Tax question

Quote: GWAE

Quote: odiousgambit

I remember you mentioning this before, and it was a matter of the IRS contacting you and saying "where's the W2g pal?" They didn't say "oh I guess during that session he must have lost as much as he won, after all the W2g is meaningless and should be abolished" It may be that you could have responded that you won as much as you lost in the session where you won the W2g, and the truth is at the very least that you at least lost quite a bit vis a vis that damnable thing [I'd bet], but the hassle of making that response would be beyond belief. And you probably didn't keep a diary.

Can you confirm the IRS contacted you, am I remembering right?

Wow your memory is better than mine. I forgot all about that. Yes I ended up filing and not including the w2g and got a nice little letter about a year later saying hey numb nuts, you didn't include your w2g, you owe us 1500 plus interest. I cant remember if I refilled or just sent them the money. I think I just sent them the money since I knew it was correct.

I do wonder if you could fight a w2g saying the session resulted in a zero gain, even though you have a w2g. In that case your agi would not be affected. My guess is the IRs employee would not understand the difference and it wouldn't matter.

Quote: Wizard

Quote: MichaelBluejay

Well, did you read the article? You *do* report your wins as a single integer (and your loss as a single integer, if you're itemizing.) What you *don't* do is subtract your losses from your wins and report the net profit as your income. You also don't submit your daily journal, that's just backup in case you get audited.

I do not dispute this is what you're supposed to do.

Let's look at an example.

Johnny is single with a work income of $100,000. He has absolutely nothing to deduct on schedule A except, perhaps, gambling losses.

The standard deduction for 2018 for individuals is $12,000 (source: forbes.com).

The marginal tax rate for income between $82,501 and $157,500 in 2018 is 24% for individual filers. (same source)

Summing up every individual session, here are Johnny's gambling results for 2018:

Wins: $12,000
Losses: $32,000

If my understanding is correct, he would have to pay taxes on $100,000 in income. Whether he itemizes or not, he deducts the same $12,000 from $112,000 in AGI.

The situation for Mary is exactly the same, except she didn't gamble at all. She uses the standard deduction and pays income on $88,000.

So, John actually lost $20,000 gambling and ends up paying 24%*$12,000 = $2,880 more in taxes than Mary.

Do I have that right? Does that sound fair?

Yes and it sucks! Figure it will cost me over 2-3k this year by not being able to enjoy the larger standard deduction due to false gambling "winnings". Lost a little bit this year so stings to know government is getting paid when there was no true gambling income. Some people just can't see how it costs them money if you write off your winnings as losses. The only ones not hurt are those who already have enough deductions to itemize. If you don't, cha-ching for the IRS.

Excellent article, Michael Bluejay. There is a ton of confusion among gamblers and tax professionals in this area. The people I truly feel for are those non AP types who throw away their money and then don't realize they are getting nailed on the tax side as well.

I say make gambling winnings tax free. It's a losing game for most. It would actually raise revenue and lower expense for casinos. Fewer employees and players would be excited knowing no tax consequences if they win. At the very least, raise the stupid W2G threshold!

I'm surprised the increase in the standard deduction hasn't made bigger news in the video poker community. I will take some blame for that, as I'm supposed to be on top of such things.

Here are the standard deductions for 2017 and 2018:

Filing Status	2017	2018
Single	$6,350	$12,000
Married Filing Jointly or Qualifying Widow(er)	$12,700	$24,000
Married Filing Separately	$6,350	$12,000
Head of Household	$9,350	$18,000

Personally, I have itemized for years, but due to this increase I don't think I will any longer in 2018. That means I'll be paying taxes on my W2G's, despite the fact that 2018 is looking like a losing year for me, thanks to an awful Super Bowl.

Quote: Wizard

Personally, I have itemized for years, but due to this increase I don't think I will any longer in 2018. That means I'll be paying taxes on my W2G's, despite the fact that 2018 is looking like a losing year for me, thanks to an awful Super Bowl.

I am in the same boat. I have also itemized every year but don't think I will be this year. Forunately I haven't gambled as much this year so my W2G's will be a lot less.

I think I will just quit playing video poker if I have to pay taxes on the W2G's and can't offset losses.

Quote: GWAE

. My guess is the IRs employee would not understand the difference and it wouldn't matter.

My experience is that the front line IRS people know nothing about gambling.

I had an experience like you many years ago when I was gambling big. I received a letter from the iRS stating that I forgot to include over $38,000 in W2G's on my taxes. They were not wrong. At that time I was getting many W2G's per week and many just got lost or misplaced. I declared about $400k in W2G's but missed about $38k. They were requesting that I pay about $14k in additional taxes. It took me about 9 months to explain to them that I had additional losses that were not claimed to offset the missing W2G's. After lots of frustration and time spent we came to an agreement that I would pay an additional $1,100 and call it good.

Who will lead the charge to reform this system? Especially when there was enough sentiment out there to even consider lowering the W2-G threshold. Hawaii even passed a law that all wins, even the "you win .95 cents on your $2.00 slot pull" were supposed to be reported as income, with no deductions for losses. The law was overturned, but the sentiment remains; gambling (not just winners) needs to be throttled.

Maybe the budding business in recreational marijuana sales will provide pressure to reform the tax codes regarding "blue" income.

Quote: Wizard

Personally, I have itemized for years, but due to this increase I don't think I will any longer in 2018. That means I'll be paying taxes on my W2G's, despite the fact that 2018 is looking like a losing year for me, thanks to an awful Super Bowl.

This is sick. You earn money at the day job: you pay some tax - that's sad but makes sense.
Casinos make a profit from you (plural) and presumably pay Corporation Tax on those profits.

But if you then entertain yourself with a big chunk of gambling and proceed to lose (generally that's the case) then your income tax payable increases. Is there really any point in trying to be a winner while honestly keeping records and reporting everything?

Quote: OnceDear

This is sick. You earn money at the day job: you pay some tax - that's sad but makes sense.
Casinos make a profit from you (plural) and presumably pay Corporation Tax on those profits.

