A new IRS tax memo just came out, once again affirming the validity of using the “session method” for keeping records and reporting gambling win/loss figures. In this case the IRS
conceded that $1100 (the net win of the day) was the “gambling win,” as opposed to the $2000 reported on the W-2G that was hit that day.
You have to always remember, however, that memos only refer to the case under question and have no legal basis for future cases. But they do show that the IRS is, albeit slowly, moving away from the absolute W-2Gs-are-your-wins position.
I may have more on this subject in a few months since the IRS is questioning our 2007 gambling figures. We’ll see if they accept our “session” method after I explain things to them!!!
The IRS has never specifically stated what a “session” is. I discussed this subject at length in my book “Tax Help for Gamblers.” It could be anywhere from the time on one machine to a complete week’s vacation in one casino town. However, the IRS, in an audit, might not accept long periods like the latter. Many gamblers use a one-day session time. We close each session when we change casinos. Whatever you use, it should be “logical” – and most important of all, it should be supported by good recordkeeping.
Does a session consist of a “days” total play?
Or does a session occur each time you change machines, or go to a different casino?
Casino A, Machine 1 = $100 win
Casino A, Machine 2 = $200 Loss
Casino B, Machine 3 = $200 win
Is this days play 1($100 win),2($200 win & $100 loss), or 3 sessions for the tax man?
What are they questioning specifically?
Making gamblers pay taxes on wins without being able to deduct losses is unbelievable. According to the memo you posted they lost money for the year but still owe taxes on their one winning day!