tax recoveries?
and suppose the next 3hr or days you manage to win that 3k-5k$ right back, do you owe taxes on your winnings but not really winnings just recoveries? if so thats more then a -0.5 disadvantage you are playing with , i am not saying blackjack is beatable but with 1-10 spread or 25-250 needing atleast 29 grand right off the bat knowing you could lose 1/2 of it in a short time and having the pit boss say off the floor with you like Colin jones had on youtube video it all seems like a giant head if you owe the tax man money on your break even bets lol but again im sure you can extract money from the tables so many have claimed so in the past...
What if I go on monday and lose 1k, then go on Friday and win 1k. Again is that 1 week long session or 2 separate sessions? What about the year? Is it 1 long session or many many throughout? There is always debate on what is correct.
thats dumb and retarded to the 5th power, does the casino assist the government on your wins/losses?
Quote: sidthesquidi guess i should make things more clearer, what is the legal stand point ? if you lose 2k$ in 2 weeks and win 2k$ in 2 weeks you really do owe taxes on 2,000 win?
thats dumb and retarded to the 5th power, does the casino assist the government on your wins/losses?
That is my point. The legal stand point is so ambiguous that there is no clear cut definition. Casinos however do not assist in tax related matters unless they issue a 1099 or w2g.
if they dont log your actions i guess you claim what you "felt" was a win
Quote: sidthesquidso if i win 3k-5k$ do they have me sign anything at the table or cage? god thats so stupid when your down the hole your really down the hole times two x2
if they dont log your actions i guess you claim what you "felt" was a win
They don't do forms for wins on tables unless it is a huge side bet win.
Gambling taxes are mostly an on your honor type thing.
Quote: sidthesquidso if i win 3k-5k$ do they have me sign anything at the table or cage? god thats so stupid when your down the hole your really down the hole times two x2
if they dont log your actions i guess you claim what you "felt" was a win
If you are gambling large amounts and are really that concerned, do yourself a favor. Find a seasoned tax attorney, preferably a CPA, plunk down a few hundred $$ and have him answer your questions. Short of that, spend a few hours researching on the web.
The fact is that for most, this won't be an issue. The IRS is doing fewer and fewer audits each year. Less than one in a hundred returns are being audited. A tax pro can tell you how to avoid red flags that can raise IRS suspicions.
Topic 419 - Gambling Income and Losses
The following rules apply to casual gamblers. Gambling winnings are fully taxable and you must report them on your tax return. Gambling income includes but is not limited to winnings from lotteries, raffles, horse races, and casinos. It includes cash winnings and the fair market value of prizes, such as cars and trips. For additional information, refer to Publication 525, Taxable and Nontaxable Income, or review How Do I Claim My Gambling Winnings and/or Losses?
Gambling Winnings
A payer is required to issue you a Form W-2G (PDF), Certain Gambling Winnings, if you receive certain gambling winnings or if you have any gambling winnings subject to federal income tax withholding. You must report all gambling winnings on your Form 1040 (PDF) as "Other Income" (line 21), including winnings that are not subject to withholding. In addition, you may be required to pay an estimated tax on your gambling winnings. For information on withholding on gambling winnings, refer to Publication 505, Tax Withholding and Estimated Tax. If you are considered a nonresident alien of the United States for income tax purposes and you have to file a tax return, you must use Form 1040NR (PDF), U.S. Nonresident Alien Income Tax Return. Refer to Publication 519, U.S. Tax Guide for Aliens, and Publication 901, U.S. Tax Treaties, for more information.
Gambling Losses
You may deduct gambling losses only if you itemize deductions. However, the amount of losses you deduct may not be more than the amount of gambling income reported on your return. Claim your gambling losses on Form 1040, Schedule A (PDF) as an "Other Miscellaneous Deduction" (line 28) that is not subject to the 2% limit. A nonresident alien of the United States cannot deduct gambling losses.
Recordkeeping
It is important to keep an accurate diary or similar record of your gambling winnings and losses. To deduct your losses, you must be able to provide receipts, tickets, statements, or other records that show the amount of both your winnings and losses. Refer to Publication 529, Miscellaneous Deductions, for more information.
https://www.irs.gov/taxtopics/tc419.html
I do know that some people write about how they are treated in an audit situation, etc. but starting with the information above, and diving deeper into it with all the links if necessary, is the place to start. The key that I always see mentioned is to have good Recordkeeping. Without that, the auditor can easily disallow a lot of things should they be so inclined and you would not have room to fight their decision since you did not follow the basic rules.
