Question of the Day - 21 August 2018

It really isn't all that puzzling. Casinos are required to issue W-2Gs for wins of $1,200 or more. Failing to do so would have serious consequences.

Issuing W-2Gs for net wins of less than $1,200 has no legal downside. Players don't like it, but it's not like they can complain that they didn't actually win. It seems obvious that casinos have adopted an approach that is easy to administer, is easy to train employees to do, and prevents players from arguing their way out of W-2Gs. Gross wins over $1,200 = W-2G, easy peasy.

The casino considers the money it pays you for a successful wager, not the profit you make, to be the taxable amount. So if you bet $1200 and win $1201, you think you've won $1, but the casino say you won $1201. The wager is a price you pay for the entertainment value of the risk, not an investment. This way the casino only has to keep track of its payout instead of what you bet to get that payout. Your win is not the same as your profit, at least that seems to be the logic.

So...are W2-Gs required for table game side bet payoffs of more than 300 to 1? Lucky Ladies for example.

Some of the comment-posters were precise, while some (including some of those same precise comment-posters later on) became imprecise, with the relevant terms/concepts. The correct term for taxation is "$1200 or more", not "over $1200"; a "payout" (not a "profit") of exactly $1200 WILL trigger a W-2G almost universally. For horse racing, the condition is twice as complex as stated: not only does the payout have to be at least (not "more than") 300 times the wager, but the amount of the payout must be at least $600. And there's been an advantageous clarification recently by the IRS due to our lobbying: it's 300 times the total wager, not 300 times the unit of the wager; e.g., if you bet a $2 Daily Double with 2 horses in the 1st leg & 4 horses in the 2nd leg (8 combos), the unit is $2 but you bet $16, so a W-2G only needs to be issued if your payout is 300 times $16, not 300 times $2. There's a real chance that some employees haven't "gotten this memo" & may try to force a W-2G on you.

Spouse was playing 3 card and had only $1 side bet for the 6 cards used to make a 5 card poker hand. Yes a royal flush came up. It had a 1000/1 payout with a W2G.

One other thing: The IRS does not use the term "jackpot" in determining whether a W-2G gets issued or whether you owe them money or whether you have to file a tax return. "Jackpot" is a term that was created for gamblers, to excite them and make them want to go to Nevada (long before other states legalized gambling). On the IRS's end of things, excitement doesn't come into play; to them, it's all business, and they only care about whether "income" was earned (they lump gambling wins with job earnings). That admission from the IRS that the payout of $1200 didn't need a W-2G because the WIN (profit) was under $1200: was it in writing on IRS letterhead? If so, you should send a copy of it to every casino in Nevada, and carry a copy with you in your wallet.

Another thing: While I agree that a W-2G should not be issued for a payout of $1200, but only for a WIN of $1200 or more, I can see difficulty for casino employees if they had the task of deciding whether a payout of $1200 or slightly more constituted a WIN of $1200 or more. If a progressive were hit on video poker with the meter just over $1200, the employee would have to determine for sure what the amount of the bet was, but with multi-play machines and with some games having the option to play a 6th coin to be eligible for a bonus, a player might succeed in deceiving the employee about how much he actually wagered on the deal. I wouldn't want to depend on employees to get it right every time, because that would not happen. They would either miscalculate or get fooled at least some of the time. The casino would think: Why should we take a chance that an employee might screw up & possibly get us nailed with a fine? A policy of always issuing a W-2G for a $1200+ payout avoids this.

Don't forget all wins must be reported to the IRS even if the wins regardless of the amount even those less than $1200.  So if when you head to your favorite casino for a little Blackjack, play 2 hands, and your spouse tells you your dinner reservation is now and you must least, if you won $50 you should report it.  Remember you can always subtract your losses from other profitable sessions.  I keep a log in my billfold listing the day, time, casino, game played and of course if I had a win or loss that sessions.  My wife does the same.  I keep these for the calendar year with the year's tax return.  Really not too difficult.  

Played a table card game, don't remember which game but maybe it was Let It Ride.  I won $750 on a hand and when the pit boss came to the table to pay me he asked for my Social Security card for the W2G.  Argument commenced.  I was not playing slots and the win was way less than $1200 so no W2G needed.  Pit Bosses final answer was that he didn't give a shit about my argument, bottom line, W2G or no $750.  I took the $750.  Where you ask?  Harrahs Tahoe.  BTW, the jackpot was $700, the hand paid the $50. 

I recently discovered that losses can be deducted from winnings only if you itemize. This would be bad for someone in the already mentioned case where a $100 machine is being played and a $1500 win is achieved after betting $500. It would not be worth playing the $100 machine unless you itemize.

I think everyone is missing the point. The law needs to be changed to at least $5000 for a W-2G and then adjusted annually for inflation. $1200 is decades out of date. How about lobby the congress starting with 2 senators in Nevada?

A good question for Russel Fox, let's get him into this discussion.
George

I am wondering why you are taxed at all ?

You wager after tax money so you should win after tax money. 
Don’t get me wrong but if I was a professional gambler (which allows you to deduct gaming losses). I would be hanging out in Canada which does not tax winnings - including lotteries. 
They also have never heard of a 6/5 blackjack table.

http://www.ourtaxingtimes.com/2015/06/proposed-w-2g-changes.html
  That W-2G form has been in place since 1977.
The proposed changes the IRS (may) incorporate is the total wins.
If using a player card,the system knows how much total 'pay outs' you get and add them together.
There were also proposed changes to reduce the amount to $600!!!
Insane.
Yes,you must itemize B-4 you may deduct your losses against your winnings.
The link was posted in 2015.

About ten years ago, when I played for higher stakes than i do now, I would routinely get 10-20 W2Gs a year. I found out quickly that the IRS would assume--unbelievably--that the sum of my W2Gs was what I had won for the year!! Fortunately, I was able to disabuse them of this insane notion by providing win/loss statements from every casino where I'd played.
A W2G is actually meaningless since, as several have pointed out, you're responsible for reporting ALL wins, of whatever amount. I, of course, video-record and note in my player diary every time I find a nickel on the floor. Law-abiding me.
But I did object to that bogus W2G simply because of that idiotic assumption I mentioned above, that some IRS monkey brain in a suit would equate a W2G with an actual WIN of that amount (ask anybody who was down $800 when they hit a $1000 royal if they think they won $1000).

Since for tax purposes (which is all a W2-G really is used for anyway) it's kind of a moot question about what constitutes a win or the fact one is issued, especially if it is within your normal amount for gambling. Why? Because you will also write off losses against the wins and wouldn't make a difference to what you might normally declare to the IRS. If it is an unusually large win for you, then it might cause you to pay taxes against a big win like a progressive win might do. The real problem though is why has that $1200 threshold not been raised? Inflation does not make it all too difficult to hit a $1200 win, especially considering $5 slots are almost equivalent to what $1 slots were in the 80's.

Actually, a $1200 win NOT reduced by the wager in bingo or slots is reportable on a W2-G according to the IRS.gov website. You know it is an antiquated tax law because it still lists keno winnings with a rule of its own.  :D

Who actually believes that the Fed would want to increase the reporting threshold?  It is lucky that the proposal to LOWER the threshold to $600 didn't go forward...yet.   

Payouts, not profit, is why some slots have paylines that pay $1,199. 

On our tax return, we must report such minor things as insurance policy dividends than exceed premiums paid, jury duty and (this year) a small check for $41 for a small class action suit. It's all barely more than a "Jackson" in taxes and quite annoying, isn't it? Fail to report such income and W2-G's and face years of (possible) back auditing. It's all very scary, isn't it?