But if you then entertain yourself with a big chunk of gambling and proceed to lose (generally that's the case) then your income tax payable increases. Is there really any point in trying to be a winner while honestly keeping records and reporting everything?

That's how all taxation works. It is basically a MLM scheme. I employee someone and they pay taxes. They take that money and buy something. The business they buy from has an employee. They use your already taxed money to pay employee and they get taxed. It goes on and on

Quote: Ayecarumba

Who will lead the charge to reform this system? Especially when there was enough sentiment out there to even consider lowering the W2-G threshold. Hawaii even passed a law that all wins, even the "you win .95 cents on your $2.00 slot pull" were supposed to be reported as income, with no deductions for losses. The law was overturned, but the sentiment remains; gambling (not just winners) needs to be throttled.

Maybe the budding business in recreational marijuana sales will provide pressure to reform the tax codes regarding "blue" income.

I don't want to get political (one of the reasons I'm here is that I grew tired of shrieking political discussions), but I was surprised that Harry Reid didn't address the issue when he ruled the Senate.

Harry Reid would have you buy casino chips when the GOP defaults on the federal debt.

Quote: OnceDear

This is sick. You earn money at the day job: you pay some tax - that's sad but makes sense.
Casinos make a profit from you (plural) and presumably pay Corporation Tax on those profits.

I agree. I'm not against paying taxes, but am against the complexity of it all, unfairness, and regressive nature where often the middle class pay a higher percentage than the top 1%.

I'd prefer to see a system based on taxing consumption rather than creation.

Quote: Wizard

I agree. I'm not against paying taxes, but am against the complexity of it all, unfairness, and regressive nature where often the middle class pay a higher percentage than the top 1%.

I'd prefer to see a system based on taxing consumption rather than creation.

There’s an inconsistency there. A consumption tax would result in the middle class paying an even higher percentage than the top 1% vs today.

Quote: Wizard

I'm surprised the increase in the standard deduction hasn't made bigger news in the video poker community. I will take some blame for that, as I'm supposed to be on top of such things.....

I think you may start seeing news stories about it towards tax time. A lot of these ploppies who get $1500 jackpots and then throw it right back in are going to realize they are getting no benefit from the new tax law. I’m surprised I haven’t heard about casinos lobbying to get tax laws changed. You think they would, especially by trying to get the $1200 threshold raised.

I have a lot of w2g’s this year and I am worried. I don’t mind paying taxes on what I make but I shouldn’t be penalized by paying tax on money I didn’t make. I will file as a professional this year so I think I’ll be ok.

Another issue is I have w2g’s in at least 7 different states and I’m worried how that is all going to work out. Last year I used turbo tax and they wanted me to pay $400 in tax to another state on a single $1250 w2g because they said I should also pay tax to the other state on a separate business that I pay tax to in my home state.

The other thing never mentioned is let’s say you are playing $50 video poker. A 4oak pays $1250. They give you a w2g that says you made $1250. The spin cost $50. Right off the bat you didn’t even make $1250.

But don’t worry I’m sure this new Congress will be quick to fix all of this just as soon as they get done investigating Trump for the next 2 years.

Quote: GWAE

I do wonder if you could fight a w2g saying the session resulted in a zero gain, even though you have a w2g. In that case your agi would not be affected. My guess is the IRs employee would not understand the difference and it wouldn't matter.

my experience with asserting one's rights with the IRS, though limited, is not good. Pretty soon it is common that a regular guy realizes "hey I better get a lawyer if I'm really going to prevail here, or just have a chance. "

I have had the experience of having my assertions dismissed rudely

Quote: Wizard

Let's look at an example.....If my understanding is correct, he would have to pay taxes on $100,000 in income. Whether he itemizes or not, he deducts the same $12,000 from $112,000 in AGI. The situation for Mary is exactly the same, except she didn't gamble at all. She uses the standard deduction and pays income on $88,000. So, John actually lost $20,000 gambling and ends up paying 24%*$12,000 = $2,880 more in taxes than Mary....Does that sound fair?

Just answer me this: Did you actually read the article? Because I address that fairness issue head-on.

Quote: GWAE

I do wonder if you could fight a w2g saying the session resulted in a zero gain, even though you have a w2g.

So can I guess that you didn't read the article either? You generally don't have to "fight" a W-2G because you're not supposed to enter W-2G amounts as income in the first place. The only time you'd have a problem is with an inexperienced auditor, in which case you simply quote the IRS rules to them (handily referenced in my article). That year that I got at least $6000 in W-2Gs I reported zero gambling income (because I didn't have any winnings sessions), and the IRS never said a peep.

Congrats on your SAT. I guess those skills don’t help you not be a prick.

Quote: CrystalMath

Congrats on your SAT. I guess those skills don’t help you not be a prick.

The above post is exactly why I don't frequent this forum much.

Quote: MichaelBluejay

You generally don't have to "fight" a W-2G because you're not supposed to enter W-2G amounts as income in the first place.

this does not match what I have done with online filing since 2008. (using online software)
The last year I received a w2g was in 2016, and all w2Gs added up and were placed on line 21 and nothing I could do to stop it.

well, that means turbo tax has been doing this wrong (by your explanation)
dating back for me from 2016 to 2008. (when I retired from full-time work)
some years they called it a different name (other income statement) as did a few other companies,
but same result.

all w2gs got added to form 1040 line 21
nothing I could do to stop it, they did it automatically
all my w2gs were entered and were placed on Other Income Statement


all my w2gs were entered and were placed on form 1040 line 21


that $6k was rounded up, IIRC

watch out for software that adds all w2gs and places that onto line 21
interesting thought

Quote: 7craps

watch out for software that adds all w2gs and places that onto line 21
interesting thought

How interesting would it be for Turbotax to change that and have zillions of angry customers who were contacted by the IRS, questioning their returns?


