Do You Have An Online Gambling Account?

If so, you should be aware that each United States person who has a financial interest in or signature or other authority over any foreign financial accounts, including bank, securities, or other types of financial accounts, in a foreign country, if the aggregate value of these financial accounts exceeds $10,000 at any time during the calendar year, must report that relationship to the U.S. government each calendar year.

This is done by electronically filing the FinCEN Form 114 (Report of Foreign Bank and Financial Accounts), commonly referred to as the FBAR, on or before June 30 of the succeeding year with the Department of the Treasury. Penalties for failing to comply can be draconian. For non-willful violations, civil penalties up to $10,000 may be imposed; the penalty for willful violations is the greater of $100,000 or 50% of the account’s balance at the time of the violation.

You should also be aware that many of the online gaming sites are actually operating from outside of the U.S., and if, at any time during the year, your combined account balances from all of those accounts exceeds the $10,000 reporting threshold, you will have an FBAR reporting requirement.

In a recent case, the court upheld the IRS’s imposed penalties for not filing FBARs for an online gaming account with an out-of-the-country online casino (Hom District Court CA 6/4/2014). In that case, the taxpayer gambled online and had accounts worth more than $10,000 during the years in question with two online poker companies, PokerStars and PartyPoker. He used a third company, an online financial organization, FirePay.com, to facilitate the transferring of money to and from his two poker accounts; he also had more than $10,000 in his FirePay account during one of the years in question.

The taxpayer was assessed with 31 penalties for his non-willful failure to submit FBARs, regarding his interest in his FirePay, PokerStars, and PartyPoker accounts.

If you or someone you know has an online gambling account and you need help in determining whether you have a filing requirement and/or you require help with filing the FBAR, please give this office a call.

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