In less than one week, many poker players will finally receive their balances that they had at FullTiltPoker when that online poker site was shut down as a result of “Black Friday.” According to the Garden City Group (the claims administrator hired by the US Department of Justice to handle the remission claims), the first payments will be made by the end of February. So how much of the money you receive will be income? Will 1099s be issued?
The answer to the first question–how much of the remission payment you receive is taxable–is “it depends.” This will depend on each individual’s facts and circumstances. I did an interview with CardPlayer last year and talked about some hypothetical cases. Some of this will be a repeat of that article while some of this will be new.
For most individuals, the amount of money you will pay tax on from the remission payments is the amount you receive less the amount you deposited less any money you receive that you’ve already paid taxes on. Let’s take three individuals, all of whom receive their full balances next week.
1. Joe receives $1,700. He earned it all in 2011, starting with a freeroll. He’ll have $1,700 of income that will need to be reported on his 2014 tax return.
2. Russ receives $1,700. He earned it all prior to 2011, and has already paid tax on all the money he’s receiving. He will not owe any tax on the remission.
3. John receives $1,700. He had a balance on January 1, 2011 of $500 (he paid taxes on this in previous years). He withdrew $500 during 2011 (and paid taxes on that). He’ll owe 2014 tax on the $1,200 he receives that he hasn’t paid tax on.
Those are all relatively simple scenarios. I can imagine far more complex ones; indeed, I spoke with someone today who has such a scenario. There are people with disputed balances, “Red Pros,” affiliates and others who still don’t know what they’ll receive. Anyone who doesn’t have a simple, straightforward scenario should consider speaking with a competent tax professional regarding their remission payments.
The other major question is whether or not GCG will issue Form 1099-MISCs to recipients. We don’t know the answer to this, and we likely won’t know until early February 2015. GCG hasn’t said they would (nor have they said they wouldn’t); they’ve been silent on this issue. It may be they simply don’t know. If 1099s will be issued, the deadline for mailing them out will be January 31, 2015.
The problem with issuing 1099s is that for most individuals the amount of money being received will not all be income. Almost everyone deposited something on FullTiltPoker; the return of those deposits is clearly not taxable. I could speculate on whether 1099s will be issued, but it would be just that: speculation. Until GCG makes a pronouncement or we’re one year from today (when 1099s would have been received), we just don’t know. My hope is that 1099s will not be issued because almost every one of them would be wrong. If there is official guidance on this from GCG I’ll update this post with that information.
So we are definitely nearing the end of the FTP remission process. That is definitely good news.