I did read Bluejay's article once more, having read it before. Very informative, thank you - I can find no real errors, so I don't think there is any need to be defensive. If a poster still wants to complain about the IRS it doesn't mean there is something wrong with the article. 


The way I view it is this: the IRS has been forced by some pushback, evidently, to agree that sessions are what matter, not the moment in the session when a player won big. However, we are hearing from posters that they are still addicted to using the W2g as a hammer, making it a nightmare for the online software people for instance - it seems they know how 'the real IRS' wants the taxes done. If Turbotax trembles, are the rest of us supposed to scoff? 


For some devilish advocacy, here is the other perspective: it is a reasonable assumption that someone receiving a W2g might have had a winning session. Surely it is time to question it when someone wins really big, say upper 5 figures, and if I were in the tax collector's shoes I too would be suspicious about a claim that the session was a loser. Maybe the year was a loser and the filer has just done his taxes wrong, or maybe the filer was trying to get away with some real BS. I'd come down hard on providing the supporting evidence too. It'd be my job to do that even if I think that the year as a whole is what should be considered as gambling income in tax law [which I do think, plus I think carry-over losses should kick in too]


What about a $1200 W2? It's occurred to them I'm sure that filers who don't report any win at all, not a few hundred at least, may, repeat, *may*, just have decided to ignore the W2, or forgotten about it.  Perhaps every time it is only $1200, your word is good enough, with escalating risk as the amounts go up. 

Quote: MichaelBluejay

That year that I got at least $6000 in W-2Gs I reported zero gambling income (because I didn't have any winnings sessions), and the IRS never said a peep.

Well, don't take this personally, but that's enough to raise eyebrows, is it not? Was that five $1200 W2s? All five times [fewer is worse] you lost it all back during the same session? Not once it wasn't merely whittled down, but always a wipeout? I think you have to admit you risked a 'peep', though we aren't talking $38,000 either. Were you prepared with your stack of evidence, your diary etc? Never mind that, but should your article put more emphasis on just what a player might be getting himself into? That is all I would pick on. 


Speaking for myself, the risk of contact from the IRS is a big deal. YMMV, but me and, it seems, the online tax services have plenty of respect for just how obstinate these people can be.

My experience with tax filing software (Turbotax) is consistent with what 7craps has outlined. It has me enter each W2G individually which it then sums up into a total that it places on line 21 of Form 1040.

I also had an experience with my 2016 return where I missed entering a few W2G's and late in 2017 received a collections letter from the IRS demanding payment for an additional tax liability attributable to those W2G's. I had to file an amended return to account for the missing W2G's and then increasing my loss offset in order to remove the liability (I was a net loser for the year), That one is still in progress though and I would not be surprised if an audit will be forthcoming. Fortunately, I believe I have enough documentation to support the losses (thanks to this forum!).

In reading MBJ's article it seems like the makers of Turbotax and the Form 1040 Instructions from the IRS are completely inconsistent with how the W2G's should be handled per the resources cited in the article. You can see from the 7craps screen shots that the Other Income Statement explicitly instructs you to enter "Gambling Winnings from Form W2G". Given my 2016 return experience the IRS really is expecting you to enter them and if you do not expect to get a collections letter from them.

Quote: MichaelBluejay

The above post is exactly why I don't frequent this forum much.

You are annoyed by CMs comment, yet you are ok with your condescending comments made to multiple people?

Yes I did read your article. Yes I did not report w2gs as you say you dont have to and yea the IRS sent me s letter saying that I didnt report them.

Quote: CrystalMath

Congrats on your SAT. I guess those skills don’t help you not be a prick.

I have to defend MB here. His article is very comprehensive, and addresses many of the issues people are bringing up here in surprise, even though he posted it at the beginning of the thread.

Quote: CrystalMath

Congrats on your SAT. I guess those skills don’t help you not be a prick.

Oh my goodness. I never thought I would see the day CM got a suspension. Especially for CM, I'm going to make the suspension for pi days.

Quote: GWAE

Yes I did not report w2gs as you say you dont have to and yea the IRS sent me s letter saying that I didnt report them.

I have heard many stories like this. If it important to the filer to have a clean looking return that won't get audited, then the sum of "gambling winnings" on line 21 should be equal or greater than the sum of your W2G's. I think many gamblers report exactly this sum and take a deduction in schedule A and I have never heard of anyone getting an audit for gambling winnings who did this. Yes, I know that is not what tax instructions say, but story after story show that the IRS puts a lot of stock into W2G's.

BTW, my total itemized deductions for 2017 was $19,608. The standard deduction for married filers for 2018 is $24,000. That means that 2018 will be the first year I take the standard deduction I believe since I bought my first home in 1992. More importantly, it means I will suffer paying taxes on W2G's. I fall in the 22% tax bracket. If I'm playing a game where only a royal gets a W2G, that will lower the expected return of the game by about 0.44%, which is huge in video poker. When I do play, it is often on multi-play machines that get a W2G on a dealt four of a kind or more too.

Suffice it to say that unless I find a huge play, I am done with video poker.

Quote: Wizard

I have heard many stories like this. If it important to the filer to have a clean looking return that won't get audited, then the sum of "gambling winnings" on line 21 should be equal or greater than the sum of your W2G's. I think many gamblers report exactly this sum and take a deduction in schedule A and I have never heard of anyone getting an audit for gambling winnings who did this. Yes, I know that is not what tax instructions say, but story after story show that the IRS puts a lot of stock into W2G's.

BTW, my total itemized deductions for 2017 was $19,608. The standard deduction for married filers for 2018 is $24,000. That means that 2018 will be the first year I take the standard deduction I believe since I bought my first home in 1992. More importantly, it means I will suffer paying taxes on W2G's. I fall in the 22% tax bracket. If I'm playing a game where only a royal gets a W2G, that will lower the expected return of the game by about 0.44%, which is huge in video poker. When I do play, it is often on multi-play machines that get a W2G on a dealt four of a kind or more too.

Suffice it to say that unless I find a huge play, I am done with video poker.

Moving on to comp hustling?

