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Tax fraud using scratch cards in the USA

Published: Friday, March 9, 2018

Our US friends from overseas have found a creative way to avoid paying taxes. This was in part due to the strange law allowing to account unsuccessful scratch cards in the tax returns. Soon, black market appeared, specialising in the resale of used scratch cards.

Players in the United States have come up with a way to cover their lottery spendings with used, non-winning scratch cards. Cards worth $ 1,000 can cover the tax of lottery winnings of up to $ 1,000. They use this as a way of securing for unpaid taxes in the case of an inspection. Sale of old scratch cards was popular on auction sites on the internet, where for a penny you can buy a lot of scratch cards without any winnings.

For example, some of these creative "traders" have sold scratch cards worth $ 10,000 with a 500% profit. The advertisement spoke directly about tax protection. Sellers argued that theoretically, it is not illegal - in this way you can show your losses and avoid tax. The case is quite difficult and tax departments have already become interested in this procedure, claiming that you can not do so and these people will have problems in the future.

The first such a tax scam was noted as soon as in 1985. Phillip Cappell won $ 2.7 million in the Massachusetts lottery. His accountant as well as himself showed greed and decided in their tax testimony to show a $ 65,000 loss for the passing fiscal year. A pair of smartsters needed to show a loss somehow and they managed to borrow a lot of scratch cards worth $ 200,000. It was such a number of scratch and play cards that they had to be packed onto a truck with the help of several people. Of course, the gentlemen were sentenced for a prison.

The state tax rule, in this case, says that if you win $ 10,000 and lose 1000, then you pay the tax on these $ 9,000 dollars. People are often confused as they should interpret it and this leads to abuse. The idea is to get more non-winning coupons to show your loss and thus reduce the lottery tax to be paid. However, how to explain to the tax collector that you own a box of scratch cards from all over from the whole of the United States? As you can see there are ways to find such dishonest players.

Lotteries in the US claims that these abuses are not often because people are afraid of control, and that they will not be able to confirm the property of coupons, and what is more important - to remember about archiving them after buying. The problem yet still remains, because, as informs, after sending a request to the office in this case, a reference to the website was received, which does not explain fully this issue.