First problem: identifying taxes on gambling winnings is a complicated subject. Second problem: Current tax code is often modified each year. So, if you are a regular gambler, discussing with your accountant or CPA each year is important.
One basic principle is pretty much engraved in stone: All citizens of United States who win money at gambling must pay winning taxes. So never assume -like many misinformed gamblers – that a gambling income is exempt. As a matter of fact, currently U.S. citizens can estimate forking over twenty-eight percent of their winnings to US Government. (Non-resident aliens typically pay thirty percent.) Proper tax preparation should separate the wins from the losses. Certainly, you have to think about your losses, too, but it does not mean you’ll get a great tax return in a losing year. In reality, a recreational gambler may only deduct financial losses up to the amount of his total winnings for the year.
Consult your tax preparer or accountant for dependable help with your tax form. You should know that losses are a bit trickier than winnings. And you may only offset your wins with your losses if you itemize and take the basic deduction on the tax return. So, if your financial losses are insignificant, they may have no real effect at all on taxes.
Let’s say you had winnings of $4,000 for the year and losses of $6,000. You may think that the bigger losses cancel out your winning so you do not owe any tax. But when the total deductions (including this year gambling losses of $6,000) are lower than the standard deduction (for example, a married couple filing jointly, the standard deduction is $10,000), you are not allowed to take any of these losses on your return since you are not itemizing. Regrettably, you still need to pay taxes on your gambling winnings, although you are actually losing money. Confused? Good, welcome to the strange world of tax code.
It is a known fact that casinos usually report certain activity to the IRS. In craps, for instance, the house notifies the IRS using the Currency Transaction Report (CTR) when a casino visitor cashes out or buys in $10,000 or more in a day. And in slots, the house must fill out a W-2G form, including the winner’s name and Social Security number, if the winning is $1,200 or more. Casinos use the same form if you win $1,500 or more in keno. You shouldn’t waste your time begging casino staff not to fill out the tax form on you (either a W-2G or a CTR). U.S. laws necessitate these forms, and attempting to avoid them can put you in hot water. Casinos file the W-2G to IRS, and you will get a copy later in the year. Be sure you include a copy if you file your return.
Hopeful gamblers may assume they only need to pay taxes on winnings that the house reports to the IRS. That’s not true. Each gambling winning is subject to taxation, no matter if they come from a church bingo night, your neighbor’s poker game, the Internet, a foreign country, or your favorite casino. Many players dismiss this law, however, believing Big Brother will not find out about their insignificant wins. The IRS can conceivably get records from a casino to determine your annual win or loss. Always remember this important principle: Underpaying taxes is a criminal activity. So even if your likelihood of getting caught is low, that’s a bad gamble.
Comps (the complimentary perks that casino give to visitors) pose a grey area in tax reporting. In general, casino comps are income, however, the government is probably to care only when you receive luxury merchandise or substantial gifts, such as a new speedboat or an expensive watch.
Few gamblers lose considerable money to have casinos send them a luxury car at Christmas. Most comps are soft – implying the casino doesn’t pay a hard cost for them, for example dinner buffet or hotel accommodation.
One way to offset those nasty taxes is to take advantage of the online casino bonus offeres that are available at all the casinos listed at nobluff.com.