You can even keep playing VP

Quote: darkoz

Moving on to comp hustling?

I already do some of that. I'm going to have to put in my play other ways than video poker from now on. Ultimate Texas Hold 'Em, I think, is a good choice. I'll split this off to a new thread if the topic seems of interest to others.

So playing double or nothing sessions of blackjack with a $5000 buy-in. Double-up and get a CTR written up.
125 sessions of winning $5000 = $625,000 in session wins, and 125 CTRs.
103 sessions of losing $5000 = $515,000 in session losses
Gambling wins of $625,000
Standard deduction of $12,000
Gambling wins after standard deduction: $613,000, 37% tax bracket in 2019.
Gambling losses: $515,000
Net taxable income: $98,000
Tax owed: 37% x $98,000 = $36,260
Paying way more than 50% more tax than if just a net of $98,000.

Quote: ChumpChange

So playing double or nothing sessions of blackjack with a $5000 buy-in. Double-up and get a CTR written up.
125 sessions of winning $5000 = $625,000 in session wins, and 125 CTRs.
103 sessions of losing $5000 = $515,000 in session losses
Gambling wins of $625,000
Standard deduction of $12,000
Gambling wins after standard deduction: $613,000, 37% tax bracket in 2019.
Gambling losses: $515,000
Net taxable income: $98,000
Tax owed: 37% x $98,000 = $36,260
Paying way more than 50% more tax than if just a net of $98,000.

You should not get a single CTR filed on you for that. Only buy ins or cashouts over $10k get a CTR. Also, CTR's are not reported to the IRS they are filed with FINCEN. Unless FINCEN thought you were a criminal they would not contact the IRS.

Quote: DRich

You should not get a single CTR filed on you for that. Only buy ins or cashouts over $10k get a CTR. Also, CTR's are not reported to the IRS they are filed with FINCEN. Unless FINCEN thought you were a criminal they would not contact the IRS.

I always wondered if these agencies really dont contact each other. When I worked in the census it was always told that nothing that we do gets reported to any other agencies including ice or ins. Do they really not talk at all?

Quote: sltploppy

My experience with tax filing software (Turbotax) is consistent with what 7craps has outlined. It has me enter each W2G individually which it then sums up into a total that it places on line 21 of Form 1040.

we ain't the only ones. someone needs to get a w2g and take the irs to court and get a ruling. enough is enough

Quote: sltploppy

I also had an experience with my 2016 return where I missed entering a few W2G's and late in 2017 received a collections letter from the IRS demanding payment for an additional tax liability attributable to those W2G's. I had to file an amended return to account for the missing W2G's and then increasing my loss offset in order to remove the liability (I was a net loser for the year),

My friend in CA got hit hard one year, had to look it up. in 2015.
He forgot to give his wife a w2g that he got while at an Indian casino by himself. (??? forgot??? LOL)

An irs letter the next year jogged his memory and he showed it to me. It was really rude and threatening, IMHO.

The w2g he failed to list on his taxes was for $1250. that is it!

he ended up paying almost $3000 because of his error NOT to show he got it.
LOL to this day.
His wife knows all about keeping receipts and getting them to the tax person each year. My friend TOTALLY blew it and I asked him why he did not file an amended tax form.
He did not want any more to do with the IRS, payed them OFF and that is with mattered to him at the time.
LOL
IRS

I say using turbo tax and other online tax software that I have used, turbo tax for a few years was not free if you had a w2g to file, and I only use free software to file these days.

I saw MB article may be correct but really the IRS needs to be taken to court on this for a ruling placed in stone.
no more of this he said, he said, she does it this way, the IRS really does not say how to do it on one important form, the w2g!

I now collect 1099-MISC from casinos.
makes me feel way better when they call my name as a WINNER
no w2g playing Video Poker for 25 cent denom either.

but when I get my next one - w2g - it goes on line 21, 1040 form, exactly what it says to do!

Quote: Wizard

I have heard many stories like this. If it important to the filer to have a clean looking return that won't get audited, then the sum of "gambling winnings" on line 21 should be equal or greater than the sum of your W2G's.

i say, use the L21 worksheet places like turbotax uses. can't go wrong with it.

you know filing married pays a 'marriage penalty' that is more than what it would be being single and filing both as single. that was something changed a few years ago, but got lost.
marriage tax penalty
IRS w2g tax penalty
resort fee tax penalty
The Beatles had a song Taxman in the 1960s
nothing is better, tax on nothing is 0

Quote: Wizard

I'd prefer to see a system based on taxing consumption rather than creation.

CAN YOU SAY THIS LOUDER FOR THOSE IN THE BACK

Quote: DRich

You should not get a single CTR filed on you for that. Only buy ins or cashouts over $10k get a CTR.

I found a penny on the floor. I'd better not put that on the cage desk.

If I bought in for $5000, and won $5010, and took $10,010 chips to the cage, unless they are going to wire that amount (or a sub-amount) straight to my bank, they will fill out a CTR and give me the cash.
Edit: I've been advised casinos don't wire money back into your bank account, but you can take a check, if it's over the casino's accepted minimums, which could exceed $10,000 anyway. Also, some casinos cages will check your buy-in at the table if you used a Player's Card and deduct that from your cash-out so you don't trigger a CTR. They may also limit any checks they write to you to an amount of your winnings that excludes your table buy-in. (I would expect those kinds of check amounts to be some kind of receipt of session winnings if you're keeping track.)

I've been reading a thread about somebody trying to buy a car on Craigslist for $10K cash and the bank won't let him have the money. Other posters were saying many banks and bank branches don't even have $10K to give you, and you have to give a few days notice before you pick up your large amount. But the posters said the $10K amount was invoking "terror" & "Homeland Security" in the bank staff ramblings about why they won't pay you today.

Quote: ChumpChange

I found a penny on the floor. I'd better not put that on the cage desk.

Why would you cash in a penny? It is already currency. :)

I understand your point about the taxes being unfair.

