Individual from New Jersey Confesses to Counterfeiting Casino Tax Documents, Illegally Acquired $1.3 Million in Tax Refunds with IRS Assistance
In a case that highlights the importance of truthfulness and accuracy in tax filings, Michael Watsey, a resident of South River, has pleaded guilty to filing false tax claims for gambling winnings from 2014 to 2016.
Watsey orchestrated a scheme that involved the preparation of false tax returns claiming a total of $3,936,000 in federal tax refunds stemming from casino withholdings. According to US Attorney Craig Carpenito, the false and fraudulent Form W-2Gs were part of the scheme. These forms, which casinos are required to issue for significant gambling winnings, were submitted to the IRS, bearing the names of real casinos in Atlantic City but containing false and unauthentic information.
The IRS paid Watsey and unnamed conspirators $1,292,720 based on these falsified returns. It was only after the federal agency questioned the returns that the false documents were submitted.
The consequences for such actions can be severe. Criminal charges, including up to 10 years in prison and a $250,000 fine, are possible. Additionally, civil penalties and accuracy-related penalties may apply. The IRS can pursue unpaid taxes, interest, and penalties even many years after the return was filed if fraud or intent to evade tax is involved.
In the United States, casinos must withhold 24% of certain gambling winnings for federal tax purposes. This withholding applies when the winnings exceed a specified threshold, such as $5,000 for slot machines or bingo, or when winnings are from poker tournaments exceeding $5,000. The withheld amount is reported on Form W-2G, which the gambler receives and uses to report income on their tax return.
However, the IRS does not allow offsetting losses against the reported gross income unless properly documented on a tax return. Failure to report the winnings can lead to IRS notices and adjustments, increasing tax liability along with possible penalties.
Casual gamblers can only claim gambling losses as itemized deductions on Schedule A up to the amount of their winnings. Professional gamblers who file Schedule C can include their gambling losses in the profit or loss from their business.
Sentencing for Watsey is scheduled for April 7. His case serves as a reminder that honesty and accuracy are crucial when dealing with tax matters.
[1] IRS.gov: Filing False Returns [2] Kiplinger.com: Gambling Winnings and Taxes [3] IRS.gov: Penalties for Filing a False Return [4] IRS.gov: Criminal Investigation [5] IRS.gov: Form W-2G and Gambling Winnings
- Michael Watsey's case, involving the fabrication of casino-related financial documents from 2014 to 2016, has been classified under 'crime-and-justice' section of general-news, highlighting the severe consequences of falsifying tax filings, particularly in casino-games.
- The IRS has emphasized that honesty and accuracy in reporting gambling winnings, including the submission of authentic Form W-2Gs, is crucial to avoid criminal charges and penalties, as exemplified in the ongoing case of Michael Watsey.
