But with money laundering it seems to me that there’s a requirement that the purported source of legitimate funds can stand up to at least cursory scrutiny. If you’re working on the assumption that nobody will ever look closely at your finances, then you would not attempt to launder the money at all. You would certainly not introduce something to an IRS return that the IRS would not otherwise be aware of.
Do you even need to claim you won the money playing poker? My understanding is that the IRS wants you to pay so there’s a line in the tax return for “other income”.
We talking about money laundering here. The assumption here is obviously that you need to be able to explain the income in an audit. If you work on the assumption that you won’t be audited, you won’t report the income at all. It’s illegal income.
I don’t know that the only reason to launder money is to avoid an IRS audit - remember, Al Capone went to prison for tax evasion because he didn’t report his illegal income on his tax return. Had he reported it and paid tax on it, they couldn’t have gotten him on tax evasion - and apparently the reason they went that route was because they were having difficulty nailing him on his other crimes.
It seems to me that it was structured that way so that he could write off his actual expenses against the 1099 income.
Nope - at that time, he could have deducted those expenses even if he got a W2 subject to an income limitation. ( 2% of AGI , I think). And if they had used an accountable plan*, there would have been no pay to report on either a W2 or a 1099.The only way we could sort of file correctly was to file as if he had his own business and pay both halves of SS and Medicare - which means we had to pay the half his employer would have paid if it was correctly reported as wages. The IRS is very clear that amounts paid under non-accountable plans are to be reported as wages and that an employee doesn’t get a 1099 and a W2 from the same employer unless it’s some sort of situation where an employee is hired as a contractor to do a completely different job - like if the mail clerk has a DJ business on the side and gets hired for the after work hours holiday party.
- Which they finally did
I understand and totally agree with all of that. I was speculating on why they set things up so screwy. They could have thought that the 1099 was a way around the 2% limitation. Who know? It’s crazy.
That’s no mystery - it was absolutely done so the employer wouldn’t pay SS/Medicare taxes on that amount. The owner might have assumed that the salesmen would cheat on their taxes and end up paying nothing - but there were a couple of wives who worked for government agencies in high enough positions that they had to file financial disclosures every year. Although the finance people knew that wasn’t the right way to do it, boss wouldn’t change it until someone offered to bring in a friend who happened to be an IRS revenue agent to explain things to the boss.
Efficient money laundering… wasn’t there a story that some famous gangster (Bulger, maybe) bought the winning ticket of some multimillion payout lottery from the actual bettor? For a significant bump over what the guy would have gotten if he’d taken the one-time-payout from the lottery guys.
Of course, then HE had a big lump of money to somehow account for, but …
Haha, yes, the Boston Irish folk hero still lionized by the police here. As long as he kept “those people” out of the wrong neighborhoods, he was an ally.
Not on your 1040. For that, yes, you would just put it in as “other income.”
But if you get audited and asked where it came from, you should probably make sure you have your story straight.
You can even make it “legitimate”, if you have a few compatriots to whom you can give money for them to lose to you at the table.
It looks like I kicked off a debate about laundering money at the casino. I should have been clear that I’m not talking about saving on tax, but of showing that your income was ‘legitimate’.
Drug dealers, scammers, embezzlers and others with illicit gains are an obvious client for this tyoe of laundering, but if you were worried that your under-the-table income might have violated some laws and you’ll get in troubke if you declare it, this type of laundering would work.
I think that most of us get that, at least I do. I think we’re curious how the process would work and if that could be done year after year.
Yeah, I don’t know about long-term viability. The IRS might buy thatnyou got lucky in Vegas once or twice, but if you established that as a pattern I think you’d get caught. Also, the casinos get better every year at spotting scams.
This might work for a one-off event like a robbery or a hoard of cash from years of skimming a cash register. Save up all your illicit gains and don’t spend them, then do your big Vegas trip and ‘get lucky’, get receipts for the money, pay the tax, and then spend it to your heart’s content.
But most criminals are too greedy and atavistic to be willing to pay tax on illicit money, so they are more likely to just live beyond their reported means until someone gets supicious.
We’ve had a number of crooked people get caught skimming the city, and they almost always get caught because of their lifestyle. There was a worker whose job was to empty LRT ticket machines of their coinage. He was skimming a massive amount over many years: $2.4 million dollars. The idiot got caught when people started to wonder how a low level worker could afford a multi-million dollar home, a vacation home and an expensive car.
I think the point is the casino isn’t just going to give you a ‘receipt’ for what you cash out.
They are legally required to report your total cash transactions within a 24 hour period if it exceeds $10000. So if you buy $5000 in chips and cash out $5000 in chips the same day, both transactions are legally required to be reported since the sum is $10000. The fact that neither you nor the casino netted any money is immaterial. This is a federal requirement enacted because it’s clearly an issue with several large cash transactions occurring daily. So if you just walk up and buy $10k in chips, the casino reports that you handed over $10k in cash to the casino to begin with. Cashing it back out does not really help launder that cash.
