With few rules or law enforcement to stop it, a cottage industry has popped up to help lottery winners avoid taxes, child support, and other debts, potentially costing the state and federal governments millions in lost revenue.
Enterprising merchants — risking charges of aiding tax evasion — are openly hawking losing lottery tickets on Craigslist and eBay to help winners offset the profits with phony gambling losses.
"If you need the losers to write off for taxes," read one ad, since removed, from Medford. "I have 2 boxes full of Mass. losing scratch tickets."
Other Craigslist advertisers will gladly buy your winning tickets at a discount and claim the prizes themselves — allowing real winners to potentially avoid paying taxes on the prizes as well as any court orders to garnish the payments for other debts. One poster, who listed his first name and phone number, offered to buy a $1,000 ticket for $750 and "pay the taxes" himself.
Such efforts all support a lottery-driven underground economy of sorts, one in which professional ticket cashers known as "Ten Percenters" will, for a fee, cash in winning tickets presumably so that the original owner can dodge taxes, child support payments, or other obligations. Since an investigation on suspected Ten Percenters was published last month, the extent of the practice has become more evident. (See Some lottery winning streaks have defied belief, Lottery Post, July 20, 2014.)
Critics say neither lawmakers nor agencies are doing nearly enough to discourage potential tax evasion, even though it directly reduces revenue to the state and federal governments.
"It's outrageous," said former inspector general Gregory Sullivan, who noted that state auditors first raised concerns about people cashing in large volumes of lottery tickets 15 years ago.
"Everyone knows what is going on, but nobody is doing anything about it," Sullivan added.
Now, that could be changing. The Massachusetts attorney general's office began looking into whether it could potentially prosecute Ten Percenters.
Clarance Jones, 76, of Lynn, has cashed in more than 1,700 winning tickets worth $600 or more since January 2013 alone. And Chelsea insurance broker Robert Brudnick and two of his children have cashed in 340 tickets in the past two years.
Lottery officials suspect Jones and the Brudnicks are cashing in other people's tickets because it is improbable they won that many tickets just by chance.
The attorney general's office is also looking at whether tougher laws are needed because it's generally legal to buy and sell lottery tickets unless prosecutors can prove that fraud or tax evasion is involved, something that can be difficult.
"The behavior of a few individuals cashing an unusually high number of lottery tickets raises many concerns," said Brad Puffer, a spokesman for Attorney General Martha Coakley. "It is also clear that we must look at whether additional legislative tools are needed to effectively combat this behavior and hold people accountable."
However, legislators have shown little interest in beefing up the statutes.
Lottery officials proposed a bill that would give them the ability to halt payments to people the Department of Revenue suspects may be Ten Percenters.
But the legislation appears unlikely to be approved this year, lottery spokesman Christian Teja said. The formal legislative session ended last month.
"It's just frankly a matter of indifference," state Auditor Suzanne Bump said, referring to legislators. "This issue has been kicking around for years."
Colleen McGonagle, a spokeswoman for the House Ways and Means Committee, said the committee is still reviewing the proposal.
The state could also try other tactics.
Sullivan, the former inspector general who is now research director at the Pioneer Institute think tank, said the state could pass laws or regulations limiting the number of tickets a single person could cash.
A lottery spokesman, however, said officials don't believe they have the authority to pass such a rule without legislation.
In addition, Bump said the state could launch more stings to try to catch suspected ticket cashers.
Lottery officials said they already do some checks. After a complaint from a customer, the lottery found that a clerk at the Richdale Food Shops in Randolph was telling customers their winning lottery tickets were worthless and then cashing them in herself.
In April, the lottery suspended the convenience store's license for a week and barred the worker from any further involvement with lottery sales. The store later fired the worker.
"Lottery sales agents are checked consistently," said Teja, the lottery spokesman.
