1099s are not easy to fake nowadays. Two copies get sent to the IRS and they have to match. The IRS now requires all but the smallest payers to electronically upload the Copy A (payer copy) in bulk using a secret password registered at fire.irs.gov with a verified identity. The electronic filings then get cross checked with the info on the Copy C from the payee.
If somebody files a Copy C with their Form 1040 with no corresponding Copy A the IRS computers will flag it. If it is a one time exception and/or relatively small amounts the IRS will likely let it slide (you are over paying your taxes). But if it is chronic and/or big they will notify the authorities to investigate it further.
What I think was actually happening was that the casinos were filing real 1099 Copy As for his $5 million in winnings, but his offsetting losses (also in the millions) were also reported on his Form 1040. Losses are reported basically on the honor system, and he used this loophole to launder the 1099 money.
"What I think was actually happening was that the casinos were filing real 1099 Copy As for his $5 million in winnings, but his offsetting losses (also in the millions) were also reported on his Form 1040. Losses are reported basically on the honor system, and he used this loophole to launder the 1099 money. "
It's not just the honor system if you're playing the slot or video poker machines. The casinos keep computerized records of your play if you use your player's card while at the machines. They will know to the penny how much you wagered, how much you won and how much you lost and will provide you a printout of your wins and loses for your tax filings if you ask for it.
It is more of an honor system at the table games and in the poker room but even there (for any serious amounts of cash) the casino has a very good idea of how much is being won and lost. They are under constant scrutiny by the feds just because they are one the few remaining places that small-timers can launder money.
Note: the big boys just ask their bank to provide the laundering service for them and the banks are more than happy to comply.
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