I don't think you're wrong, exactly, but as a practical matter there are lots of transactions that should be taxed that people tend not to report. Did you hire someone to perform contract work at your house? Did you hire a babysitter to watch your kids each weekend? You may have been supposed to issue them a 1099, or in the case of child care, you may technically have been required to pay them like an employee, withhold wages, and issue a W-2. Fun, huh?
I think there are specific thresholds of an amount of money you pay to someone each year that trigger a need to report the payment, but the general point is that there are tons of taxable transactions that fly under the radar due to ignorance all the time.
That would all matter, and until you sort out their classification you can't really assess the full scope of the tax implications beyond the fact that the judges should DEFINITELY have been reporting their judge rewards as income.
Can you defend against a tax assessment on an issue like this by claiming something like "innocent spouse?" That is, the transaction was re-classified as a gift to compensation for employment after the fact? My sense of fairness makes me think there probably is a way to avoid paying at least penalties and interest in that case, but I dont know.
Woe be onto he the Judge who received 100 Force of Will judge promos as his compensation, I guess. ;)
In the examples above, you wouldn't have to issue the 1099 unless the payments were made as part of a trade or business, so that would be out. The babysitter, under certain circumstances, may require you to withhold and do a W2, but again, situation dependent. The common conception of a babysitter would likely not require a W2.
As to the judges: depending on how much they made, the value of the compensation, etc. not every judge would need to report...but this would be because their total income didn't exceed the standard deduction for that year. If you are at the filing threshold, even $5 you found on the street should be included as income. Now obviously no one is going to report that they found $5, and no one is going to catch you, but the fact remains that you are supposed to include it.
You could maybe try and argue that the promos from Wizards represent an Achievement award, and should therefore be excluded, but the sealed product that the TO gave you is straight up income.
The guy that got paid in 100 Judge FoW's might be OK, you'd have to use the value at the time of issuance to figure out what the hit would be, but I don't know what those things opened at.
Theres no way to get around the interest. You might be able to get around the penalties, but not the interest.
@AmbivalentDuck said in Judges Suing Wizards:
Ultimately, Magic will be a bubble that pops. The cards simply aren't "worth" their ascribed values. Unlike a dollar that has guaranteed value as a means of paying American taxes, nobody is sitting around guaranteeing the value of Black Lotuses or aggressively hunting down counterfeiting operations. In fact, we presently see counterfeiting operations increasing both their quality and rate of output over time. Unless Wizards agrees to be a buyer of last resort for authentic Magic cards and guarantees buy prices, a card is only "worth" the cost of producing an undetected forgery. The cost is dropping and so is the rate of detection.
Dude I just picked up of the new black core proxies for research purposes. They are shit. Even if you managed to take away the gloss they are shit, because the printing is shit and fine details get obliterated. Anyone with a loupe and a few commons for reference could spot the issues. Even without a loup they evidently don't luminesce under UV light as well, though I haven't personally tested this yet because my light hasn't come in yet. But these are touted as state of the art, and they are shit, trust me. They look scary good in pictures, but in person they are shit.
Older Magic cards have inherent value simply because of their rarity. Marquis baseball cards still have high value, and you can't even do anything with them besides look at them. Magic cards are deeds, that allow you to take actions in the game...they are functional aside from being rare.