Expert contributor Marissa Chien answers:
I don't have an exact year as to when the $1,200 came into existence, but I believe it was at least 25 years ago. Obviously, as you point out, $1,200 back then was a lot more money than it is today, especially in the current world of multi-line/multi-denomination slot- and video poker machines.
In fact, adjusted for 4% annual inflation, the $1,200 reporting requirement for the W-2G should be approximately $4,000 today! If all machine (and keno) jackpots less than $4,000 didn't require a W-2G, it would cut down on a lot of paperwork -- for the casinos and the IRS. On the other hand, the IRS would probably prefer the limit to be lowered, rather than raised, so that it could keep closer tabs on personal gambling income.
There's always talk -- among gamblers -- of raising the limit, though I'm not sure the IRS has given the idea much consideration. Gamblers might be able to instigate talk at higher levels by contacting congresspeople, writing letters to editors, and bringing the limit to the attention of casino executives to see if they can lobby Congress. Occasionally, the IRS has public-opinion days where you can show up and address perceived hardships within the system.