The lottery also requires winners to go to lottery offices to claim any tickets worth $600 or more. And it holds back a portion of the money for taxes — 5 percent for state taxes on tickets worth $600 or more, plus an additional 25 percent for federal taxes on tickets worth $5,000 or more — which could deter some people from cashing in tickets.
But savvy ticket cashers could potentially get back some or all of that money by claiming that their winnings are offset by gambling losses. And losing tickets are easy to find to generate phony losses.
Many lottery players ditch losing scratch tickets at stores, though others sell them online.
"It seems too easy for a taxpayer to collect a bunch of losing tickets," said Kathleen DeLaney Thomas, an assistant law professor at the University of North Carolina, who specializes in tax law.
"The state/IRS should be auditing the people who are claiming a suspicious number of winning tickets in a year," she said.
Thomas said she thought the state and federal government could make it much harder for Ten Percenters to claim losing scratch tickets on their taxes, however, by requiring gamblers to keep receipts showing their purchases.
Thomas also said she thought the Craigslist ads peddling losing tickets as tax write-offs likely violate several federal statutes against tax evasion but noted "the IRS doesn't tend to bring criminal charges unless there's a lot of money at stake."
Federal prosecutors have also successfully targeted two Ten Percenters in the horse racing industry — including one in Massachusetts — for tax evasion and falsely signing forms claiming that they were the sole recipients of the prize winnings.
But officials couldn't recall any similar cases against lottery ticket cashers, perhaps because it can be hard to prove that someone is knowingly cashing in someone else's tickets to help them evade taxes — even though the lottery routinely sends reports of frequent winners to state and federal tax authorities.
In fact, lottery officials said there was nothing they could do to stop people from buying winning lottery tickets on Craigslist because it is legal to buy and sell used tickets — unless they can prove tax evasion or fraud is involved. (The ads have since expired or were removed after the authors were contacted.)
One man offering to buy winning tickets on Craigslist said he has cashed in three or four winning lottery tickets in the last few months to earn extra cash.
But he said he had no idea why people are selling him the tickets at a discount instead of cashing them in themselves.
"I don't even ask them the reason," said the man, who would only talk on the condition that he not be named. "It's not my business."
The man said he has a full-time job at a diner and wouldn't jeopardize his family by doing anything illegal.
Nor would be knowingly help someone avoid child support. But he acknowledged he would never know because he doesn't ask.
"The less I know, the better I feel," he said.
What's wrong with these people?.
I maintain a record of all my ticket purchases and losses because I thought it would be necessary to have if I ever won enough to claim loses equal to my wins. It sounds like I been wasting my time because such audits are never made if they only involve a few thousand dollars per individual because it would cost more money than they would collect.
When you tax people to death this happens. It's a form of civil disobedience. I haven't done it. Yet.
Don't be silly. Paying lots of taxes is patriotic, right?
God D----IT!------MUST THE GOVERNMENT TRY TO BE THAT NOSY AND BLEED EVERYONE?
This story makes no sense....the darn government don't care about homelessness and poverty, but they are concerned with someone trying to get some money for themselves that they wouldn't otherwise be able to get any other way. Anytime someone comes up with a creative way to make a dollar, like people cashing lottery tickets for someone else, the stinkin' government always has to stick its smelly behind where it doesn't belong. They keep inventing new ways to criminalize people for things that make little or no difference to the rest of society. Man, just give people a break and leave them alone. I wish we didn't have a "Big Brother"...this is the end product of people wanting a government to regulate everything and "keep everyone safe".
Now with me, I have unpaid student loan debts and if I knew someone I could trust, I would gladly sell them my winning lottery tickets if the amounts ranged from $5,000 to $100,000. Anything over $100,000 I'm not concerned with as I will have a bit of money left over after taxes and garnishments. If the winning amount is say $5-$10,000 I will definitely sell the ticket so that I can continue receiving food stamps, as I'm unemployed right now. No use in taking a winning ticket to the lottery and having the amount garnished and having my food stamps being cut off and starving as a result. Lottery winnings will automatically cut food stamps. No money and no food would really suck. I'd rather take it to a trustworthy friend, he/she cashes it, saves me from filing a tax return and reporting the payment to the food stamp office. Our government expects us to be honest and have integrity, but they don't show any honesty and integrity towards the people.
