2b. Re: 1099 vs W2-g Pet peeve
Posted by: "Harry Porter" harry.porter@verizon.net vp_wiz
Date: Sat Mar 17, 2007 9:59 am ((PDT))> It appears that which way to go is "company policy" and not subject
> to IRS rules; a previous post suggested that the IRS did have some
> rules about poker tournaments, but I think that is probably not the
> case.As I've indicated, I disagree with this expression of "way to go".
I'll suggest that the technically correct "way to go" is to file in
whatever manner that you feel you can best defend based upon your
knowledge of the subject (incl that gleaned from others), and/or your
preparer's.
I don't have any squabbles with your reply, which I have not posted here again -- but I do want to clarify that when I said, above "which wasy to go is company policy" - I was NOT referring to which way to go for ME, but which way the casinos choose to go in deciding what forms to give you or file on your behalf (W2G, 1099, or nothing at all) for poker tournaments; a previous post had suggested there were applicable IRS rules specifically for those tournaments, or at least had implied as much, and I don't believe that is the case.
Certainly "which way to go" for the tax filer should, as you say, be based on what suits their situation best - both with regard to the financial bottom line (reward), the risk of audit, with the individual's desire for reward and fear of risk being balanced in their own individual judgment.
That said, one thing I've always said is, the IRS never writes anyone to ask them if there are any deductions they forgot to take -- first you take them, and then they write to tell you if there are any they don't like 
Then you decide whether to pay up or contest it.
However, with regard to deciding what income to report, there is a lot less lattitude. Under-reporting income is not well-tolerated, and is where the costs start to incur. I agree with your statement that some proof of intent or knowing misconduct is probably needed to incur criminal charges, but that's a lot easier to provide, I think, than it would be to prove you took a deduction KNOWING that it was fraudulent (although even that certainly is the case for individuals who claim dependents that are totally fictitious, for example).
I have no idea whether there is any precedent out there for someone who tried to defend their return with the idea that they didn't know gambling income was not taxable unless it generated a W2G, for example -- certainly it IS taxable, but is it criminal not to report it -- but that's been discussed before and is off the subject here.
--BG
···
============