There was a recent GWAE with tax man Russell Fox that addressed this exact issue, line 21 being less than the sum of W-2Gs due to session accounting. I can't seem to find the episode (I skimmed the 2 most recent episodes with him). I will keep looking and if I can find it, will post a link.

Russell explains it exactly like Michael Bluejay - essentially most front line IRS employees have no idea how their own guidelines have been written, and you will likely be contacted by the IRS if you follow session accounting and your total win is less than your W-2G total.

However, you will win on this count if you are persistent (and have the correct documentation in the form of a contemporaneous gambling journal). You just have to keep pushing back until you get to the IRS employee who knows what TF they are doing. He also mentions that it can be a good idea to include a statement with your return, noting that you have used session accounting (including references to the appropriate IRS publications) and that is why your number doesn't match the W-2G number.

Obviously this is a burden and a PITA. So depending on the numbers in play for you personally, it may not be worth your time and suffering to claim a smaller number based on your journal.

It is frustrating that Turbo Tax can't handle this correctly. I'm not really surprised though. If most of the IRS people don't even know how to do it correctly, not surprising that a 3rd party software and services company can't get it right.

Regarding TurboTax, I think they are right to ask their users for a sum of the W2Gs if their goal is to minimize the chance their customers will get an audit, which I think it should be.

Quote: AcesAndEights

There was a recent GWAE with tax man Russell Fox that addressed this exact issue, line 21 being less than the sum of W-2Gs due to session accounting.

how about a look at the 2018 w2g

"Instructions to Winner
Box 1. The payer must furnish a Form W-2G to you if you
receive:
1. $1,200 or more in gambling winnings from bingo or slot
machines;
2. $1,500 or more in winnings (reduced by the wager) from
keno;
3. More than $5,000 in winnings (reduced by the wager or
buy-in) from a poker tournament;
4. $600 or more in gambling winnings (except winnings from
bingo, keno, slot machines, and poker tournaments) and the
payout is at least 300 times the amount of the wager; or
5. Any other gambling winnings subject to federal income
tax withholding.
Generally, report all gambling winnings on the “Other
income” line of Form 1040. You can deduct gambling losses
as an itemized deduction, but you cannot deduct more than
your winnings. Keep an accurate record of your winnings and
losses, and be able to prove those amounts with receipts,
tickets, statements, or similar items that you have saved. For
additional information, see Pub. 529, Miscellaneous
Deductions, and Pub. 525, Taxable and Nontaxable Income."

just skips the part about line 21 but beats around it, calls it something else instead of Line 21 form 1040. LOL

but wants one to do more reading and more reading and more reading, LOL, great stuff
he said do this,
no they do not do it right, she says do this and this and try to not make mistakes,
not right, not right, do it this way
IRS "LOL"

Quote: AcesAndEights

It is frustrating that Turbo Tax can't handle this correctly. I'm not really surprised though. If most of the IRS people don't even know how to do it correctly, not surprising that a 3rd party software and services company can't get it right.

turbotax gets a lot right where the irs gets it wrong.
over 50% of irs advice is wrong. TT is better than that.

I just emailed them (TT) and want to see what they have to say about this.
I don't really care but know it will really piss off some, like God and Sally comes to mind.

I doubt they (TT) are even interested as gambling is yuk to most.
I used Quickbooks (Intuit) way back in 1991 with my auto repair business, that is how I found TurboTax and all their software had some problems I found and had to do something else (just used Excel) as they (TT) were clueless. that was then, who knows about now?

Quote: Wizard

Regarding TurboTax, I think they are right to ask their users for a sum of the W2Gs if their goal is to minimize the chance their customers will get an audit, which I think it should be.

yes, that is something new they now do due to many questions about it. Having 117 w2gs to enter one-by-one used to BE a ROYAL pain. now they say just one and use whatever on it. make sure it all adds up.

In their instructions, NOTHING about sessions.
Line 21 other income worksheet must equal the sum of all w2gs turned into the IRS.
Turbo tax instructions now. (might change come Jan 2019)

IRS.
try understanding all they say about the issue.
should be on the w2g, all the rules. look nowhere else.
LOL

Quote: WangSanJose

Any payout over $1200 is reported to the IRS.
Due to tax obligation, does video poker have worse payout than expected, especially if you play larger denomination?

yes NO yes

Any payout of $1200 or more is reported to the IRS.

especially for a US tax filer using 1040ez, not the long form 1040.
could be (keep it fair) bumped up into a higher tax bracket.
Table 1. Tax Brackets and Rates, 2019

Rate	For Unmarried Individuals, Taxable Income Over	For Married Individuals Filing Joint Returns, Taxable Income Over	For Heads of Households, Taxable Income Over
10%	$0	$0	$0
12%	$9,700	$19,400	$13,850
22%	$39,475	$78,950	$52,850
24%	$84,200	$168,400	$84,200
32%	$160,725	$321,450	$160,700
35%	$204,100	$408,200	$204,100
37%	$510,300	$612,350	$510,300

https://taxfoundation.org/2019-tax-brackets

Quote: Wizard

I agree. I'm not against paying taxes, but am against the complexity of it all, unfairness, and regressive nature where often the middle class pay a higher percentage than the top 1%.

I'd prefer to see a system based on taxing consumption rather than creation.

Talk about regressive! I now make 10x an average American but pay 50x in taxes what the average American pays. (Talking Federal). Maybe I consume 3-4x what an average American consumes. My taxes plummet under your consumption based system.

Quote: GWAE

You are annoyed by CMs comment, yet you are ok with your condescending comments made to multiple people?

For the first part of your question, yes. I didn't call anyone a prick, or come anywhere close to anything that mean or hostile, and never would. Whether what I said qualifies as condescension is debatable, but even if it were, it's an order of magnitude away from calling someone a prick.

For the record, I apologize if anything I said came across as condescension, though I'll admit to being annoyed. People keep asking me questions that I addressed head-on in the article, suggesting they hadn't read it, even though I provided it for the express purpose of answering those kinds of questions. To me, that's kind of rude.