As the government tends to get bigger and bigger, so will the underground economy. Underground economies are the product of big, tyrannical, unrepenting and controlling governments.
IN ALL: BIG GOVERNMENT STAY OUT OF MY BUSINESS!
What is the big deal? A ticket is worthless until it has a bearer. If a person wants to sell their ticket, they should be able to do that.
I don't think there's anything wrong with selling your winning lottery ticket to someone. But if you do, you are supposed to pay taxes on the money you made from the sale. Even if it is a private sale to someone.
If you don't like that concept of paying taxes when you privately sell your lottery ticket, then perhaps you are in agreement that HIGH TAXES ARE NO GOOD FOR ANYONE. All that money the government gives away "for free" to people has to come from somewhere. It comes from TAXES. And if you try to avoid paying taxes, you are subject to jail time.
It's always easy to say "tax the rich" when you're not one of the people getting socked with the outrageous tax bills. But then when you win the lottery, don't complain when you are taxed like a rich person. Or, just join the people who say that high taxes are bad for ANYONE to pay.
Any system that rips the Government or State off has my vote. It's just wrong how badly they get to waste our money. I will give our Governor credit for asking why they bought new Highway equipment when the old stuff is still good.
From the OP:
"If you need the losers to write off for taxes," read one ad, since removed, from Medford. "I have 2 boxes full of Mass. losing scratch tickets."
Maybe that should actually read New Hampshire losing tickets. Lots and lots and lots of NH losing tickets, and not just scratchers.
That's all I'm saying.
That's one way of helping money laundering, doesn't it?
The question is, why do we have to pay taxes at the embassies with monies that are not earned in the United States as an American?
No such postings on my local Craiglist, probably because we have 2nd Chance drawings where
you send $10 worth of losing tickets for a chance to win $1,000
I see listings in Chicago though.
they're just becoming aware of this now. it has been going on openly for the last 40 years. there's a ten percenter on every corner of every town or city that has a lottery. everyone who plays knows someone who does it or knows someone that knows someone that will do it. it cannot be stopped because if someone overdoes it and gets bagged (unlikely) there are literally hundreds of others who haven't done it and are willing to do it to take their place. so they might as well continue to do nothing about it as they have been doing for the last 40 years. the lottery doesn't care as it help sales in the long run. we all know the IRS is fraudulent and anyone who willingly gives them their money are foolish.
it's ok for the mega billionares to hide their money in protected offshore accounts to avoid taxes,but it's not ok for the common schmo to duck and juke once in a while.???
Yeah! They kept on freagin donating for a tax right off. I wonder, can blood donation has a tax right off too? lol...
You can't take a tax "write-off" for donating blood, but you CAN take a deduction for the fair value of old clothes you donate. I don't remember the particulars, but Pres. Bill Clinton donated underwear and took a deduction for ea. pair. Much was made of it, but as I recall, they never had never been worn. (he should have saved them up and later sold them on eBay and made a ton of money!)
Not sure why off-shore accounts have such a bad rap. Sure, they're often used by criminals such as drug dealers to hide and/or launder money, but otherwise they are legal and serve legitimate purposes, such as if you do international business. They can offer tax benefits and sometimes higher interest rates. Any income derived from the account(s) still has to be reported and there are severe penalties, including jail time, for not doing so. Before the last election, his opponent and the progressive media attempted to smear Mitt Romney with accusations about his offshore investments and banking accounts. Try as they might, everything was found to be legal and above-board. He paid the required taxes on the income but some people seemed to think he should have paid more. It's just another example of the "Occupy" mindset, a perverted wealth envy that comes from those who think they deserve a larger piece of the pie and not have to do anything (other than whine) to get it.
