GWAE questions on taxes requested

Russell Fox, tax accountant, will be our guest next Thursday morning.

You can count on a big discussion on the nex tax law —- for gamblers and others

Any suggested questions will be considered

Quote: BobDancer

Russell Fox, tax accountant, will be our guest next Thursday morning.

You can count on a big discussion on the nex tax law —- for gamblers and others

Any suggested questions will be considered

I would just ask if the new tax law makes any real difference? Is there any business expense that a gambler could take before that he cannot take now? Not the personal stuff like the SALT deductions. Can he now write off drink tips where he could not before, or vice versa. (Silly example I know, just making a point.)

As somebody with a full time job that gambles part time, I would like basically just an explanation of how badly I'd be getting screwed and what to expect in the event that I get a few W2-g's (I'm mainly a quarter player) and don't itemize

I am married filing jointly and we now take the standard deduction (house is paid off, etc.) and don't itemize. I play several several poker tournaments a year. When I win, say $5000- $9000, in a poker tournament and get a W2G I am effectively unable to claim any gambling losses such as entry fees for tournaments in which I did not win (as well as for other gambling losses.)

Can a recreational gambler who has received one or more W-2Gs in my situation go the route of declaring that he has a professional gambling business and thus deduct travel expenses and claim gambling losses as business expenses? I am retired, so have no other occupation.

Reading through the IRS tax code, I believe it said that W-2Gs must be issued to players when a payout is $5,000 or greater or when the payout is at least 50 times the size of the wager.

I have seen high rollers wager $5,000 or more at a blackjack table on a series of hands for lengthy periods. They were not issued W-2Gs on each hand that they won.

I don't recall seeing the casino stop a poker variant table game and issue W-2Gs for a player wagering $5-$10 who makes a straight/royal flush and earns a payout of 50-1 or higher.

Surely, a person playing quarter slots doesn't get issued a W-2G when they hit a 50-1 jackpot and get paid $12.50?

What is the actual casino practice for when to hand out a W-2G? Will the IRS require changes in the future?

Even if you legally report all of your gambling winnings and losses, is there a certain amount of W2G's for example that could get you flagged for an Audit? Say last year I had $1500 in the form of 1 W2G, but this year I have $100,000 in dozens of W2G's. Am I more likely to be flagged for an audit this year?

W-2gs are given out on machines if you hit a payoff of $1200 or more.

On table games to be taxable it has to pay odds of 300 to 1 or more and be more than $600.

So for example on Miss stud you can hit a straight flush for 20k,its not taxable because it only pays 100 to 1 odds.

Just realize many casinos are not even aware of the law and will try to issue you a 1099 or refuse to pay you if you don't show Id and give your SS#.

Quote: Romes

Even if you legally report all of your gambling winnings and losses, is there a certain amount of W2G's for example that could get you flagged for an Audit? Say last year I had $1500 in the form of 1 W2G, but this year I have $100,000 in dozens of W2G's. Am I more likely to be flagged for an audit this year?

I don't know if that matters as long as you claim them all,I have had over a million in w2gs in a few years and never had a problem.

Quote: Hunterhill

I don't know if that matters as long as you claim them all,I have had over a million in w2gs in a few years and never had a problem.

Thanks for the feedback Hunterhill, it's appreciated!

Here's a real good "NEWBIE" tax question then... Don't most audits occur years down the road for a previous year? Isn't the IRS backed up a ton such that if you had an error on your taxes this year you wouldn't hear about it for several years down the road?

I have used Russell Fox for my taxes for the last three years and I strongly encourage other pro gamblers to do the same. He is worth much more than the small amount he charges. I think people might not use him because they expect his services to be more expensive than they are. It is overwhelmingly valuable to have the piece of mind that comes from knowing you are doing things right instead of guessing.

One thing which I learned about last year that I think a lot of other people would like to hear about is when you are required to file state taxes when you earn gambling income in a casino outside your state of residence. I specifically found the laws about income from Native American casinos the most interesting and have even filed returns that I didn't have to in the years before I used Russell because of it. I think the audience should benefit from a question like: when are you required to file an out of state tax return when you have out of state gambling income?