Interestingly, people either seem to hate me or love me, with no middle ground. This was posted on another forum in response to a post I made yesterday:

Quote: Jen Spencer on Nextdoor.com

This is awesome. Michael Bluejay, you are a good human and inspire us all to be kind to others.

Quote: sltploppy

My experience with tax filing software (Turbotax) is consistent with what 7craps has outlined. It has me enter each W2G individually which it then sums up into a total that it places on line 21 of Form 1040.

Yes, TurboTax definitely gets this wrong, and that's not the only thing. I often have to battle it to get the right figures input, in the right place (e.g., self-employed health insurance deduction for S Corporations). TurboTax on the whole is pretty lousy. For gambling income, I ignore the W-2G questions and manually enter an "other income" item that I label "Gambling winnings".

Quote: odiousgambit

If a poster still wants to complain about the IRS it doesn't mean there is something wrong with the article.

I'm all for complaining about the unfairness of the gambling tax. Someone posted an example of how losses can't effectively be deducted and asked whether he had that right, and whether it seemed fair. Yet my article has *an entire section* titled, in large flaming green letters, "Yes, it's not fair", which details the various unfair aspects, including exactly the one the poster asked about.

Quote: odiousgambit

Was that five $1200 W2s? All five times [fewer is worse] you lost it all back during the same session?

This is taxing my memory (no pun intended) (okay, maybe a little) since it was ten years ago, and I don't have my records handy. I don't remember exactly how many W-2Gs I got or what the amounts were, but I'm sure it was at least five, and I never had a winning session. I think I was wagering $50 or $100 a hand, in a supposedly AP comp situation, and my results on the game itself were way south of expectations.

Quote: odiusgambit

I think you have to admit you risked a 'peep', though we aren't talking $38,000 either.

It could have been talking $38k, I don't really remember. And yeah, it could have been a risk of being contacted, but I honestly wasn't worried. During the first Gulf War I stopped paying taxes in protest because I didn't want my tax money used to kill people. (It was a lot easier to protest back then when I didn't have any money.) I joined a group of other tax resisters (mostly Quaker ladies) who'd been resisting for years, and read books written by former IRS collections officers and the Quaker groups who aggregated the experiences of the resisters, so I felt pretty well versed on how the system worked. Many people seem to quake in fear of the IRS which I think is for the most part unfounded. There's this idea that if you pay your taxes a day late they're gonna be at your door with guns and handcuffs. In reality I've filed and paid taxes as much as 4.5 years late when I got behind, and in most cases when I've been late, even by years, I've barely heard from the IRS. If you do hear from them about an issue that you reported correctly then you just politely show them your evidence and the tax instructions and they'll almost certainly agree with you. If not you can appeal and you'll almost certainly win there. It's not a guarantee, sure, but I'm sure as hell not gonna pay extra tax that I don't really owe just because I fear that the IRS might make an inquiry.

Quote: 7craps

someone needs to get a w2g and take the irs to court and get a ruling....I saw MB article may be correct but really the IRS needs to be taken to court on this for a ruling placed in stone.

Well, at the risk of getting called a prick again, this has already been done, and is mentioned in the article...twice. The case is Shollenberger v Commissioner.

Quote: MichaelBluejay

this has already been done, and is mentioned in the article...twice. The case is Shollenberger v Commissioner.

You know this, many do not
thanks for the point out

I found this while searching
https://www.ustaxcourt.gov/ustcinop/opinionviewer.aspx?ID=11365

where the data is in 2017
and the folks did not follow the rules of session accounting
looks like they lost and have to claim the w2gs on line 21 because the IRS goes after returns that just do not match (in this case nothing was for gambling winnings when 3 w2gs existed)
and they did not follow the rules of session accounting.

difficult reading for sure, one must agree
so the IRS KNOWS of the 2008 ruling, in the pdf, but still takes people to court over their returns.
can't blame them, they have NOTHING to lose.
Looks like about $5k in unreported gambling w2g winnings
(and no loss taken as the filers used the standard deduction)

so bottom line, better follow the "session" rules exactly and be ready to be called into court and have to prove
to the Judge you can actually use the session rules for your return.

scary

According to an inflation calculator, $1200 in 1978 would be equivalent to $4638 in 2018 so I guess I'd back a change to $5000 pegged to inflation. A good lobby from gambling states (including horse racing) could probably do it. I'd love to see it eliminated but the G is going to demand its pound of flesh.

The problem now reminds me of an issue several decades ago when the minimum amount you had to earn before being required to report to the IRS was so eaten up by inflation that even the kid that mowed your lawn might have gotten into trouble if he didn't file. In that instance they raised the minimums. For gambling it's also reaching the point where Uncle Sam is squatting down in the mud to squabble over nickles and dimes. Something has to be done, and lowering the number would just make things worse.

Quote: AcesAndEights

There was a recent GWAE with tax man Russell Fox that addressed this exact issue, line 21 being less than the sum of W-2Gs due to session accounting. I can't seem to find the episode (I skimmed the 2 most recent episodes with him). I will keep looking and if I can find it, will post a link.

Russell explains it exactly like Michael Bluejay - essentially most front line IRS employees have no idea how their own guidelines have been written, and you will likely be contacted by the IRS if you follow session accounting and your total win is less than your W-2G total.

However, you will win on this count if you are persistent (and have the correct documentation in the form of a contemporaneous gambling journal). You just have to keep pushing back until you get to the IRS employee who knows what TF they are doing. He also mentions that it can be a good idea to include a statement with your return, noting that you have used session accounting (including references to the appropriate IRS publications) and that is why your number doesn't match the W-2G number.

Obviously this is a burden and a PITA. So depending on the numbers in play for you personally, it may not be worth your time and suffering to claim a smaller number based on your journal.

It is frustrating that Turbo Tax can't handle this correctly. I'm not really surprised though. If most of the IRS people don't even know how to do it correctly, not surprising that a 3rd party software and services company can't get it right.

