Did you know that gambling winnings are fully taxable and must be reported on your tax return. Here are the top seven facts the Internal Revenue Service wants you to know about gambling winnings taken from the IRS website:
- Gambling income includes – but is not limited to – winnings from lotteries, raffles, horse and dog races and casinos, as well as the fair market value of prizes such as cars, houses, trips or other noncash prizes.
- Depending on the type and amount of your winnings, the payer might provide you with a Form W-2G and may have withheld federal income taxes from the payment.
- The full amount of your gambling winnings for the year must be reported on line 21 of IRS Form 1040. You may not use Form 1040A or 1040EZ. This rule applies regardless of the amount and regardless of whether you receive a Form W-2G or any other reporting form.
- If you itemize deductions, you can deduct your gambling losses for the year on line 28 of Schedule A, Form 1040.
- You cannot deduct gambling losses that are more than your winnings.
- It is important to keep an accurate diary or similar record of your gambling winnings and losses.
- To deduct your losses, you must be able to provide receipts, tickets, statements or other records that show the amount of both your winnings and losses.
So, did you know all that? Say, you go into a casino – once, with friends – and you win $100. You keep it, take it home and never go to a casino again. That $100, my friend is taxable. It is bad enough that a person could go in and bet $20, win $1200 and get a 1099 and put it all back in leaving with nothing. If they don’t itemize they will pay taxes on the $1,200. No on wins except the casino and the IRS. This is penalizing the taxpayer for the entertainment of gambling. Here’s a true story.
One time in Las Vegas, before the Ticket-In Ticket-Out technology, I was playing a Triple play bonus Video poker machine. Anyone who plays VP knows that Max play or usually 5 coins, gives you the jackpot of $4000 credits, or essentially $1000 playing quarters. On this triple play machine, on one play I hit a Royal – $1000 non-taxable by a W2-G form. But…..on another line I also hit a Straight Flush for $250 credits, bringing my grand total to$1250 in winnings. Well, as you can expect, the machine locked up, the slot staff came over and minutes later, I received my payment of under $900 (instead of $1250) and a tax form.
To be real, thousands of gamblers play daily across the country and never claim anything. The IRS winnings threshold of $1,200 triggers casinos to prepare W2-G forms for customers who win at bingo or slots. But that may change, and change the industry forever if the IRS gets the changes it wants – and that is reducing that threshold to $600! But that’s not all! The IRS has suggested the rule could be carried out through electronic tracking of wagers and winnings via player’s cards. In others words, the IRS would have access to more than just the taxable income from you win.
Gaming executives say lowering the threshold would mean added paperwork for casinos, disruptions on the casino floor and costly upgrades to systems necessary to track winnings in larger numbers.
Steve Tetreault of Casino City Times reported that the casino industry and its allies on Capitol Hill have mounted a late push to persuade the Internal Revenue Service to back away from that proposal, and the pro-casino lobbyists and lawmakers are out in full force. “The gaming industry is aware of no other industry in the country for which the IRS has issued regulations requiring the industry to deploy its customer loyalty program for federal tax collection purposes,” American Gaming Association CEO Geoff Freeman, said in comments to the IRS recently. The American Gaming Association, the casino industry’s policy and politics arm, sought to stir up the grass roots up to last week when the IRS stopped taking opinions from everyone concerning their proposal.
The IRS will gather more reaction at a next week, June 17th in a public hearing in Washington. The agency unveiled its proposal March 4. It said reducing the reporting threshold to $600 would make the gaming industry consistent with other trades and businesses that must report every person to whom it makes a payment of $600 or more in a given year. If anything, it has been suggested that the reporting threshold should be increased to near $5,000, which amounts to the $1,200 level established in 1977 plus inflation.
As Ben Steverman, from Bloomberg News says, “Nothing kills the thrill of a big-money win at the casino quite like a tax form—and soon the grasp of the taxman could be felt before the jackpot celebration stops at a lucky slot machine.”
With the cutting of staff in the casinos we visit, how would you like to have everything come to complete halt for 15 – 20 minutes for a handpay at your penny slot for a win of $601.00? Video Poker players – play $.50, get those aces and a kicker? – same scenario.
So, let’s hope the IRS comes to its senses. If not, Big Brother will be watching you more and taxing you more!
That’s all for now.