Quote: RonCThis conversation should start with the IRS (assuming that your activity is in the US and you are a citizen/resident of the US):
Topic 419 - Gambling Income and Losses
The following rules apply to casual gamblers. Gambling winnings are fully taxable and you must report them on your tax return. Gambling income includes but is not limited to winnings from lotteries, raffles, horse races, and casinos. It includes cash winnings and the fair market value of prizes, such as cars and trips. For additional information, refer to Publication 525, Taxable and Nontaxable Income, or review How Do I Claim My Gambling Winnings and/or Losses?
Gambling Winnings
A payer is required to issue you a Form W-2G (PDF), Certain Gambling Winnings, if you receive certain gambling winnings or if you have any gambling winnings subject to federal income tax withholding. You must report all gambling winnings on your Form 1040 (PDF) as "Other Income" (line 21), including winnings that are not subject to withholding. In addition, you may be required to pay an estimated tax on your gambling winnings. For information on withholding on gambling winnings, refer to Publication 505, Tax Withholding and Estimated Tax. If you are considered a nonresident alien of the United States for income tax purposes and you have to file a tax return, you must use Form 1040NR (PDF), U.S. Nonresident Alien Income Tax Return. Refer to Publication 519, U.S. Tax Guide for Aliens, and Publication 901, U.S. Tax Treaties, for more information.
Gambling Losses
You may deduct gambling losses only if you itemize deductions. However, the amount of losses you deduct may not be more than the amount of gambling income reported on your return. Claim your gambling losses on Form 1040, Schedule A (PDF) as an "Other Miscellaneous Deduction" (line 28) that is not subject to the 2% limit. A nonresident alien of the United States cannot deduct gambling losses.
Recordkeeping
It is important to keep an accurate diary or similar record of your gambling winnings and losses. To deduct your losses, you must be able to provide receipts, tickets, statements, or other records that show the amount of both your winnings and losses. Refer to Publication 529, Miscellaneous Deductions, for more information.
https://www.irs.gov/taxtopics/tc419.html
I do know that some people write about how they are treated in an audit situation, etc. but starting with the information above, and diving deeper into it with all the links if necessary, is the place to start. The key that I always see mentioned is to have good Recordkeeping. Without that, the auditor can easily disallow a lot of things should they be so inclined and you would not have room to fight their decision since you did not follow the basic rules.
Good concise excerpts. You must be able to itemize on a Schedule A to deduct your losses ( as opposed to taking the standard deduction. You have to take the higher of the two).
Quote: lilredroosterYou can only deduct your gambling losses down to zero, not below zero. And then if you have done that you have lost your standard deduction which is intended for general living expenses. If that is what happened then you got creamed by Uncle Sam. And he didn't even provide any vaseline.
That's the part that most don't understand. If win 20k and then have 20k loss people figure oh no big I can deduct it all. However if you are going from the ez form to long form then you just lost about 2k in real money. That amount may be off, I have no idea what the amount is but it is definitely substantial.
Quote: GWAEThat's the part that most don't understand. If win 20k and then have 20k loss people figure oh no big I can deduct it all. However if you are going from the ez form to long form then you just lost about 2k in real money. That amount may be off, I have no idea what the amount is but it is definitely substantial.
Actually, it's not quite that bad. As long as you document your wins AND losses, you can report only the net win as income and still file the short form. True, if your net result is negative, you can't subtract that from other income. But offsetting your gambling wins with documented losses (and your personal records are usually good enough) doesn't torch your standard deduction.
There is an exception to even that, though. If you file multiple Schedule Cs, you can report a loss from your gambling activity (i.e., that was intended to generate income) just the same way as you can report a loss from the operation of your donut shop (never should have hired that fat kid). You close all Schedule Cs into your 1040. The key is whether you've shown your gambling activity to be a purposeful (and successful) generator of income.
I believe it's called Schedule C.
Quote: RSTLDR: You can deduct your losses against your wins, and only pay taxes on your net win. You can even deduct expenses (travel, food [when out of town], lodging, airfare, etc.).
