Vegas Free-for-All - The IRS seeking public input on the possibility of someday lowering the amount at which casinos must report slot winning

The IRS seeking public input on the possibility of someday lowering the amount at which casinos must report slot winning

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alanleroy

Jun 4, 2015
6:36am

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Quote

Originally posted by: Chilcoot

Quote
Originally posted by: alanleroy
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Originally posted by: ChilcootWe've had 38 years of increased recordkeeping efficiency since then.

Really? How has the process of creating W2G's for $1,200+ VP wins become more efficient?

The casino flunky who walks over to initiate the paperwork is just one part of the process. And is probably the part that's changed the least.

It's the process of accounting, retaining, and conveying the paperwork to the IRS that has been completely revolutionized over the past 38 years.

If $1,200 makes sense in 2015, fine. But we shouldn't keep it just because that's what it was way back when Gerald Ford (!) was in office.

What is your criteria for 'making sense'? How much it costs the casinos? How much time it wastes for the gambler? How much revenue it generates?

I was going to mention there have probably been back office efficiencies, but it's the handpay and W2G process that interrupts the play and has always been the most labor intensive. If the threshold and real value of handpays just keeps going down, the gambler is eventually going to say 'fuck it' and play a different game.

The fact is that if this doesn't get indexed and inflation runs the same as it has over the last 4 decades in another 38 years we'll have the same 'flunkies' doing the same hand pays for the 1978 equivalent of a $50 jackpot....$25 if they lower the threshold to $600. Sometime before then the golden goose will be dead. That's why I said it's going in the wrong direction. Just because they have the technology to plop a W2G on a $600 jackpot doesn't mean it's a good idea.

Roulette Man

Jun 4, 2015
6:51am

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Quote

Originally posted by: forkushV
Correct me if I'm wrong, but the reporting requirements discriminate against those who own their homes outright or who rent. Because gamblers who keep good records can right off their losses against W2-Gs, but the moment they do that on a Schedule A they lose their standard deduction. To people with significant mortgage interest that isn't an issue, otherwise it usually is.

Correct?

Several items here.

First of all, you always take the greater of your standard deduction or your itemized deductions (Schedule A) when filing your tax return. While you may offset gambling wins with gambling losses, if your standard deduction is still more than your itemized deductions (with the gambling losses) you will take the standard deduction.

There are two classes of gamblers:

Professional: You may treat gambling like a business (Schedule C - above the line). You may write off reasonable travel, meals, and other expenses. Be prepared to be audited. You may still only offset gambling wins with losses, but you can expense this other stuff. There has been talk about treating comps as in-kind income. To be classified professional, you should provide proof of what you do. I would say some of these professional poker players would qualify under this category.

Recreational: (most of us). You CANNOT deduct expenses of gambling (below the line). You can only offset wins with losses and cannot deduct any losses in excess of winnings.

While you are technically supposed to report any winnings, whether they are reported to the IRS or not, the IRS is smart enough to realize that isn't probably going to happen. They usually get more than their pound of flesh from the casinos.

The IRS does offer machines that pay 1199 so they don't have to fill out any forms. Obviously if it is lowered to 600, they are going to have to W-2G many more players.

forkushV

Jun 4, 2015
7:26am

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Quote

Originally posted by: Roulette Man

Quote
Originally posted by: forkushV
Correct me if I'm wrong, but the reporting requirements discriminate against those who own their homes outright or who rent. Because gamblers who keep good records can right off their losses against W2-Gs, but the moment they do that on a Schedule A they lose their standard deduction. To people with significant mortgage interest that isn't an issue, otherwise it usually is.

Correct?

I'm still a little confused, so let me ask the question a different way.

Mr. McMortgage pays lots of mortgage interest , and Mr. Nestegg has his house paid off and always takes the standard deduction. They both get a $1,200 W-2G and both have records showing that they lost the equivalent amount, resulting in net zero winnings.

Mr. McMortgage shows the $1,200 as income, but it's offset by the $1,200 loss on his schedule A, and his taxes do NOT go up at all. Mr. Nestegg shows the $1,200 as income, but his taxes DO go up accordingly, even though he was not a winner.

Is that accurate?

O2bnVegas

Jun 4, 2015
8:06am

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Quote

Originally posted by: forkushV

Quote
Originally posted by: Roulette Man
Quote
Originally posted by: forkushV
Correct me if I'm wrong, but the reporting requirements discriminate against those who own their homes outright or who rent. Because gamblers who keep good records can right off their losses against W2-Gs, but the moment they do that on a Schedule A they lose their standard deduction. To people with significant mortgage interest that isn't an issue, otherwise it usually is.

Correct?

Several items here.

First of all, you always take the greater of your standard deduction or your itemized deductions (Schedule A) when filing your tax return. While you may offset gambling wins with gambling losses, if your standard deduction is still more than your itemized deductions (with the gambling losses) you will take the standard deduction...

