Tax Help Q+A
Down through the years, many casino players, and especially regular readers here, knew that when they needed information about how to handle gambling figures on their tax returns, they could go to the most current edition of Tax Help for Gamblers. Thus, I didn’t get a lot of questions during tax season.
However, this year has been different. The questions have been coming in right and left. Plus, I’m seeing far too much bad advice on the Internet. Case in point, see the comments on the recent QOD on tax questions.
Why more questions, you wonder? One reason could be a whole new generation of inexperienced gamblers who get much of their gambling entertainment and action online. Sports betting, especially, is bringing in many new gamblers who have no experience in dealing with the tax issues connected with gambling. Also, because of the recent jump in the standard deduction, many long-time gamblers who used to deduct their losses by itemizing and thus reduce the impact of their wins find that this is no longer a smart tax move and are looking at the possibility of filing as a professional.
So in this blog I want to discuss a few of the questions I’m hearing to give some basic tax information that both new and experienced gamblers may need to keep out of trouble with the IRS.
One note: My answers here obviously need to be brief. To get more details, check for the expanded answers in Tax Help for Gamblers. I will help you find those by giving chapter references.
Q: I don’t have to report my gambling wins if I have just a few and most are very small, do I? I lose most of the time.
A: Yes, all of them, including online gambling. Read Chapter 1.
Q: But most people don’t do that unless they get some paperwork from a casino, right?
A: You’re probably right, but my job is to give you the government rules and regulations. If you don’t follow them, it’s your problem if you have to deal with the IRS, not mine.
Q: I don’t keep a very detailed record of my gambling results, but if I were audited, I could get a win-loss statement from the casinos and that would satisfy the IRS?
A: No, no, no! The win-loss statement would be very very unlikely to satisfy an auditor. It takes much much more paperwork. It took me 10 pages to cover this subject in Chapter 2!
Q: I play in casinos a lot and I get lots of W2-Gs. Would you suggest I file as a professional gambler?
A: Oh, dear. I dread this question and I get so many of them. Although Brad and I filed this way for umpteen years and I continue to do so, I cannot give a definitive answer to anyone asking my advice about it. The long Chapter 4, “The Recreational vs. Professional Gambler,” tackles the question from every angle, with a helpful list of nine factors that can be considered. The more of these factors you can claim and the strength of each will help determine whether you’re conducting a real business and not just a hobby. Many court cases have put more – or less – importance on each of these basic components. However, over and over again, courts have ruled on individual taxpayer’s situations, using the age-old legal guide for evaluation according to the facts and circumstances of the case. It’s not an easy decision and most would want to consult a tax preparer who is experienced dealing with gambling issues.
Q: If I hit a slot machine jackpot over $1,200, I know I’ll get a W2-G, but will the casino automatically withhold federal tax?
A: Not if you’re a U.S citizen, present proper ID, and give your Social Security number. However, you can request (before any paperwork is started) any amount to be withheld for federal taxes, perhaps a good ploy to avoid filing required tax withholding. Chapter 5, “Federal Government Issues,” covers all the details – and the special situations and exceptions – for W-2Gs and other special government-required forms, tax withholding, Social Security numbers, and gambling issues for non-U.S. citizens. You may – or may not – be surprised how much Big Brother is watching your gambling!
Q: I played more live and online poker this year rather than video poker previously. I knew the tax rules I had to follow for machine play, but are they the same for poker?
A: I wrote Chapter 6, “Tax Help for the Poker Player,” for players just like you. Some of the basic concepts are the same or similar, but there are many special circumstances. I cover these special rules about recordkeeping, casino paperwork, tournament play, group play, and recreational vs. professional play.
Q: I live in a state that doesn’t have a state income tax, but I’m planning to take a long road trip around the country visiting and playing in casinos wherever I find them. Hopefully, I’ll get lucky and hit some good-size jackpots, but I hear that in some places, they will take state taxes out automatically. Is this going to involve a lot of paperwork?
A: I’m afraid you aren’t going to like this answer. Not only might you get hit with more paperwork, but in some states, you might face automatic state withholding that you can’t get refunded even if you file that state return. Before you plan your trip itinerary, you might want to read Chapter 9, “How All 50 States Handle Gambling Wins/Losses.”
Other topics my co-authors and I cover not mentioned above: lottery play, tournaments, comps, free play, gambling sessions, fantasy sports, cryptocurrencies, tax audits, and much more.
Finally, if this post sounds too much like an ad for my book, well, the $20 or so you spend on learning the ropes when it comes to gambling and taxes will more than pay for itself in correct information on the subject that you can’t get anywhere else at any price. I learned that early in our casino adventure when I had to research the information to give to our foreign-to-gambling accountant . That’s why I had to write it to help others with information on avoiding costly mistakes. In fact, many gamblers down through the years have given this tax book to their tax preparer!