Another thing that I am very curious about is how to properly transfer w2gs from one person to another. Lets say for example that you pay someone to play a machine for you and they hit a big w2g, but only earned a small amount of income from it. You, as a pro gambler, would like to claim that income on your return and have it impact their return as little as possible. This is particularly important in states like Rhode Island, Massachusetts and Connecticut where gambling losses cannot be deducted from gambling wins for amateur gamblers. If this worker claimed the w2g in a normal fashion they could have state tax liability and also federal liability even if they had no net gambling win. What is the proper way to handle this situation? If this involves issuing 1099s, who issues who what? If the worker has an otherwise standard simple filing, is there a way not to complicate that significantly?

Recently on the radio show there has been discussion of using cryptocurrency for online casino bonuses. I wonder what the tax implications of this are for people that are long term holders of cryptocurrency. Does depositing and withdrawing crypto at online casinos create a taxable event? Lets say you buy a bitcoin at 500, hold it for more than a year, and now its worth 6000. You deposit the bitcoin to an online casino. Is that deposit a taxable event? Lets say then you run the 6000 up to 20000 and withdraw to bitcoin. What is the correct way to record this result on your taxes?

From IRS.gov:

Quote:

Keep records for 3 years from the date you filed your original return or 2 years from the date you paid the tax, whichever is later, if you file a claim for credit or refund after you file your return. Keep records for 7 years if you file a claim for a loss from worthless securities or bad debt deduction.Apr 23, 2018

W2Gs are neither of those 7 year retentions. So follow the 3 year rule. They can't audit you more than 3 years back, either, because of this rule.

Quote: beachbumbabs

From IRS.gov:



W2Gs are neither of those 7 year retentions. So follow the 3 year rule. They can't audit you more than 3 years back, either, because of this rule.

I thought if you were caught cheating on your taxes they could audit you back as far as they want.
I guess that would be a good question.

Quote: Hunterhill

I thought if you were caught cheating on your taxes they could audit you back as far as they want.
I guess that would be a good question.

My mom, a recently retired IRS Enrolled Agent, verifies this answer is correct. 3 years, except as specified.

Quote: Hunterhill

W-2gs are given out on machines if you hit a payoff of $1200 or more.

On table games to be taxable it has to pay odds of 300 to 1 or more and be more than $600.

So for example on Miss stud you can hit a straight flush for 20k,its not taxable because it only pays 100 to 1 odds.

Point of order:

1) $600 or more. So exactly $600 on a $2 bet would trigger a W2G.

2) All gambling winnings are taxable. These are just the thresholds for triggering W2Gs.

Yes, if there's no W2G, you'd probably get away with it. I just want the OP to have the facts.

Quote: Hunterhill

On table games to be taxable it has to pay odds of 300 to 1 or more and be more than $600.

So for example on Miss stud you can hit a straight flush for 20k,its not taxable because it only pays 100 to 1 odds.
.

This is incorrect. ALL GAMBLING winnings are taxable to the IRS and you are obligated to report them on your tax return. I think what you are trying to say is that Casino's aren't legally required to issue you a W2-G/1099/etc. if the winnings are less than 300 to 1 on table games.

That obligation to report that money is still there. Whether you do or not is another discussion.

Quote: Dyvan13

Quote: Hunterhill

On table games to be taxable it has to pay odds of 300 to 1 or more and be more than $600.

So for example on Miss stud you can hit a straight flush for 20k,its not taxable because it only pays 100 to 1 odds.
.

This is incorrect. ALL GAMBLING winnings are taxable to the IRS and you are obligated to report them on your tax return. I think what you are trying to say is that Casino's aren't legally required to issue you a W2-G/1099/etc. if the winnings are less than 300 to 1 on table games.

That obligation to report that money is still there. Whether you do or not is another discussion.

Does this mean if I, as a recreational gambler, make $10k in bets over the course of the year, and have total wins equaling $9k, I am liable for that $9k (assuming I'm not itemizing), even though I netted a $1k loss and didn't have any W2-G's?