I believe it's called Schedule C.
You can only deduct expenses if you file as a professional
Quote: RSTLDR: You can deduct your losses against your wins, and only pay taxes on your net win. You can even deduct expenses (travel, food [when out of town], lodging, airfare, etc.).
I believe it's called Schedule C.
You can only include your gambling activities on a Schedule C if you have demonstrated that those activities are purposefully to generate income. The IRS will look at your personal history, including past Schedule C filings. You will have to have shown a profit in at least two of the five previous years (that may be different this year).
So just cooking up a Schedule C because you had a big win and deducting the cost of all those buffets won't cut it. A W2-G combined with a new Schedule C filing is a giant audit red flag.
Seeing how he was referred to me by a future member of the Blackjack Hall of Fame, I'll stay with him.
I don't see what was wrong with my post. I certainly hope someone didn't expect to get answers from a bunch of accountants on here....and OP would be able to look into advice given. What I said is correct, you can deduct losses & expenses against your wins when you file Schedule C. As far as how or who can file schedule c, I have no idea. But from the OP saying he's a card counter (or heading toward that path), I'd assume he can file as a professional. Or did you expect me to lay out all the terms and requirements for someone to file schedule c?
IOW: Look into filing Schedule C so you can deduct losses & expenses against your wins.
"Gambling losses are indeed tax deductible, but only to the extent of your winnings. However, the deduction for your losses is only available if you are eligible to itemize your deductions. If you claim the standard deduction, then you can't reduce your tax by your gambling losses."
Right, but the bigger point is that winnings go to AGI, losses are deductions after that. You can't subtract losses from winnings for the purposes of computing AGI. In other words, if you make $35k/year at a day job and don't gamble at all, your taxes will be lower than if you make $35k/year, then you also make $20k counting cards and lose that $20k the next month shooting dice. While your net may be the same in both cases, your AGI is higher in the second case (and therefore, so is your tax bracket):Quote: lilredrooster"Gambling losses are indeed tax deductible, but only to the extent of your winnings. However, the deduction for your losses is only available if you are eligible to itemize your deductions. If you claim the standard deduction, then you can't reduce your tax by your gambling losses."
Quote: IRSYou can claim your gambling losses up to the amount of your winnings on Schedule A, Itemized Deductions, under ‘Other Miscellaneous Deductions.' You must report the full amount of your winnings as income and claim your allowable losses separately. You cannot reduce your gambling winnings by your gambling losses and report the difference. Your records should also show your winnings separately from your losses.
https://www.irs.gov/uac/newsroom/five-important-tips-on-gambling-income-and-losses-1
Bottom line, anyone gambling for a significant amount of money, or as a professional endeavor, should discuss the tax ramifications with a CPA. It's just the cost of doing business, but doing it wrong may mean an unpleasant future surprise.
Quote: billryan
Seeing how he was referred to me by a future member of the Blackjack Hall of Fame, I'll stay with him.
I'm curious how someone would know whos a future member of the BJ HOF. The HOF, and ball, are based as much on politics tas accomplishment, although you'd certainly need an abundance of both. I just don't know how anyone can be certain of a future member with the amount of politics involved.
Quote: lilredroosterJoeshlabotnik: You're giving out wrong info. I'm not sure why. Deducting your gambling losses does cause you to lose your standard deduction. Here is a cut and paste from Turbotax. It couldn't be any more clear.
"Gambling losses are indeed tax deductible, but only to the extent of your winnings. However, the deduction for your losses is only available if you are eligible to itemize your deductions. If you claim the standard deduction, then you can't reduce your tax by your gambling losses."
That's actually incorrectly stated. You are allowed to report a NET AMOUNT as gambling income--of all your wins AND losses--and you can report that as regular income. If your losses exceed your winnings, you can write up a schedule proving that, attach it to your W2-Gs, and report zero income from that activity.
Where TurboTax gets it wrong is that the law is actually that gambling losses can be used to OFFSET gambling wins.
I've been having the same Vegas acccountant do my taxes for fourteen years, and most of those years, I've had W2-Gs. He says that many people, including those at the IRS, misconstrue how gambling income should be reported.