Found the podcast - from November 2017, so not exactly recent heh.
https://www.lasvegasadvisor.com/gambling-with-an-edge/podcast-guest-tax-man-russell-fox/
W-2G tallying talk (for amateurs) starts around 10:40

Quote: MichaelBluejay

For the first part of your question, yes. I didn't call anyone a prick, or come anywhere close to anything that mean or hostile, and never would. Whether what I said qualifies as condescension is debatable, but even if it were, it's an order of magnitude away from calling someone a prick.

For the record, I apologize if anything I said came across as condescension, though I'll admit to being annoyed. People keep asking me questions that I addressed head-on in the article, suggesting they hadn't read it, even though I provided it for the express purpose of answering those kinds of questions. To me, that's kind of rude.

Interestingly, people either seem to hate me or love me, with no middle ground. This was posted on another forum in response to a post I made yesterday:



Yes, TurboTax definitely gets this wrong, and that's not the only thing. I often have to battle it to get the right figures input, in the right place (e.g., self-employed health insurance deduction for S Corporations). TurboTax on the whole is pretty lousy. For gambling income, I ignore the W-2G questions and manually enter an "other income" item that I label "Gambling winnings".

I'm all for complaining about the unfairness of the gambling tax. Someone posted an example of how losses can't effectively be deducted and asked whether he had that right, and whether it seemed fair. Yet my article has *an entire section* titled, in large flaming green letters, "Yes, it's not fair", which details the various unfair aspects, including exactly the one the poster asked about.

Quote: odiousgambit

Was that five $1200 W2s? All five times [fewer is worse] you lost it all back during the same session?

This is taxing my memory (no pun intended) (okay, maybe a little) since it was ten years ago, and I don't have my records handy. I don't remember exactly how many W-2Gs I got or what the amounts were, but I'm sure it was at least five, and I never had a winning session. I think I was wagering $50 or $100 a hand, in a supposedly AP comp situation, and my results on the game itself were way south of expectations.

It could have been talking $38k, I don't really remember. And yeah, it could have been a risk of being contacted, but I honestly wasn't worried. During the first Gulf War I stopped paying taxes in protest because I didn't want my tax money used to kill people. (It was a lot easier to protest back then when I didn't have any money.) I joined a group of other tax resisters (mostly Quaker ladies) who'd been resisting for years, and read books written by former IRS collections officers and the Quaker groups who aggregated the experiences of the resisters, so I felt pretty well versed on how the system worked. Many people seem to quake in fear of the IRS which I think is for the most part unfounded. There's this idea that if you pay your taxes a day late they're gonna be at your door with guns and handcuffs. In reality I've filed and paid taxes as much as 4.5 years late when I got behind, and in most cases when I've been late, even by years, I've barely heard from the IRS. If you do hear from them about an issue that you reported correctly then you just politely show them your evidence and the tax instructions and they'll almost certainly agree with you. If not you can appeal and you'll almost certainly win there. It's not a guarantee, sure, but I'm sure as hell not gonna pay extra tax that I don't really owe just because I fear that the IRS might make an inquiry.

Well, at the risk of getting called a prick again, this has already been done, and is mentioned in the article...twice. The case is Shollenberger v Commissioner.

I certainly did not read every post in this thread and I am not sure how terrible the questions are. I did indeed read your post.

I need to go back and read your article again as my reading comprehension sucks and I didn't realize that there would be this much discussion. If I am recalling correctly you are saying that if I gamble 1 time this year and get a w2g for 2k on my first spin, but before the session is over I lose 5k then I do not have to report any gambling at all on my taxes. However I will get a notice from the IRS that I owe taxes for the missing w2g. But you say we can fight with them and not actually have to pay that tax? If that is the case how likely is that going to trigger and audit? If you finally talk the IRS agent into that argument I would imagine they don't believe the was the case. Taking it a step further. Say you gambled a bunch throughout the year and have 20 w2gs but still never had a winning session. You shouldn't have to pay but I can't imagine the IRS ever believes you didn't have 1 winning session. Maybe I am not understanding any of this but it seems like very few people actually do understand it.

Quote: GWAE

Quote: MichaelBluejay

For the first part of your question, yes. I didn't call anyone a prick, or come anywhere close to anything that mean or hostile, and never would. Whether what I said qualifies as condescension is debatable, but even if it were, it's an order of magnitude away from calling someone a prick.

For the record, I apologize if anything I said came across as condescension, though I'll admit to being annoyed. People keep asking me questions that I addressed head-on in the article, suggesting they hadn't read it, even though I provided it for the express purpose of answering those kinds of questions. To me, that's kind of rude.

Interestingly, people either seem to hate me or love me, with no middle ground. This was posted on another forum in response to a post I made yesterday:



Yes, TurboTax definitely gets this wrong, and that's not the only thing. I often have to battle it to get the right figures input, in the right place (e.g., self-employed health insurance deduction for S Corporations). TurboTax on the whole is pretty lousy. For gambling income, I ignore the W-2G questions and manually enter an "other income" item that I label "Gambling winnings".

I'm all for complaining about the unfairness of the gambling tax. Someone posted an example of how losses can't effectively be deducted and asked whether he had that right, and whether it seemed fair. Yet my article has *an entire section* titled, in large flaming green letters, "Yes, it's not fair", which details the various unfair aspects, including exactly the one the poster asked about.

Quote: odiousgambit

Was that five $1200 W2s? All five times [fewer is worse] you lost it all back during the same session?

This is taxing my memory (no pun intended) (okay, maybe a little) since it was ten years ago, and I don't have my records handy. I don't remember exactly how many W-2Gs I got or what the amounts were, but I'm sure it was at least five, and I never had a winning session. I think I was wagering $50 or $100 a hand, in a supposedly AP comp situation, and my results on the game itself were way south of expectations.

