IRS Data Mining Could Snare Unwary Poker Players

Poker players have always faced problems related to paying tax on their winnings and a recent report on the IRS using data-mining algorithms to search social media could see them come under increased scrutiny by tax authorities.

A recent report by a business law professor at Washington State University claims that ‘current IRS practices, mostly unknown to the general public are violating fair information practices’ adding that ‘lack of transparency and accountability not only violates federal law… but may also result in discrimination.’

Kimberly Houser and Debra Sanders’ report doesn’t mention poker anywhere, but when you consider the sums of money involved in the game and the high-profile social media profiles of many players, it’s not a stretch to imagine that the analytics used by the IRS could easily snare an unwary pro or two.

Houser claims that ‘The IRS has a long history of using audits for political purposes… one of the more recent examples is when the IRS was accused of targeting conservative organizations affiliated with the tea party’. Replace that with ‘poker players affiliated with poker site X’, for example and…well, you get the idea.

The possibility was raised on the 2+2 forum, linking the WSU article and wondering how it might affect poker players. We only need to look at last week’s news to see what the results might be for anyone who isn’t declaring their full winnings to the IRS.

Spanish pro Dragan Kostic has just had his appeal against an 18-month jail term for tax evasion refused – Kostic being one of those who came under investigation back in 2012 when Spanish tax authorities started looking at HendonMob.com to check whether tournament results and declared winnings matched up or not.

 It transpired that he had failed to declare the €532,000 ($766,438) payday he received for finishing 2nd in the 2011 EPT Barcelona Main Event.

Houser and Sanders’ report, entitled ‘The Use of Big Data Analytics by the IRS: Efficient Solutions or the End of Privacy as We Know It?’ states in its introduction:

"The IRS is now engaging in data mining of public and commercial data pools (including social media) and creating highly detailed profiles of taxpayers upon which to run data analytics."

Of course, we might expect poker players who have decided to dodge their tax requirements to be clever enough to keep schtum about it in, public at least.

 As ‘michelle227’ posted:

"Don't be stupid on social media and there is no issue... same thing as the idiots that post about their vacation while ON vacation and then are surprised that someone broke into their house while ON said vacation..."

Fair point, of course, but the very fact that the IRS seemingly have such capabilities must be at least a little concerning. Some well-known poker players have fallen foul of the IRS in the past, including Michael ‘The Grinder’ Mizrachi.

Mizrachi saw both his home and a rental property lost to foreclosure, the IRS also hitting him with ‘a tax lien for nearly $340,000’ according to Accountingweb.com, the famous poker pro telling reporters that his accountants were to blame, stating: “They were doing a bad job,” although he added:

“Obviously, I’m a better poker player than a businessman.”

So, for poker players the line to take is pretty clear – cough up or shut up.