Taxes and Winnings From Gambling

The Internal Revenue Service just can’t stay out of your pockets, even when you are taking risks to earn. In fact, the IRS believes it is entitled to your winnings if you have good luck worth $600 or more at a horse track or casino, $1200 or more if you hit at bingo, and when you bring in $1500 or above playing keno.

The Internal Revenue Service refers to these sums, as “qualifying amounts” and the establishment where you are gambling will take your social security number and issue you an IRS form W-2G when you reach these “qualifying amounts.” It’s important not to try and trick the house by supplying a false social security number, as it could land you in a lot of hot water.

Even though the gaming establishment will not report lesser earnings, it is your duty to report them on your income tax return, none-the-less. Although the Internal Revenue Service probably would not catch on to your small winnings, since the gaming establishments don’t report them, they may get suspicious if you are only reporting gambling earnings associated to a W-2G. They figure that you are just not reporting your lesser earnings since you obviously gamble.

You can deduct your losses at gaming establishments, but not if your losses exceed your winnings. If your losses do exceed your winnings, maybe you should quit gambling, right?

If you like to gamble, it is probably smart to keep a recorded account of your earnings and losses, including where you won and lost, and when.

You must report all monies received from gambling and any non-cash winnings, as well, on your 1040 income tax return. You cannot file a 1040EZ form when reporting your gambling winnings, as you will need to itemize these earnings and deductions. If taxes were withheld from your winnings, you need to report that on the W-2G form the gaming establishment will send you in the mail and transfer it to the total payments section on your 1040 form when filing your income taxes.

To prevent the Internal Revenue Service from getting too curious, you should attach all forms, including the W-2G to your income tax return.

Also be aware that any “comps’ you receive from a gaming establishment are also considered taxable by the Internal Revenue Service. In this case, you will need to figure the fair market value of the “comps” in order to comply with reporting them.

If you occasionally go to Las Vegas to try your luck, IRS wants those details! Whatever is the outcome of your effort – you win on your lose – you should report it to IRS. If you don’t, then what happens? Well, don’t allow IRS to be too curious! Chintamani Abhyankar explains.

New Tax Rules Concerning Gambling Activities

The Internal Revenue Service (IRS) has historically required that gambling winnings and gambling losses be separately accounted for. The reason for this has to do with the way gambling losses are deducted for tax purposes. Gambling losses are treated as an itemized deduction and reported on Schedule A of the individual income tax return (Form 1040). This creates a problem in the cases in which taxpayers cannot itemize (as is the case when a standard deduction is greater) or in which the taxpayer’s income exceeds a certain threshold (in which case the taxpayer loses part of their itemized deduction via a phaseout). In such cases the taxpayer does not get the full benefit of the gambling losses to offset against the gambling winnings. What the IRS is really after is the reporting and taxation of gross gambling winnings.

New Tax Rule:
According to a recent tax court case (Shollengerger, TC Memo 2009-36) taxpayers are allowed to net gambling winnings during a given day with gambling losses. This is a significant setback to the IRS. As an example, imagine if you were to win $2,000 in the morning at a casino and lose $900 later that afternoon. Prior to this court case, the IRS would require that you report the $2,000 in gambling winnings and then separately itemize the $900 in gambling losses on your tax return. The court instead ruled that the taxpayer in this case was permitted to net the gambling winnings for the day and report $1,100 as net gambling winnings instead of the $2,000 gross amount, the IRS mandated. The court went on to state that this “netting rule” only applied on a daily basis. It stated that a taxpayer could not net gambling winnings and losses for the entire year.

Irrespective of this change in reporting and taxation of gambling activities, there are specific accounting requirements for gambling activities. The IRS requires taxpayers to keep a diary or ledger of all gambling activities. This tax accounting requires the taxpayer to record the following information concerning various gambling activities:
1. Type of gambling activity
2. Location of gambling activity
3. Amounts won and amounts lost for every activity
4. Number of games played
5. Cost of Bingo cards purchased
6. Winnings for each Bingo card
7. Copies of Keno tickets validated by the gambling establishment
8. Copies of casino credit reports
9. Copies of casino check cashing records
10. Records of the number of races bet on (horse, harness, dog)
11. Amount of racing wagers
12. Amount of racing winnings and losses
13. Record of slot machine number
14. Record of slot machine winnings by date and time per machine
15. Table number played (blackjack, craps & roulette)

16. Table credit card data including where credit was issued

All of the above items can be supplemented by receipts, tickets etc.

Recover Your Casino Gambling Winnings

As per the US-Canada Tax Treaty, Canadians and International patrons* can offset their gambling losses against their winnings. Jackpot winners who have had their gambling winnings taxed can benefit from this treaty.

A win in the US casinos can be exhilarating but soon that excitement will fade when you realize that a 30% withholding tax that has been deducted from your gambling winning. However, there are several casino games and lotteries on which you can obtain a gambling tax refunds.