It could have been talking $38k, I don't really remember. And yeah, it could have been a risk of being contacted, but I honestly wasn't worried. During the first Gulf War I stopped paying taxes in protest because I didn't want my tax money used to kill people. (It was a lot easier to protest back then when I didn't have any money.) I joined a group of other tax resisters (mostly Quaker ladies) who'd been resisting for years, and read books written by former IRS collections officers and the Quaker groups who aggregated the experiences of the resisters, so I felt pretty well versed on how the system worked. Many people seem to quake in fear of the IRS which I think is for the most part unfounded. There's this idea that if you pay your taxes a day late they're gonna be at your door with guns and handcuffs. In reality I've filed and paid taxes as much as 4.5 years late when I got behind, and in most cases when I've been late, even by years, I've barely heard from the IRS. If you do hear from them about an issue that you reported correctly then you just politely show them your evidence and the tax instructions and they'll almost certainly agree with you. If not you can appeal and you'll almost certainly win there. It's not a guarantee, sure, but I'm sure as hell not gonna pay extra tax that I don't really owe just because I fear that the IRS might make an inquiry.

Well, at the risk of getting called a prick again, this has already been done, and is mentioned in the article...twice. The case is Shollenberger v Commissioner.

I certainly did not read every post in this thread and I am not sure how terrible the questions are. I did indeed read your post.

I need to go back and read your article again as my reading comprehension sucks and I didn't realize that there would be this much discussion. If I am recalling correctly you are saying that if I gamble 1 time this year and get a w2g for 2k on my first spin, but before the session is over I lose 5k then I do not have to report any gambling at all on my taxes. However I will get a notice from the IRS that I owe taxes for the missing w2g. But you say we can fight with them and not actually have to pay that tax? If that is the case how likely is that going to trigger and audit? If you finally talk the IRS agent into that argument I would imagine they don't believe the was the case. Taking it a step further. Say you gambled a bunch throughout the year and have 20 w2gs but still never had a winning session. You shouldn't have to pay but I can't imagine the IRS ever believes you didn't have 1 winning session. Maybe I am not understanding any of this but it seems like very few people actually do understand it.

As long as you can back up the facts and circumstances of your gambling activities with a contemporaneous gambling journal, then you are correct in both examples. No gambling winnings need be reported, you will almost certainly be contacted by the IRS, and you will tell them that you follow the session accounting rules and had no winning sessions for the year. Backed up by your journal which shows only losing sessions.

Quote: Wizard

I have heard many stories like this. If it important to the filer to have a clean looking return that won't get audited, then the sum of "gambling winnings" on line 21 should be equal or greater than the sum of your W2G's. I think many gamblers report exactly this sum and take a deduction in schedule A and I have never heard of anyone getting an audit for gambling winnings who did this. Yes, I know that is not what tax instructions say, but story after story show that the IRS puts a lot of stock into W2G's.

On the GWAE ep I linked above, Russell does say that for their clients, they generally run the taxes 2 ways: once the correct way using session accounting, and once again with the amount on line 21 equaling the W-2G total, with an adjustment to losses on Schedule A so that the net amount is the same. If the tax due ends up being the same, they will submit the latter return to avoid any notices from the IRS. It can actually be worse for the player due to credit and deduction phase-outs based on your AGI (which counts winnings but not losses), so that is why they check.

He said they prefer to do it the correct way, but understand that it is nice not to get a nastygram from the IRS.

Quote: 7craps

how about a look at the 2018 w2g

"Instructions to Winner
Box 1. The payer must furnish a Form W-2G to you if you
receive:
1. $1,200 or more in gambling winnings from bingo or slot
machines;
2. $1,500 or more in winnings (reduced by the wager) from
keno;
3. More than $5,000 in winnings (reduced by the wager or
buy-in) from a poker tournament;
4. $600 or more in gambling winnings (except winnings from
bingo, keno, slot machines, and poker tournaments) and the
payout is at least 300 times the amount of the wager; or
5. Any other gambling winnings subject to federal income
tax withholding.
Generally, report all gambling winnings on the “Other
income” line of Form 1040. You can deduct gambling losses
as an itemized deduction, but you cannot deduct more than
your winnings. Keep an accurate record of your winnings and
losses, and be able to prove those amounts with receipts,
tickets, statements, or similar items that you have saved. For
additional information, see Pub. 529, Miscellaneous
Deductions, and Pub. 525, Taxable and Nontaxable Income."

Key word there is generally.

Quote:

just skips the part about line 21 but beats around it, calls it something else instead of Line 21 form 1040. LOL

but wants one to do more reading and more reading and more reading, LOL, great stuff
he said do this,
no they do not do it right, she says do this and this and try to not make mistakes,
not right, not right, do it this way
IRS "LOL"

I mean if you just total up the W-2Gs, it may not be "right", but it's going to result in more taxes to the IRS. So of course they don't care if it's wrong in that respect. As long as you are reporting at least as much as they think you should be, they don't care.

Quote: AcesAndEights

Found the podcast - from November 2017, so not exactly recent heh.
https://www.lasvegasadvisor.com/gambling-with-an-edge/podcast-guest-tax-man-russell-fox/
W-2G tallying talk (for amateurs) starts around 10:40

This is a very good source and I recommend those interested in the topic listen to it.

My interpretation of it is that the IRS has a computer that will raise a flag if the sum of the W2Gs is less than the amount entered on line 21. This flag may or may not result in an audit. The show says it has about a 50% chance of triggering an audit, if I remember correctly. If you keep good session records, you'll probably win the fight after many months and levels of appeals. If you do report less than the sum of W2Gs, you should make a comment on your return that you are following "gambling session rules." Not until you go through the appeals level might you reach somebody who actually may know a thing or two about the law.

The bottom line, for me, is you have two choices:

A) You can do things by the book and risk fighting the IRS through appeals and will probably win in the end, assuming you kept a good log.
B) You can declare on line 21 your sum of W2Gs, plus a little more if you want to play it safe, and deduct on schedule A the appropriate number to get to your real net win for the year. With this method, you pay taxes on your net gambling win and likely avoid an audit.

The choice is yours.