It's true that if you show a net gambling loss, you have to be a Schedule C filer to claim it. But even THAT doesn't force you onto the long form 1040 (and force you to itemize your deductions). That's another common misconception.
Not according to the IRS quote I linked above. "You must report the full amount of your winnings as income and claim your allowable losses separately."Quote: JoeshlabotnikThat's actually incorrectly stated. You are allowed to report a NET AMOUNT as gambling income--of all your wins AND losses--and you can report that as regular income. If your losses exceed your winnings, you can write up a schedule proving that, attach it to your W2-Gs, and report zero income from that activity.
There is some wiggle room on what constitutes a session for the purposes of defining wins. Winning a $5 bet and then losing it on the next hand doesn't trigger reporting requirements. But if you win $10k in January and lose $8k in August, you don't get to report just $2k in gambling income for the year. That much is crystal clear.
Quote: KellynbnfIf you have any gambling income to be reported (even without deducting losses) I believe you have to use the long form to begin with since there isn't a space on 1040EZ (or 1040A for that matter) to report that kind of income.
For fourteen years, my accountant has simply supplied a supplementary schedule showing my income from all sources and closed that number into the appropriate line on my 1040 (short form). We used the long form when I filed a Schedule C as an AP, but I haven't done that since 2005 as it hasn't been my primary income-generating activity since then. Never been audited, never heard a peep from the IRS (for what that's worth). But my accountant has been practicing in Vegas for 30+ years, so I assume he knows what he's doing.
One year, I did have over $1 million in W2-Gs, had good records, filed a Schedule C, and closed my net gambling income of $28,000 into my 1040. Easy.
Quote: Joeshlabotnik
One year, I did have over $1 million in W2-Gs, had good records, filed a Schedule C, and closed my net gambling income of $28,000 into my 1040. Easy.
This is how it's done for professional gamblers.
For recreational gamblers, you must break up your gambling into sessions. The winning sessions are added to your AGI and the losing sessions are subtracted as itemized expenses. In my opinion, this is garbage, since a higher AGI can phase out deductions, such as student loan interest, and can phase out credits such as the Child Tax Credit. It will phase these out regardless of how much losses you can itemize.
Quote: CrystalMathThis is how it's done for professional gamblers.
For recreational gamblers, you must break up your gambling into sessions. The winning sessions are added to your AGI and the losing sessions are subtracted as itemized expenses. In my opinion, this is garbage, since a higher AGI can phase out deductions, such as student loan interest, and can phase out credits such as the Child Tax Credit. It will phase these out regardless of how much losses you can itemize.
I have told the story on here in the past. As the years go by my numbers are not triggering in my memory. Anyways, the basic story is. We were on an income based repayment plan for student loans. Our amount to pay was very very very low. One year we had muliple w2gs. We also had enough loses for the year to offset all wins. This wasn't a made up amount, we were more than 1k negative for the year. The 8k in w2gs went to our AGI. We ended up paying $2100 in taxes because of the w2gs. The 8k was not enough for us to offset the w2gs. Because of the AGI our student loan payment was increased by $210 a month.
So in summary.
Lost 1k in the casino for the year
We received 8k in w2gs
Paid $2100 in taxes because of them
Paid $2510 in student loans because of increased agi
So the w2gs cost us $4600 even though we had a net loss for the year. This part of the tax code is very broken.
The best way, both financially and legally is to fill out a 1040 however you see fit based on your best interpretations and see if the IRS will accept it. I've done it that way for a while and they've never once had a problem (admittedly that is for an average of between $1,000 and $2,000 per month). If they ever disagree with your interpretations, then pay whatever they say you should pay and move on to the next year. If you ever get screwed over too severely (or worry too much about it), then start paying one of the professionals who specialize in this area.
Quote: CrystalMathFor recreational gamblers, you must break up your gambling into sessions.
My gambling session started sometime in the 1990s and hasn't yet ended. I could accept if the IRS believes it should be shorter, in which case I'll start a new session every January and have it end every December.
There's caselaw that says that interpretation isn't correct so it's not even a proper starting point. The tax practitioners seem to be focusing on the "session" as a unit of play, which naturally isn't defined, but certainly a "session" isn't the entire year as you suggest in your next post. If I play VP in the morning, I stop for lunch, and then I play blackjack in the afternoon, that's at least two sessions.Quote: TomGBased on the wording, we should be itemizing all of the one million hands of video poker we see in a year. However, no one has ever done that and the IRS would never ask you to. So based on precedence, the law is something different than what is actually written.
