I keep strange hours. Sometimes I’m up all night. Sometimes I’m up all day. Overall, I get my sleep, but nobody knows at any given time of day whether I’ll be awake or not.
At about 2 a.m. on a recent night, I was writing an article when I received a text message from a friend, George. The message showed two jackpots. One was for deuces with an ace kicker for $3,400 on a $1 13-4-3-3 Deuces Bonus game with two progressives, and the second was for the royal itself — $8,000. By looking at the numbers for the screen shots, they must have hit almost back to back.
I responded with “Congratulations,” but didn’t say more. This is not a friend who sends me pictures of every W2G he gets, and I don’t want to turn him into one.
As soon as I sent off the congrats, he texted “Can we talk?” I didn’t know what it was about, but I called him right away.
It turned out that he hit the aces jackpot and his sometimes-partner, Cliff, hit the royal. He said this time they were partners on all of the scores.
Cliff, it turns out, is a Canadian citizen in the United States on a permanent work visa. He has a temporary driver’s license, which gets renewed one year at a time, because he is not a United States citizen.
The floor person noticed the temporary license and asked about it. When she found that Cliff was a Canadian citizen, she said the casino was required to withhold 30% of the W2G — $2,400. Cliff has previously earned hundreds of W2Gs and this is only the second time money has been withheld.
When the money is withheld, it is sent to the appropriate taxation department in Canada. To retrieve any or all of it, Cliff would need to file a Canadian tax return. Right now, he only files United States returns.
The slot supervisor showed up and told Cliff that the 30% would be withheld, period. It would be withheld temporarily if Cliff said he could bring in a United States passport or a non-temporary driver’s license. If Cliff didn’t think he could produce one of those in the very near future, the money would be sent to Canada.
So, George asked my advice as to what to do.
I told him that my read was that the casino was acting appropriately. That’s the law. The $2,400 they were withholding wasn’t doing the casino any good because they had to forward it to Canada, but refusing to do it could get them into trouble if it was discovered.
I suggested that Cliff’s options were to become a United States citizen (which I understand is his intention, but it is sometimes a lengthy process), accept that losing 30% of jackpots occasionally was just an expense of doing business, or, perhaps, find another way to earn money.
I had no advice about filing a Canadian tax return. I don’t know the rules and can’t speak to the advantages and disadvantages of going that route.
Although I’ve met Cliff and like him, George is my friend. I suggested that if George and Cliff are going to continue to be occasional progressive-chasing partners who share some or all of jackpots, then this potential of 30% being withheld should be explicitly discussed. Right now, George and Cliff are sharing that 30% “penalty.” It probably hadn’t been discussed because it hadn’t happened recently, but now that it’s out in the open, it needs to be discussed.
I don’t particularly care how they resolve it. It could be that Cliff is the dominant partner and George is lucky to be allowed to tag along. In that case, sharing in the 30% is probably correct. If Cliff is the more knowledgeable partner, a different arrangement would be appropriate.
There are privileges that are associated with being a U. S. citizen. This particular one has been agreed to by treaty and is not likely to be changed in the near future. The fact that this particular one affects some of my gambling friends is unfortunate, but that’s the law and we all must live with it.
the money is never sent to Canada. It goes to the IRS. Canadians are not taxed by Canada for lottery or casino winnings, won in the US or Canada. When I have won jackpots in Vegas, the casino fills out a 1042-S form (Foreign Person’s US Source Income Subject to Withholding) they then hold 30% which they forward to the IRS. Back in Canada I submit the forms along with my US tax number, (which you are given when you first submit a 1042-S. to the IRS) About 6 month later the IRS sends a me a check for the money the casino submitted to them.
On occasion the IRS may request win/loss statements.
I thought the withholding went to the US treasury and you had to file there to get it back. Canada has no taxes on gambling, unless you’re doing it as a business, in which case they do have business tax. In any case, you need expert tax advice, and the best way to get that is with a good tax accountant, you probably even have to shop around. Las Vegas has a number of tax accountants that specialize in gambling taxes. There are also tax attorneys, but we’re talking a lot more money. You should really figure out the tax situation before you start gambling, many gambling situations that sound good on paper are dogs after taxes. There’s a book, “Tax Help for Gamblers”, that might help you get started.
Canada is in no way involved in this event. Canada does NOT tax non residents, except on income originating there.
The only “permanent work visa” that I’m aware of is a green card. If that is what George has he is allowed a normal license except that the license won’t be valid past the green card (10 year validity) expiry date.
I will assume “George” has a Social Security number and can prove US residency. He most likely can just file only a US tax return and claim the withholding as a payment towards any tax owed.
The withholding goes to the IRS not to Canada. Presumably he is already filing a US tax return that includes W-2Gs so this amount should just go into his account and will count toward any tax owed or refund due at the end of the year.
I am a Canadian citizen and regularly hit jackpots of over $1200.00. The casino then holds back 30% from me . The money does not go to Canada, it goes to the US IRS. I am a visitor all winter and stay almost 6 months. Every year in March or April I file a US tax return for non residents. If my losses are greater than my winnings, I get all my money back with a US treasury check. If your winnings are greater than your losses you get a percentage back. There are no gambling taxes in Canada.
I am a Canadian citizen. I can confirm that the previous poster is correct. The 30% withholding has absolutely nothing to do with Canada. The withholding is required by the IRS
The 30% withheld amount is recoverable by filing a US non resident tax return (form 1040NR), and having the IRS accept that you are a net gambling loser for the year.
While not my area of expertise, I believe the casino sends the money to the IRS not to the Canadian tax agency. Canada doesn’t tax gambling winnings. If Cliff files a 1040, it would be business as usual. If he files a 1040-NR that is another subject. He should look for either a CPA or EA who specializes in gambling taxes and see if he can find one that also has extensive experience with Canadians.
The comments above are correct. As a Canadian, I once had 30% of a tournament win in the US withheld. I had to file a US tax return to get it back.
Should have suggested they share the jackpot and have casino file IRS 5754. That way George could have got his whole 50%.