If the money was made honestly and is being invested legally, I don't know why people have the right to criticize what someone does with their funds.
Classic, if you can find a copy well worth reading.
The April Game
Secrets of an internal Revenue Agent
by Diogenes
Contents
The Game
3
The Revenue and the Agent
21
Rich Man Poor Man Middleman
27
Whoops! Write-off...my bad...
That's OK, I didn't want to come straight out and act like a "grammar Nazi".
I believe that, IF I ever win the lottery and depending upon how much it is, I'm going to have some money "offshore", maybe in Switzerland....just so I can casually mention "my Swiss bank account".
(j/k, I'm nowhere near that pretentious, but I WOULD keep "some" money out of the U.S.)
I heard Suiss Offshore Accts don't collect taxes on interest rates, but still if you were a U.S. citizen you have to declare it here in the U.S.A. and pay taxes for them.
Yes'm, that's right. I can guaran-darn-tee ya that if I ever win the lottery, I'm gonna make sure I do things on the up-and-up w/ my money. The IRS can not only squeeze blood out of a turnip, they can confiscate the turnip. It does annoy me about the limitations on what you can give away, but then again, they wouldn't be able to get the taxes on gifts and estates.
Uncle Sam ain't my favorite uncle these days.
Reminds me of the Matthew Lesco book my sucker neighbor bought. I read through it and learned nothing.
Yup Swiss accounts have to be reported and US Gov can get records that was done years ago,but Grand Cayman accounts on other hand US Gov can not get records of these accounts,So IRS has to take the persons at his/her word, so having several accounts you can show some of your money but not all saving millions in Taxes this is why Mitt Romney and all the RICH moved their money from Swiss acounts to Grand Cayman accounts.The money 10%'s are stealing is minimal compared to that the rich are stealing.
Suisse Acct is the same with Cayman, U.S. Gov. can't find them unless you start reporting. The only thing is that, Suisse is more secured.
Ok here is what the US Gov IRS did
Poking around a little bit, the US originally demanded UBS hand over the names and accounts of 52,000 people. However, Swiss tax officials responded that "does not identify any facts that could be construed as constituting tax fraud or the like, but rather makes a broad demand for the identity of all U.S. taxpayers for which certain forms have not been filed." That would be against the spirit of the 4th amendment.
The only thing that changed is that the Swiss caved and agreed to do a deal.
According to the WSJ Blog, the US still doesn't have to give specific reasons for information on that data.
But the structure of the deal could allow the U.S. access to far more than the 4450 contained in the agreement. For starters, the names of the 4,450 haven’t been revealed, nor has the criteria the U.S. used in determining who might be on the list. Furthermore, the agreement says that notifications to the 4450 will be made on a rolling basis.
They're still fishing for illegal activity...which is still goes against the spirit of the 4th Amendment.
Under FBAR - you only have to report a bank account if you have foreign accounts worth more than 10K. That stipulation isn't there under the Swiss deal.
Even under domestic law, you don't get your account reported unless you have more than 10K, unless it is interest bearing.
and in doing this gave plenty of people having money in these accounts time to move their money to Cayman accounts
You're right. Because the U.S. Govt. is beginning to sue Credit Suisse. But I do have a question though, if the money is registered originating in Saudi Arabia which the Saudis are not allowed to collect/give interest/taxes and the bearer of the accts has a multiple diplomatic citizenship, does she/he still have to pay taxes in the U.S.?
Well people live to find ways to get over in life!!! Guess this yet another way to get over.
I say great job!
Screwing corrupt government and union thug public employees out of money!
Well that's flat out wrong. The IRS went after Americans with Suisse bank accounts who did NOT report that they had those accounts. They gave them a one time offer to declare the accounts and pay the taxes on the money in those accounts, without penalty. If they did not, they would be prosecuted. So to state that the government can't find those accounts without the taxpayer reporting they had those accounts is wholly incorrect. That was what many had thought until it was no longer the case.