Posted on: December 14, 2020, 12:03h.
Last updated on: December 13, 2020, 03:06h.
A Connecticut poker player and small business owner has pleaded guilty to one count of tax evasion, a charge that carries a maximum imprisonment of up to five years.
Guy Smith, 62, of Shelton, waived his right to be indicted last week, and instead admitted his guilt of avoiding taxes on his gambling and business income. The United States Attorney’s Office for the District of Connecticut says Smith owns a commercial interior constriction business called Centerline Interiors LLC, but made considerable income playing in poker tournaments across the country.
Even though the IRS notified Smith on multiple occasions that he was required to report all of his gambling income on his federal tax returns, Smith concealed his gambling income from his tax preparer and paid no income taxes on more than $1 million in gambling winnings,” a Department of Justice release explained.
Federal officials say Smith failed to pay $821,415 in federal income taxes for the 2012 through 2016 tax years.
Smith has been released on a $50,000 bond pending sentencing, which is scheduled for March 4, 2021. Smith has agreed to cooperate with the IRS and pay all outstanding taxes, plus interest and penalties.
Taxes on Gambling
According to The Hendon Mob, the world’s largest online live poker tracking database, Guy Smith’s best cash came in July of 2016 at Foxwoods.
Smith placed first in the $1,000+$100 No Limit Hold’em Championship Summer Kickoff, besting 216 other players. His victory won him $51,149. The very next month, Smith experienced his second-best cashing, a 5th place finish at the $1,100 No Limit Hold’em Re-Entry at the Seminole Hard Rock Poker Open in Hollywood, Florida. That tournament won him $37,800.
Winnings from gambling are considered taxable income, and must be reported. The IRS says Smith failed to do so.
“Whether it’s $5 or $5,000, from an office pool or from a casino, all gambling winnings must be reported on your tax return as ‘other income’ on Schedule 1 (Form 1040),” explains personal finance outlet Kiplinger.
Smith should have been well aware of his tax liabilities for his poker successes. Casinos issue IRS Form W-2G to poker players who win more than $5,000 in a tournament. Gamblers receive the tax form either on the spot or through the mail.
Tax professionals say there are certain red flags that make one tax filing likelier to receive an audit than others.
If you receive a W-2G form along with your gambling winnings, don’t forget that the IRS is getting a copy of the form, too. So, the IRS is expecting you to claim those winnings on your tax return. If you don’t, the tax man isn’t going to be happy about it,” Kiplinger states.
Kiplinger adds that certain gambling losses can be listed on Schedule A up to the amount of one’s winnings. However, if you claim more gambling losses than winnings, “It’s a slam dunk for IRS auditors.”