If partners hit a jackpot, will the casino issue two W-2Gs?

Today's QoD brings up another subject on jackpots, per a discussion on Facebook. Two friends pool some funds (let's just say $50 each) to play slots. The machine hits a $50k jackpot. Slot attendants arrive to do the W-2G form. Friends want to split the win. Will the casino split the jackpot and do a $25k W-2G for each of them?

IRS Form 5754, “Statement by Person(s) Receiving Gambling Winnings,” allows the casino to issue W-2Gs to each member of the group for his or her part in the win, rather than the one winner getting a W-2G for the total amount.

The player who actually hits the big prize will fill out Form 5754 with the names and Social Security numbers of him or herself and the other player. The casino is required to accept this form and issue individual W-2Gs based on the information furnished on it.

But here’s where it can get tricky. Many casino employees, especially those who pay off machine jackpots, either don't know about Form 5754 or simply don’t want to bother with it. Players can insist, but most don’t, since that might invite more scrutiny from put-upon jackpot-paying employees and why risk it?

Especially since the alternative, going the 1099 route, is just as effective and efficient.

The way this works is simple. The player who hits the jackpot takes the payout, then splits the money and issues a 1099 to the partner for the agreed-upon share. That makes them equally responsible for the taxes.

Of course, this assumes that the partner who receives the payout can be trusted explicitly to pony up the other half. Occasionally, as in this QoD and this QoD), that's not what happens. Greed kicks in and money is thicker than the agreement. Lesser considerations have broken up friendships, partnerships, even intimate relationships.

That's why in all partnering cases, especially involving large sums of money, a written agreement signed up front by the partners is desirable.

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rokgpsman Mar-11-2022

Trust me?

A similar situation happens at workplaces when several people pool their money to buy lottery tickets. Someone is trusted to go buy the lottery tickets and winning tickets are cashed by the trusted person and he divides the winnings among the group. If you're part of the group you expect things to be done fairly by your work buddies and it usually is because the winnings are too small for someone to cheat people they work with every day. But if a big amount is won the trusted person can decide to screw everyone in the group. And there's not much you can do about it except let the air out of their tires every day at work after that.

jay Mar-11-2022

Getting it back....

As a US citizen or green card holder you are issued a W2G which creates a reporting obligation but as a foreign visitor the casino will withhold a large portion of the jackpot. 

The only way to get that cash back as a Canadian is to file US Taxes and Canadian Taxes then fill in a foreign tax credit form as under a tax treaty we only pay the higher of the two tax amounts. We can then (separately) request a refund for any taxes withheld. 

Canadian Taxes are generally higher than US taxes. 
Canadians are also not taxed on gambling or lotto winnings. 
So depending on the size of the jackpot a 25% withholding might only be $300 (based on the $1200 rule) which but it will cost more than a $1000 to get US taxes prepared and orchestrated with the Canadian ones. 

When you consider that taxes are handled but once a year, and you have to separately request the refund - often its not worth the cost or hassle. 

This works for countries with tax treaties - hard to imagine timbuktu

VegasVic Mar-11-2022

???

What is this "more scrutiny"?  If someone legit wins a jackpot and insists on multiple W-2G's what potential extra "scrutiny" is there?

Roy Furukawa Mar-11-2022

Good to Know

I didn't know about Form 5754, so that's interesting and good to know. The reality is I have yet to hit something that big that I would need to ensure everyone pays their share of the taxes.

Eileen Mar-20-2022

Splitting Jackpots

rokgpsman - when the lottery gets really big my husband and maybe 8 of his Legion friends chip in for tickets. Husband always sends an email to all who participated with the lottery ticket numbers before the drawing - so if they ever win big (ha ha) everyone has proof as to which numbers are theirs (especially since we buy a few for ourselves too).

Question of the Day - 11 March 2022

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