It could be accurate, but every situation is different. As Roulette Man explained, everyone has the opportunity to either itemize or take the standard deduction, whichever one works to your advantage. A good CPA advises the taxpayer about this.

Income changes for most people at some point in life. It could be that taking the standard deduction, even with the $1200 additional income, does not shift Mr. Nestegg into a higher income brackett, in a given year.

We all have to make choices and live with the consequences. If Mr. Nestegg wants to take the standard deduction, and he also wants to gamble on slots or other games that tax winnings, it is not my fault or your fault or anybody's fault if his $1200 win causes his income to push him into a higher tax bracket. He lives with that outcome.

Roulette Man

Jun 4, 2015
9:35am

Block User

Quote

Originally posted by: forkushV

Quote
Originally posted by: Roulette Man
Quote
Originally posted by: forkushV
Correct me if I'm wrong, but the reporting requirements discriminate against those who own their homes outright or who rent. Because gamblers who keep good records can right off their losses against W2-Gs, but the moment they do that on a Schedule A they lose their standard deduction. To people with significant mortgage interest that isn't an issue, otherwise it usually is.

Correct?

Several items here.

First of all, you always take the greater of your standard deduction or your itemized deductions (Schedule A) when filing your tax return. While you may offset gambling wins with gambling losses, if your standard deduction is still more than your itemized deductions (with the gambling losses) you will take the standard deduction...

That is basically accurate. I see the same situation with people who made nice charitable contributions of something or of money and get no benefit from it, because the standard deduction is still larger. Mr. Nestegg is screwed in your example.

Don

Jun 4, 2015
12:13pm

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DonDiego realizes that the topic of this thread is limited to slot winnings.

But just to educate the interested reader the requirement for reporting winnings and generating a W2-G for withholding on sports bets is that the winnings must be:
i. $600 or more
AND
ii. odds on the bet must be 300-to-1 or higher

Example:
If one bet $1000 on a 5-team NFL parlay at 20-to-1 odds for a total win of $20,000 there would be no W2-g required and no withholding, . . . because the odds were less than 300-to-1.

n.b. Although there would be no W2-G or winnings withheld, the casino would generate a Currency/Cash Transaction Report (CTR) because any transaction over $10,000 must be reported. In fact, casino cage transactions totaling over $10,000 over 24-hours would also require a CTR.
This requirement has nothing to do with gambling per se; the IRS just wants to track large cash transactions. If one has a cash transaction with one's bank over $10,000 the bank has to submit a CTR. One's bank and one's casino have the option of reporting smaller cash transactions if they're suspicious or just wanna suck up to the IRS.

Oh, and for the record, DonDiego opposes the reporting of winnings on slot wagers or anything else being lowered. Whatsamatter! Does the IRS not trust its citizens.

alanleroy

Jun 4, 2015
1:20pm

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Quote

Originally posted by: forkushV
Mr. McMortgage shows the $1,200 as income, but it's offset by the $1,200 loss on his schedule A, and his taxes do NOT go up at all. Mr. Nestegg shows the $1,200 as income, but his taxes DO go up accordingly, even though he was not a winner.

Is that accurate?

This isn't fair. The Gambling Losses should be subtracted from the Gambling winnings and that number should be added to income for both Standard and Itemized filers....I'm not so sure Fairness is an objective of the income tax code.

Boilerman

Jun 4, 2015
9:31pm

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Chilly claims that record keeping has become more efficient, yet the IRS spends double the money in "real dollars" than it did in 1983. The truth is that private sector record keeping is far less expensive and government sector record keeping is far more expensive.

Quote

Originally posted by: Chilcoot

Quote
Originally posted by: alanleroy
If they set it at 1,200 in 1977, they should index it to inflation so the materiality remains the same. Today that $1200 in 1977 dollars would be $4,841.48. Round it up to 5K and that should be the new reporting threshold.

That presumes that the level set in 1977 is the correct one.

We've had 38 years of increased recordkeeping efficiency since then. I don't think keeping the threshhold at $1200 would be onerous. I also wouldn't mind if it hopped up to, say, $2,000.

Don

Jun 4, 2015
11:07pm

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Quote

Originally posted by: Boilerman
Chilly claims that record keeping has become more efficient, yet the IRS spends double the money in "real dollars" than it did in 1983. The truth is that private sector record keeping is far less expensive and government sector record keeping is far more expensive.

And it doesn't buy much.

"IRS computers are still running the 13-year old Microsoft (MSFT) Windows XP operating software which Microsoft stopped supporting a year ago with security updates. Even the agency’s fraud-catching software is two decades old. The outdated software may have played a role in the breach the IRS announced last week in which thieves hacked into the agency’s online service and gained access to more than 100,000 taxpayer accounts."
Ref: foxbusiness.com

forkushV

Jun 5, 2015
1:58am

Block User

Quote

Originally posted by: Boilerman
Chilly claims that record keeping has become more efficient, yet the IRS spends double the money in "real dollars" than it did in 1983...

Unless you resort to "google it," you don't have a source for that claim, do you?

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