But I'm not an AP, and "session" play and the prohibition on netting out wins/losses only applies to a casual gambler. Professionals get to file as a business and deduct losses (and other expenses) off the top as expenses so they only need to report net income. Here's a slide deck I found online:
https://www.calt.iastate.edu/system/files/premium_video_files/Gambling%20audits.pdf
Many of the tax court decisions listed in that document come up on top of searches. Worth reading if you'd rather not hire a CPA. But if I were an AP, I'd definitely hire a CPA...
Quote: mcallister3200I'm curious how someone would know whos a future member of the BJ HOF. The HOF, and ball, are based as much on politics tas accomplishment, although you'd certainly need an abundance of both. I just don't know how anyone can be certain of a future member with the amount of politics involved.
The person that is most deserving of being in the BJ HOF is the person out there crushing the game and nobody knows his/her name.
Quote: JoeshlabotnikThat's actually incorrectly stated.....That's another common misconception.
The only thing incorrect or classified as "a common misconception" is that you have even a basic understanding of tax law.
Really, your "sources of knowledge" are the fact that you use the same "Vegas Accountant" for fourteen years and he/she tells you "many people, including those at the IRS misconstrue how gambling income should be reported"!
Sounds like solid advice compared to the actual quotes from IRS Publications and case law cited by ME and CrystalMath above. What a joke...but considering the source, the value of the input met expectations!
https://archives.fbi.gov/archives/news/stories/2007/june/gambling_060607
Quote: JoeshlabotnikFor fourteen years, my accountant has simply supplied a supplementary schedule showing my income from all sources and closed that number into the appropriate line on my 1040 (short form).
Never been audited, never heard a peep from the IRS (for what that's worth). But my accountant has been practicing in Vegas for 30+ years, so I assume he knows what he's doing.
That's the problem, you don't know if it is proper until you get audited.
Quote: DRichThat's the problem, you don't know if it is proper until you get audited.
Being audited doesn't mean that you've done anything improperly, either.
The problem is that the IRS on the one hand recognizes that income tax should be paid on a yearly basis on the aggregate of all income, not on each individual income-generating event, and on the other hand, looks at W2-Gs and treats the gross amounts on them as "winnings." (If you've ever gotten a $2000 W2-G and still been, say, $5000 in the hole, you'll laugh at the idea that you've "won" anything.)
The best approach, according to my accountant, is to just declare the sum of all your gambling results--wins and losses--as a single figure and support that calculation with an addendum sheet. He says that none of his clients have ever been hassled when they did that. I think that what the IRS is really after is a way to reconcile all those W2-Gs.
Quote: ParadigmThe only thing incorrect or classified as "a common misconception" is that you have even a basic understanding of tax law.
Really, your "sources of knowledge" are the fact that you use the same "Vegas Accountant" for fourteen years and he/she tells you "many people, including those at the IRS misconstrue how gambling income should be reported"!
Sounds like solid advice compared to the actual quotes from IRS Publications and case law cited by ME and CrystalMath above. What a joke...but considering the source, the value of the input met expectations!
No need to show your ignorance. I've talked to the IRS directly dozens of times about this exact issue. Everyone I've talked to agrees that the issue is murky, the law is vague, and the practices are uneven. The IRS publications often contradict one another.
I was an accountant for over a dozen years. But rather than doing my own taxes, I sought out an accountant who had a reputation as an expert in IRS gambling taxation, and I conversed for dozens of hours with IRS officials as well. I also looked up existing case law. I had a lot at stake back then, so I wanted to get it right.
So yes, I actually AM somewhat of an expert, especially compared to you. I don't really recall what your reason might be for attacking and insulting me. Maybe you're a Trumper.
Disclaimer: this might get you into club fed.
Disclaimer: I took an accounting 101 class in college
Quote: djatcJust throw away all w2gs and don't file. I saved you guys 50+ pages of discussion.
Disclaimer: this might get you into club fed.
Disclaimer: I took an accounting 101 class in college
Whatever you do just don't give them a fake drivers license and a made up SS#. They won't be able to find you to inform you of your mistake.
