4b. Diary vs. win/loss statements: which should IRS consider more relia
Date: Mon Apr 14, 2008 1:38 pm ((PDT))But we must ponder why IRS finds gamblers' diaries "more reliable" than
casino win/loss statements.The gambler's diary has all of the same reliability problems as win/loss
statements, and more.The gambler's diary is kept by the gambler, someone with a vested
interest in minimizing reported winnings, while the win/loss statement
is kept by the casino, who is presumably more financially interested in
conforming to IRS regulations and not losing their license.If "uncarded play" is a problem, why isn't "undiaried play" a problem?
Players have an incentive to card their play (comps/cashback). Players
have an incentive not to self-document their winning sessions and to
self-document their losing sessions (lower taxes).Which is more likely to be accurate, the pit critter's "guess" or the
player's "guess", given the desire of the player to minimize her taxes?Is it not just as possible that a gambler's diary might "lose large
chunks of play" in bookkeeping mistakes, since the casino uses a
computer to track slot/VP action, and the player is forbidden to have a
computer while playing?The only advantage to the player's diary is that it's submitted under
penalty of perjury, and the casino's win/loss statements aren't.I don't see a diary as inherently reliable; in fact, I see more reasons
for IRS to consider a win/loss statement at least as, if not more,
reliable. But they still insist on the diary.
Same thing goes for mileage deductions for driving - the driver's log is considered essential record-keeping. In both cases, how else would one provide documentation of one's activities - at some point, the IRS has to say to the gambler / driver - we need you to keep your records for us, because we have no way to follow you around and determine how much you won / lost / drove. But - if they decide that your deductions are unreasonable, and that they don't believe your documentation, I'm not sure how the disagreement is resolved (probably you need to provide some additional evidence that your diary / log is consistent with that other evidence), and I'm not sure who the burden of proof is on - but I'd guess the taxpayer, that's usually how life works.
I'm sure there are many other examples of taxpayer-reported data -- tips come to mind, although there are some overriding assumptions made by the IRS, and I can probably think of others, given time.
Now, having said that, I think "penalty of perjury" may not be the applicable charge - it may be tax fraud, if the IRS can prove that the taxpayer was intentionally trying to avoid taxes, and I think the penalty for tax fraud can be more severe than for perjury. But I'm not an attorney, so consult one for advice on this from someone educated and licensed to provide such advice.
But keep in mind that tax evasion was easier to prove against Al Capone than murder.
A friend of mine suggested that tax fraud is difficult to prove (but not impossible), and that the best thing to do if you're "caught" not complying with the law in these cases (and from many posts on this board, it's clear that there are still gamblers who intend not to report any gambling activity if they don't have W2Gs to force the reporting) - is to say "I'm sorry, I didn't know, what do I have to do to make it right?" and then pay the tax, interest, and penalty, and hope that they're satisfied. I would think, unless for some reason they want to make an example of you, that this will usually do it.
Certainly, the less the amount, the less likely the IRS is to pursue criminal charges - but I don't think they are "amount-driven" for trying to get taxes from people. At the same time, they have guidelines which tell them how much effort is worthwhile for the collection of how much tax - but they can deviate from those guidelines.
--BG
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