Some people will attempt to structure their transactions to avoid this limit (doing multiple $3000 transactions, for example), which is also a legal no-no. To avoid getting involved in that, casinos will often report on cash transactions less than the $10000 limit so that they don’t run afoul if somebody tries to game the system. This can be relatively low depending on the casino.
Heck - banks already do this and will sometimes flag cash transactions as low as $1000 despite only being required to flag at $10k. That has personally happened to me at least twice on deposits in the last few years (rest assured, the cash was legitimate and there were no issues but some paperwork was involved).
But maybe you’re only trying to launder a few thousand in cash and have time to burn. That may still be an issue as casino staff are also legally required to report suspicious behavior, such as not gambling a lot despite buying a fair amount of chips. So if you come in, buy several thousands in chips, hardly gamble and look bored, and then cash out not long after, they can flag that (and are generally required to flag that) as suspicious behavior. And that would be investigated as a potential money laundering situation. Worse, for sums that low (say a few hundred only), they aren’t going to give you any sort of receipt. And if you insist on one, it looks pretty suspicious on its own. For a few thousand, they’re going to log the transaction and you’re definitely going to be on camera both ways (buying chips and cashing out).
In casinos it is very common to buy in at the table. Give the dealer $500, and it goes into the slot and you get your chips. There is no record of this. I’m sure if you tried to buy $10,000 at the table they’d send you to the cage and it would be recorded.
But the pattern for laundering would be to buy in at a table for a few hundred, play for 20 minutes, pick up your chips and head for a table in another pit. Along the way you pocket those chips and buy in with cash again at the next table. Repeat until younhave a few thousand in chips, then cash them in and ask for a receipt. Go to another casino and repeat.
I was playing a very high limit pocker game once, and a guy who went bust got on his phone and called someone to bring him money. He borrowed money from the other players (I lent him $2,000 in cash) until a private jet flew in a couple of hours later and a guy showed up with a briefcase full of money. The pit manager spread it all out on an empty table to count (it was tens of thousands of dollars), then gave the guy his chips. No questions asked. This was in a government casino in Canada. I got my money back and got out of the game, which I realized was way too rich for me.
A lot of pro poker players habitually have cash rolls on them of many thousands of dollars. It’s pretty hard to track all that across numerous games and casinos, plus private games, tournaments, etc. The government often just has to take the word of pro gamblers as to how much money they’ve won and lost in the previous year.
Yeah, I don’t think I’ve ever seen anyone buy chips at the cashier. And although it’s true that transactions structured to avoid the $10K limit must be reported , I have cashed in chips on more than one occasion ( not nearly $10K worth) , and no one has asked me so much as my name, much less for ID.
Although there are references to recipients having to file the form if a payer makes two or more cash transactions totaling $10K within a 24 hour period , I cant find anything on this page requiring a recipient to maintain records they ordinarily would not have created in order to capture multiple transactions adding up to $10K. So the casino apparently doesn’t have to keep records of every $500 or $1000 chip purchase/cash in , and I know I’ve cashed in $1000 from a slot machine at a ticket redemption machine. And if that sounds like it doesn’t make sense to you, think of it this way - if the casino has to get name/id, etc for every transaction over $X just in case you go over $10K in 24 hours, so would Macy’s. Because I could absolutely spend $10K in Macy’s in a day at different registers (since the registers are in each department, not a central location ) and they wouldn’t be connected to me unless Macy’s started asking for ID for every cash purchase.
I did this calculation 10 years ago when the max was $116k. Take you SS earnings average for the past 25(?) years. Your SS benefit was 90% of the first $9k, 28% of the next 50k, and 15% of the remainder. It was kind of like a reverse graduated income tax. The effect was that someone who’s average earnings were $35k received half the benefit of the person who kicked in the max at $116k. Earn 30% as much, but get 50% benefit. On top of that, the higher your income, the higher the percentage that was taxable, up to 85% was taxable. Ahh, socialism
LRT - is that “light rail ticket”?
When I worked at the grocery store, one morning they called an emergency meeting and my technician was the one from our department to go. They were told that one of the assistant managers had been caught skimming money out of the safe; they knew money was missing and installed a pinhole camera, and that’s how she was caught removing a 20 or two from wrapped bundles. They were able to prove that she had stolen at least $8,000 over a period of time.
This was especially distressing for another assistant manager, who thought this woman was one of her best friends but did not know that she had a serious cocaine habit, and this was one way she was hiding it from her husband and children. IIRC, she would not be sent to prison if she got treatment and made restitution in a certain period of time.
I heard later that at Christmastime, she had applied for a job at the Swiss Colony call center/boiler room, where she would have access to people’s credit card numbers. She did not get that job, and this was a place that would hire anyone who could fog a mirror.