Can We Avoid a W-2G if We Both Hit the Draw Button at the Same Time?

Hypothetical situation: My friend and I put $50 each into a video poker machine. We’re each hitting the buttons. We hit 4 aces with a kicker for $2k. When paid, we ask that we each get $1,000. Will they split the payment? Will this avoid the W-2Gs?

Probably not, at least according to our experts Jean Scott and Russ Fox in their book Tax Help for Gamblers — plus some informal discussion with Jean about this hypothetical situation.

From the book:

“Gambling groups can range from informal partnerships between two friends who pool their bankrolls to reduce individual risk in playing at higher levels to large blackjack or progressive-machine syndicates that organize for major gambling endeavors. IRS form 5754, Statement by Person(s) Receiving Gambling Winnings, can be used for these group arrangements. This 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 receiving a W-2G for the total amount.

“The person who wins a tournament or jackpot fills out Form 5754 with the names and Social Security numbers of any persons who share in this win and gives it to the casino. The casino is required to accept this form and issue individual W-2Gs based on the information furnished on it.”

That’s the background and yes, we realize that the question is about avoiding the W-2G altogether. But this is where we get to the crux of the situation. Back to the book:

“Many casino employees, especially those who pay off machine jackpots, are either unaware of this form or unwilling to bother with it. A player could insist, but most won’t, because of negative consequences.”

Tax Help goes on to discuss a few possibilities, but they’re not relevant to this answer. What’s important here is what Jean told us based on her personal experience.

“The employee has a jackpot to pay that has triggered the issuance of tax paperwork by the casino. A couple of machine players would have to claim something to the effect that they both had their fingers on the draw button at the same time when the jackpot was hit. Now the employee needs to bring the situation to a supervisor and the supervisor needs to bring it to surveillance — all in an effort to verify the draw-button claim. I highly doubt that any casino would go to all that trouble, especially not for a measly two-thousand-dollar jackpot. In fact, if it ever did escalate through a supervisor to surveillance, someone would probably start getting suspicious. It’s not much of a stretch for a slot supervisor to figure out that these two machine players are going to great lengths to try and avoid paying taxes on the jackpot.

“And let’s not forget that all this is happening before the casino pays out the two k on the jackpot. If I were the supervisor, I’d ask the players, ‘Do you want the money or don’t you? If you do, one of you has to claim it.’

"And the player who does is issued the two k and W-2G. Then he or she issues a 1099 to the other player for his or her half.

“Finally, from a strictly legal point of view, this is all moot to begin with, because even if, by some miracle, the casino went along with this scheme, each player would still owe taxes on the thousand dollars. Whether or not you receive a W-2G, you still have to pay Uncle Sam his share of gambling winnings.”

No part of this answer may be reproduced or utilized in any form or by any means, electronic or mechanical, without the written permission of the publisher.

Have a question that hasn't been answered? Email us with your suggestion.

Missed a Question of the Day?

Have a Question?

Tomorrow's Question

Has Clark County ever considered legalizing prostitution?

Comments

Jackie Jun-22-2019

Casino Attitude

Jean is right. I won a $750 jackpot in a Let-it-Ride game at Harrahs Tahoe.  Normally I would be paid the $750 and the game goes on but instead I was asked for my SS card and ID for filling out the W-2G. I protested stating that it was unneeded for that amount.  First thing out of the Pit boss mouth "you want the money or not", of course I took the money and while waiting for it listened to the dealer calling me all kinds of tax cheat.  I took the cash, left Harrahs bu told the pit boss and dealer they were stupid I would would be filing a complaint with the GC.  The GC came back to me with an answer of "You were correct that a W-2G was not required by IRS law, but any casino may set it's on policy of issuing W-2Gs for lesser amounts than $1199".

Pat Higgins Jun-22-2019

Pat H

Not really a big deal.  We keep detailed logs of our wins and losses & if we get a W-2G we write off the losses in excess of our wins which sometimes exceeds the win.  This simply means the losses cancel out the wins.  I know you can only write off losses against wins.  Any excesses losses you cannot take as a deduction.  So at the very least some losses less than the win can make the tax owed a lot lower.  Just keep some records.  I keep a small lined piece of paper in my billfold and write the date, casino amount of win or loss.  Really simple.

Randall Ward Jun-22-2019

w2 g

I do think the limits should be raised but that's just the rules.  I'm just so grateful to get a meaningful win I don't care. When I started going to  Vegas more often I bought Jean's book and just keep records, no big deal.

Ray Jun-22-2019

perception

The problem is that people believe that wins are not taxable unless you get a w-2g. As it was stated, the win is taxable whether or not you are issued the government form. In a related story, I was once part of a group with an online horse wagering site that pooled our money on Breeders Cup races (I was in for $10). My share of the "winnings" was $1.04 and I was issued a w-2g for that amount, my share.

David Jun-22-2019

Treat the disease, not the symptom

The solution is to stop confiscating a portion of gambling winnings in the form of taxes.

Question of the Day - 22 June 2019

Comments