of the world from Big Bang to the Apocalypse before accomplishing the assigned everyday task of watering a flower. The record has been sanctioned by the Guinness Book of World Records and the World Records Academy.”

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FTB Appeals Gillette Decision

Posted on November 14, 2012 by Russ

As expected, California’s Franchise Tax Board has appealed the Gillette decision to the California Supreme Court. (The FTB’s Tax Practitioner Liaison sent an email notifying tax professionals of the appeal.) The California Supreme Court does not have to take the case but is likely to. Most likely, the case would be heard in the Spring of next year with a decision sometime over the summer.

Posted in California | Tagged | 1 Comment

If It’s In Cash It Doesn’t Count, Right?

Posted on November 11, 2012 by Russ

Three owners of a charter bus company in San Jose, California apparently had the idea that if it’s in cash, it’s not income. As readers of this blog know, that’s definitely not the case. This likely won’t turn out well for a bus company.

Quality Assurance Travel provides charter bus service in the San Francisco Bay Area. Among the charters they run is one to the Chukchansi Gold Resort & Casino near Coarsegold (east of Fresno and Merced in the Sierra Nevada foothills). Quality Assurance advertises the trips on their website, even noting the low cost of $20.

What they don’t mention on the website is that the fare is payable only in cash. That is mentioned in the US Attorney’s press release, along with the accusation that the owners of the bus company neglected to include the cash on their tax returns but did manage to include the money paid by the casino (as checks) to the bus company.

The owners of the bus company, Fidencio Moreno, Arturo Moreno, and Elena Moreno, are accused of tax fraud and facing several years at ClubFed if found guilty of the charges. To answer the question I posed with the headline of this story, cash income is just as taxable as checks or credit cards.

Posted in Tax Fraud | Tagged | 1 Comment

California Raises Taxes; Will Businesses Flee?

Posted on November 9, 2012 by Russ

Elections have consequences. California approved Proposition 30 last week, raising state income taxes “temporarily” by a minimum of 1% (from 9.3% to 10.3%); the top rate is now 13.3%. That is not a typo: If you make $1 million or more, you will be in the 13.3% marginal tax bracket. That likely will cause business owners to look at states where the climate isn’t as nice but the taxes are nicer.

(This may not be the only tax increase for businesses. There is a chance that Democrats will have a “supermajority” in the California legislature. Currently, it takes a two-thirds vote to pass tax increases; Republicans have opposed all tax increases. If Democrats obtain the supermajority, expect to see plenty of new taxes. I’d guess on a repeal of Proposition 13 for commercial property, a broadening of sales tax to include services, and an oil severance tax just as starters. I probably should remind Democrats of Alan Greenspan’s line, “Whatever you tax, you get less of.” But I digress….)

Take-Two Interactive Software will move 150 jobs when their QA studio moves from Northridge (in the San Fernando Valley area of Los Angeles) to Las Vegas. The City of Las Vegas and Nevada threw in $1.2 million in incentives; I’m sure that might have helped the cause along. But consider that Take Two won’t have to pay California state income tax and Los Angeles business tax anymore, and that makes the saving seven greater.

As many of you know, I executed my own “Escape from California” last year. I haven’t regretted it for a minute. I expect many other business owners to follow in my footsteps.

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It’s Election Day

Posted on November 6, 2012 by Russ

No matter if you support Republican Mitt Romney, Democrat Barack Obama, or someone else, today is election day. Make sure your voice is heard and vote.

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Bad News for German Poker Players

Posted on November 2, 2012 by Russ

Is poker a game of skill or chance? Personally, I believe it is a skill game where there is an element of chance. For German poker players, this is more than an interesting debate; it’s a vital question that impacts their taxes.

German tax law is such that games of chance (e.g. roulette) are not taxed for players. If you are German and hit a lucky jackpot on a slot machine, you won’t owe German income tax. However, games of skill for professionals are taxed.

As I first reported on back in August, a German court was considering this. The decision came down on Wednesday in Cologne. Eduard Scharf has been an airline pilot with Lufthansa by profession. When he’s had time off, he’s become a pretty good poker player; he has won over $1.2 million, including two World Series of Poker bracelets. Mr. Scharf apparently didn’t include his poker winnings on his tax return. The German Tax Office stated he was a professional and needed to include the income on his return.

The 12th Senate Finance Court of Cologne agreed with the tax office that skill predominates over luck. That’s what most poker players believe, but it’s bad news for German players. While it appears that Mr. Scharf is appealing to the Federal Finance Court in Munich, the days of tax-free play in Germany appear numbered. The German articles I read note that other tax cases are pending.

Summary of Story in English
Newspaper Reports in German: Spiegel Online, WDR

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