A poker player from Connecticut is facing five years in prison for failing to declare more than $1million in poker earnings to the US tax authorities.
Guy Smith not paying income taxes on more than $1 million
62-year old Guy Smith, a building contractor who has seven 5-figure poker scores to his name, was repeatedly warned by the IRS (Internal Revenue Service) that he had to declare his poker earnings.
Despite this, Guy Smith ‘concealed his gambling income from his tax preparer and paid no income taxes on more than $1 million in gambling winnings’, according to court reports.
Joleen Simpson, Acting Special Agent in Charge of IRS Criminal Investigation in New England, announced this week that Guy Smith had ‘waived his right to be indicted and pleaded guilty today to one count of tax evasion.’
Smith’s business also failed to report $482,000 in income. While his poker earnings are reported to have been $1million, although his Hendon Mob listing shows only $236,580 in winnings.
That includes a career-best $51,149 for winning the 2016 Summer Kickoff event at the 2016 PPC at Foxwoods in Mashantucket, with a 5th spot a month later at the Seminole Hard Rock Poker Open.
That final table included several well-known pros, including Philip Hui and Aaron Massey, with Ruslan Dykshteyn taking the win.
Smith is scheduled to be sentenced by U.S. District Judge Michael P. Shea on March 4, 2021, and in the meantime has been released on a $50,000 bond. He has ‘agreed to cooperate with the IRS to pay all outstanding taxes, interest and penalties’, but could still face several years imprisonment.
Further cases
The poker world has seen many such cases over the years, with 2006 WSOP Main Event winner Jamie Gold apparently having to sell his gold bracelet to settle a tax bill.
“I got myself into an odd situation,” Gold told CardPlayer magazine back in 2013, adding: “The laws do not exist for cash games and taxes, but somehow they believe if you play at a high enough level, you should be taxed on your winnings and not on your losses. And not allowed to take your losses against it.”
EPT Barcelona Main Event 2011 runner-up Dragan Kostic received an 18-month jail sentence for failing to disclose his €532,000 ($753,000) payout. The 55-year old Macedonian-born pro was also hit with a €400,000 penalty and ‘back tax bill’ of €230,000.
Different tax situations for poker players
Kostic appealed the verdict but that fell on deaf ears, the final ruling staying: “It seems the least peculiar that a professional player, who participates in world tournaments and who wins prizes of such caliber, does not worry about the subject of taxation, rather, he does ensure that he knows if there is an obligation or not to pay tax when that is the only profit and only income he has”.
The tax situation for poker players varies from country to country, but the Spanish laws are particularly harsh, and in 2016 caught out world-class chessplayer and poker aficionado Francisco Vallejo Pons.
Pons was hit with a €½million bill despite having at best broke even in 2011. The problem? A new law introduced in 2012 failed to be applied retroactively, leading the grandmaster psychologically crushed and suffering from ill-health.
Tax problems
“If you had the bad luck to play in 2011, your life may be shattered” Pons stated, revealing that in 2016: “I get a bill for more than 6 figures! More than half a million euros because you played poker and lost. It sounds like a macabre joke, but it’s not, and at that moment starts a snowball that’s crushing you.”
Not all tax hits on poker players are unwarranted of course. One particular case involved a British player who won £68,930 ($95,404) at the Grosvenor UK Poker Tour Manchester Main Event.
Adam Lulat had been convicted for his part in a £40m money laundering scam and VAT fraud. He was sentenced to 28 months imprisonment, but as he had no assets he was ordered to repay only a token of £1.
However, after the HMRC (The UK tax authorities) heard of his big cash, he was forced to hand it all over. Moreover, he das to put an extra £30k on top.
An international crime gang member must repay £70,000 years after his crime, after winning a poker tournament.https://t.co/toSyJbMLhn
— HMRC Press Office (@HMRCpressoffice) August 13, 2018
“Lulat thought he’d aced the tournament but we had the better hand in the end”, stated HMRC Assistant Director of Fraud Investigations, Debbie Porter.
Even more recently, as we reported here, Canadian tax authorities were investigating several players for tax-related issues, François Billard among them.
Billard’s lawyer explained: “The verification concerns the income from his poker game activities; the CRA is investigating whether the way the defendant operates his poker makes his earnings taxable.”
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