As outlined by the IRS, these are:

• Bingo
• Keno
• Slot machines
• Blackjack
• Poker
• State Lotteries

To obtain a casino tax rebate you need to keep in mind that the refund process normally takes 12-16 weeks. An ITIN application will be filled out and submitted on your behalf to the IRS. This ITIN number will become your permanent number which you can use as often as you need to file for a gambling refund. Finally a 1040NR will be filed on your behalf.

A 1040NR is a tax return, non-us resident must file to obtain a casino tax refund. Keep in mind these simple rules.

• If you are a winner for the taxable game that has been considered as an eligible gaming activity in the last three years.
• If you are a holder of the IRS Form 1042-S and the casino has offered that.
• If you are offset winnings with losses within the same tax year.

*Apart from Canadians, In addition to Canada the following other listed countries qualify: Austria, Czech Republic, Denmark, Finland, France, Germany, Hungary, Ireland, Italy, Japan, Latvia, Lithuania, Luxembourg, Netherlands, Russian Federation, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Tunisia, Turkey, Ukraine, and the United Kingdom. These listed countries do not have to establish gambling losses in order to claim a full refund

Teenage Gambling At Post Prom High School Party

The latest trend to hit high schools is supervised teenage gambling at the Post Prom School Party. Over the past few months I have received numerous emails from parents, students and school faculty expressing concern about the new alternative entertainment. In all cases these people believe it would do more harm then good.

The concept became reality for students once the Post Prom Committee voted to accept this new alternative entertainment.
This Post Prom Committee believes this is safe night party for the High School prom. The students who are taking part are between the ages of sixteen and eighteen years old. Each student is able to purchase fake money to gamble with and at the end of the night they can trade this money in for prizes with at the end of the night. Some parents believe this is a safe wonderful event for their children. While others believe this is one area they prefer their kids not be involved with.

One of the emails I received was from a family who home schools their five children. I was surprised since their kids were not involved. She had explained to me that her daughter who is seventeen has friends who attend the public school system. She went on to tell me the negative behavior exhibited by these teens after the event took place. In fact they taught her daughter how to play black jack and poker. This is a good neighborhood that has strong community ties. She also informed me that she not see the difference between using fake money or real money when you still have a chance to win a prize that has value. She believes these teens are being educated on how to gamble, win and take the easy way out.

People in favor of this gambling event, nicely told those who were against it to have their teenager’s stay home. It was my understanding the post prom parties were supposed to be for everyone.

It surprised me that a school district finds gambling night an acceptable behavior for our teenagers.

I have seen first hand the self destruction gambling can do to teenagers and adults. It’s my belief that gambling should be limited to people who are eighteen and over.

Another email was asking me for the specific statistics on the negative impact on a teenager’s who attend a gambling event. General statistics reflect a percentage of those in attendance will develop a compulsive gambling addiction. Some of these same students may become addicted at some point in their life. I have found that addictions to gambling are not age sensitive. People of any age who are gambling for the very first time can develop a gambling addiction. Usually a friend or family member takes them to the gambling establishment. I first found it difficult to understand how a person who is sixty five retired and on a fixed income gets addicted to gambling. The seniors I spoke with were very upset and didn’t understand how this happened to them. The unfortunate part is they lost their pensions and now only have their Social Security to live on. In one case the Grandmother has to move in with her daughter.

There is very little difference between supervised gambling and allowing supervised drinking alcoholic beverages or serving the students there choice of dugs on a silver platter. If a Principal served a student an alcoholic drink he would be arrested. I am trying to understand how school educators and parents can distinguish between alcohol and gambling on school property. How is one more acceptable then the other?

Studies have shown that there is a correlation between alcohol addiction and gambling addiction. The correlation was based on individuals who attend both Gamblers Anonymous and Alcoholics Anonymous meetings.

It would be a shame to find out ten years from now that students who took part in supervised gambling at the High School level their future was compromised by a life of self destruction and low self esteem.

It’s a proven statistics that students who gamble get a similar rush as if they just had an alcoholic beverage. The only difference here they will not wake up with a hang over and the side effects are minimal until it’s too late.

We have now given our students another option in life. The major concern is the student’s will probably like the rush from gambling a lot more then alcohol and or drugs since there is no hang over or smell. Some students are likely to continue gambling. Students with A grades are not exempt from this. Statistics show that compulsive teenage gamblers are also very bright and articulate individuals.

People need to be educated on teenage gambling and its long term affects. It’s illegal to gamble if you are under 18. It’s also illegal to drink if you are under 18 (some places 21) and it’s illegal to smoke cigarettes if you are under 18. These laws were set for a reason. Another email I received wanted to know do these school systems have any respect for the Law?

I emailed each of the people and asked why haven’t they raised their concerns to the school board? They all responded the same. “We are the minority and now we look bad in front of our kids.” This is truly a no win situation.

The parents who are against this sort of entertainment believe; if just one student develops a compulsive gambling addiction that is one too many.