Why Was My W-2G for $3,045 When the Royal was for $3,000?

Recently, I was playing quarter 10-handed Ultimate X Bonus Streak. On one iteration, I hit a royal flush that paid 12,000 quarters (4000 x 3 multiplier). Of the other 9 hands, 3 paid 60 quarters each for a total payout of $3,045. The W-2G I received was for $3,045. Shouldn’t it have been for just the $3,000 royal payout? Why are the other 3 hands that totaled $15 each included, since they were well below the 600-to-1 threshold? Which leads me to another question. If I were to hit a 10-handed jackpot where each hand paid 540 quarters for a total of 5,400 quarters or $1,350, would I be subjected to a W-2G? I can’t seem to understand how to reconcile the two situations.

[Editor's Note: Bob Dancer, who's received enough W-2Gs in his career to make him as expert in that area as he is in video poker itself, answers this one.]

You seem to want the casino to handle Ten Play games as 10 separate bets for tax purposes. It doesn’t work that way. For tax purposes, the entire bet you made ($25) was one bet. On that one bet, you received a total payout of $3,045. A W-2G was properly made out in that amount.

In your second example, a $1,350 jackpot would likewise be issued a W-2G.

The 600-to-1 threshold doesn't apply to video poker (or slots). Which means you do not receive W-2Gs on single-line royals for pennies, nickels, dimes, or quarters -- even though those typically return 800-for-1.

For your reconciliation purposes, keep in mind the W-2G is issued for the entire jackpot, which is not the same as the amount won.

For example, assume you're playing $1 Triple Play and are dealt and hold a $400 jackpot on each line. That totals $1,200. It's W-2G time. Many players have argued that this is a win of only $1,185, because they had to pay $15 to earn the $1,200. Again, the win is irrelevant for tax purposes. It's the bottom-line payout that counts.

These players can argue the point until the cow that jumps over the moon to chase flying pigs is blue in the face. But until they sign the W-2G, they won't get paid.

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RichM Mar-29-2022

New bill to raise threshold to $5000

Good news! Rep. Titus has introduced a bill with bipartisan cosponsorship that would raise the IRS reporting limit to $5000 and index it to inflation! Everyone should tell their Congressperson to vote for this bill.

Dave Mar-29-2022

New bill to raise threshold to $5000

Even IF the Senate goes along with that, which I doubt.  The Current Administration would like nothing better than to hire 87,000 IRS employees, to track $600.00 transactions out of your bank accounts.  Do you honestly think they will sign off on $5K W2-G's?
But on the other side of this, the casinos would love for that to happen.  Less IRS paperwork for "Jackpots", so they would not have to bring that pesky W2-G as a reminder about the TAX BURDEN you just incurred.  So, if you hit a Royal playing a $1 and win $4k (the little "JACKPOT" doesn't appear on the screen) odds are the average player will just sit there and run the money back into the machine and think nothing of it.  But do you really think the IRS won't have a way to track that, even without a W2G, they still want the taxes for the win.  If a player doesn't claim it on the 1040, that is tax evasion, and that is a felony.
Just something to think about…

jay Mar-29-2022

Broke

You play with after tax money, you should win after tax money and the casino should be taxed on its profits. If you buy a chair the seller is taxed on his profit on the chair, you do not get taxed for sitting in the chair. Why is gambling any different. 

Not withstanding the current US tax laws say all wins must be reported regardless of amounts - will John Q public do that without paper, not likely. If they raise the reporting limits the US government is going to lose revenue due to people not reporting their wins. With a Trillion dollar/yr deficits any bill to raise the reporting limit is going to die on the vine. None of the moral majority will feel any regret over holding the line on sin taxes.

Sin taxes are easy pickings... look at a pack of smokes or a bottle of booze in Canada. Generally 2x that of the US. If they can't gain ground on gun ownership I would think taxing guns and ammo are the next target.  Get it all passed in the name of socialized healthcare.

David Mar-29-2022

Gambling and lottery winnings should not be taxed

We don't have a revenue problem, we have a spending problem.

Walter Suttle Mar-29-2022

Spending problem

I agree, we do have a spending problem. 985 billion for the defense department and growing every year. With a third of that we we would still outspend every individual country in the World. With the other 2/3rds we could repair every road and bridge as well as 5G across the Country. Hell we could have high speed train service and still give a third back to the taxpayers in the form of rebates or stimulus.

Robert Greene Mar-29-2022

Better Question???

A better question is posed by this hypothetical:  I wager $100 on a ten-line $1.00 poker machine on which max bet is 10 coins per line.  I win on only one line, and a jackpot of $1,200.  My net win is $1,100 -- WELL under the limit.  I was told once (never bothered to read the IRS Code itself) that the required reporting wording is "NET wins over $1,199," and if true, this is clearly the wrong result.  It does, however, illustrate the principle: "The IRS will always interpret any tax regulation in their own favor unless and until someone takes it all the way to tax court to dispute it.  The SLOTS Act needs to be passed NOW!

That Don Guy Mar-29-2022

re: Better Question???

I think there's one exception to the "gross win, not net" rule: you can deduct the amount of the buy-in from reported winnings in a poker tournament.

Ray Mar-29-2022

Whine whine whine

"They should do it this way". "It shouldn't be taxed". "They'll never change it". Read Bob Dancer's answer. The short version? It is what it is. Sign the form.

markvi Mar-29-2022

Buffalo win

Was just in South Point and saw a woman get 73 free spins on Buffalo. The winnings on all the free spins drove her total winnings on her original spin to $1,379. "Wait for Attendant" Confirmed that free spins are not counted as separate bets.

Question of the Day - 29 March 2022

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