Quote: Dyvan13

As somebody with a full time job that gambles part time, I would like basically just an explanation of how badly I'd be getting screwed and what to expect in the event that I get a few W2-g's (I'm mainly a quarter player) and don't itemize

similar question:
how does the new law affect, if any, the recreational gambler that has a few w2-g who writes them off with an equivalent amount of losses?

Quote: Dyvan13

This is incorrect. ALL GAMBLING winnings are taxable to the IRS and you are obligated to report them on your tax return. I think what you are trying to say is that Casino's aren't legally required to issue you a W2-G/1099/etc. if the winnings are less than 300 to 1 on table games.

That obligation to report that money is still there. Whether you do or not is another discussion.

You have missed the point. This is not a matter of reporting or not reporting.

Look, imagine you play a blackjack session for eight hours with $600 wagers. You may have made >100 bets that won, but for the session you are down, say $2,000. Should you only report the >100 Bets that won $600?

Same thing in a cash game of poker. You may win $600 on a single hand and be down $1000 for the session.

The problem with federal taxation of gambling is that the casino does not hand out W-2Gs for large losses (or for small wins or for small losses.) And even the gambler does not keep a record of individual bets - they may keep a record of net wins and losses organized by sessions or by days or by trips.

So, handing out a W-2g for a win that is >$600 to a gambler who does not itemize deductions means that he has to pay taxes on the individual event of winning >$600 even if he has lost a far greater amount in the same session. In this situation, the IRS essentially provides no way for a gambler to report the gambling losses that offset the win.

On the W2G forms, they mention "certain gambling winnings", why do they call them certain, what are uncertain gambling winnings?

Quote: Joeman

Quote: Dyvan13

Quote: Hunterhill

On table games to be taxable it has to pay odds of 300 to 1 or more and be more than $600.

So for example on Miss stud you can hit a straight flush for 20k,its not taxable because it only pays 100 to 1 odds.
.

This is incorrect. ALL GAMBLING winnings are taxable to the IRS and you are obligated to report them on your tax return. I think what you are trying to say is that Casino's aren't legally required to issue you a W2-G/1099/etc. if the winnings are less than 300 to 1 on table games.

That obligation to report that money is still there. Whether you do or not is another discussion.

Does this mean if I, as a recreational gambler, make $10k in bets over the course of the year, and have total wins equaling $9k, I am liable for that $9k (assuming I'm not itemizing), even though I netted a $1k loss and didn't have any W2-G's?

Ok. In this SPECIFIC case (net loss, not itemizing), you are sort of, technically, liable for the 9k. But, I'm told you should NOT report it, because you have losses that exceed the wins. Instead, you should keep an accurate casino log, and all receipts that prove you were there, especially ATM withdrawals or checks written for cash to coincide with your visit.

Your scenario, with no W2Gs, is extremely unlikely to generate an audit. However, if you were placed on an audit for ANY reason, it would be looked into, which is why you retain the log and the receipts.

Even if it DID come up in an audit, you would use the offsetting log and receipts to show your net loss, and you would then NOT owe any taxes or penalty on that money. But you have to be able to prove that. So just bundle your records up each year and toss them in the drawer. Get rid of them after 3 years' retention.

The intent of the law is to pay taxes on net wins. The fact that you didn't itemize doesn't negate the fact that you had a net loss.

Per mom, retired IRS EA and Block Exec Tax Svc preparer.

Quote: Dyvan13

Quote: Hunterhill

On table games to be taxable it has to pay odds of 300 to 1 or more and be more than $600.

So for example on Miss stud you can hit a straight flush for 20k,its not taxable because it only pays 100 to 1 odds.
.

This is incorrect. ALL GAMBLING winnings are taxable to the IRS and you are obligated to report them on your tax return. I think what you are trying to say is that Casino's aren't legally required to issue you a W2-G/1099/etc. if the winnings are less than 300 to 1 on table games.

That obligation to report that money is still there. Whether you do or not is another discussion.

Yes ,I meant to say that you won't be issued a 1099/w2g,not that it wasn't taxable.