Accumulating 1099's on small wins.

I recently took notice to a casino actually making a 1099(I think it was a 1099, could possibly be a W2G) for small wins on drawings of like $100 (IN FREE PLAY no less)

They make you sign a 1099 (no copy given) and start adding to it each time you win ANYTHING for the year. They said they send it in to the IRS at the end of the year(perhaps only if you reach $600 or more) I asked questions, however I didn't feel confident in this employees answers, she didn't seem like someone I would be 100% confident in

This is new to me, is anyone aware of this? I thought Free play wasn't reported by the casino, wondering how do they put a value on it.

Is this just the casino making a mistake, while covering their ass, or making sure they get to write it off?

Free play being reportable would be problematic for many of us, AP's and regular gamblers alike.

Like you, I don't know how you put a value on it, I guess 100% figuring it is like cash and only loses value as you play it. Just seems like it would be creating a whole lotta extra work for all involved.

Quote: AxelWolf

They make you sign a 1099 (no copy given)

They have to give you a copy for your records.
I'm thinking they want you to refuse to sign,
then they don't have to give you what you
won. It's a scam.

I've had them for prizes over at the $600 mark and got them. I have signed paperwork as a prize winner that appears to be just for the casino.

That's it. Doesn't appear to be new changes at IRS. (definitely not an expert on tax code though)

http://www.irs.gov/uac/Form-1099-MISC,-Miscellaneous-Income-

Is this a place you frequent often for AP play? Maybe they are trying to root out information on you.

I am not sure of the legality of misrepresenting something, but it could be within the law as long as they pay their prizes. Pretending you have to sign something or give info when you don't need to-- where's the law fall on that, if such were the case?

What other reasons would they want extra documentation if it's not officially required. Seems like tracking players may be a possible reason.

I could be wrong, but every free play coupon or token I've seen says "no cash value" on it somewhere, except on occasion I've been given a cash incentive, and that paperwork says it's redeemable for cash at the cage (only). So if whatever you're given has no cash value, I'd be taking pictures of the slips/chips/whatever for my records, and use that info to offset the 1099's if they file them on you. They can't assume you're going to redeem them at all, nor get any particular value from them; in fact, since every game they offer is -EV by design, IMO they're deceiving the IRS about the value of their awards to you if they're recording the face value of a non-negotiable instrument.

Are you sure it wasn't some other tax form? For example when I won some drawings at two different casinos last year. Both made me fill out a form with my DOB/signature/SSN. They said if I got more than $600 in winnings then I would get a tax form at the end of the year. Sure enough I had like $2k in winnings from one of the casinos and I got a 1099 that was mailed in January.

Still it seems weird that you'd get such a form for freeplay. I know many casinos have drawings/tournaments where the top prizes are given in freeplay, ostensibly to get around the tax form requirements in the same way that some top jackpots are set to $1199 or $1195.

From what I've read the casinos in the old days used to report winnings in a variety of ways and you might get a 1099 for a win over 1200 instead of a W-2G, and if it was a multi-play machine if the total win was over $1200 but none of the individual hands were over that amount (e.g. a dealt royal on a $0.25 three-play for a $3000 win) you might not get anything at all. Seems like everyone has this figured out now.

That being said, freeplay is ONLY taxable when you use it. If you have $100 in freeplay you owe nothing. If you used that freeplay and cashed out $90 then you owe taxes on $90.

Why do people think that free play as a prize would be treated any different than any other product that has "no cash" value. If you get a life time supply of XXX you still need to pay taxes on the manufacture/provider value of the prize, even if it is worthless to you. Also tax law is always changing as the IRS and IRS courts have new rulings on old tax laws.

Quote: beachbumbabs

I could be wrong, but every free play coupon or token I've seen says "no cash value" on it somewhere, except on occasion I've been given a cash incentive, and that paperwork says it's redeemable for cash at the cage (only). So if whatever you're given has no cash value, I'd be taking pictures of the slips/chips/whatever for my records, and use that info to offset the 1099's if they file them on you. They can't assume you're going to redeem them at all, nor get any particular value from them; in fact, since every game they offer is -EV by design, IMO they're deceiving the IRS about the value of their awards to you if they're recording the face value of a non-negotiable instrument.

even if you are right, nobody wants to have to do their taxes by reporting the 1099s, then trying to argue them out of existence somewhere else on the tax form - or in correspondence with the IRS - or, worst of all, in tax court.

not trying to pounce on your thoughts, but that's my 2 cents.

Quote: odiousgambit

even if you are right, nobody wants to have to do their taxes by reporting the 1099s, then trying to argue them out of existence somewhere else on the tax form - or in correspondence with the IRS - or, worst of all, in tax court.

not trying to pounce on your thoughts, but that's my 2 cents.

og, I totally agree; what I was trying to say is that any casino that's treating free play as winnings needs to be called on it, and perhaps a method of doing that is to have a record of what they're counting as "winnings", especially the one or more that's doing a cumulative log of it. The IRS should not be accepting reports of "coupons" as "income" or "winnings", but chances are it's going to have to be fought by the customers.

IMO, you should either treat FP as:

-However much they give you ($100), count it as a $100 win. Then when you play it through (say you end with $90), count that as a $10 loss.

-Count the FP as nothing. But whatever you cash out, count that as a win (ie: $90 win from above).

Both cases are the same for you.

I'd imagine the casino would be doing this (the first). They would claim a $100 loss up front, then claim a $10 win (using same figures as before).

Then again, I know nothing of taxes.

I don't know what they are doing with making you sign something. It's not a 1099, simply because you don't sign a 1099 or a W2-G. You may sign another form stating who you are with, DOB, SS#, etc and acknowledging the win, but your not actually signing a 1099 or W2. Either way any institution from which you earn income. Job, investments, pension, casino win, is required to report that income (over $600) to the IRS at the end of the calendar year. If you get a copy in the mail, then you know they reported your income. If you didn't get a copy, then they didn't report to the IRS. At least in theory. I'm sure countless mistakes happen. If for example you moved during the year and an old employer doesn't have your correct address, you're going to be missing a W-2, or 1099. It's still up to you to report your income accurately. Yes, this sucks, but it's how our system works.

It is a 1099-MISC form, from IRS website.
Also enter in box 3 prizes and awards that are not for
services performed. Include the fair market value (FMV) of
merchandise won on game shows. Also include amounts
paid to a winner of a sweepstakes not involving a wager. If a
wager is made, report the winnings on Form W-2G, Certain
Gambling Winnings.

The free play was from a drawing/sweepstakes. Most likely what the person was signing was that they accepted the prize. Most likely the casino does a lot of small drawings and the IRS told them they need to track annually their winners to see if they reach the $600 threshold for reporting.

Free play is valued at face value (FMV) for the 1099-MISC form, how you do on the free play would be recorded on W2-G forms and/or itemized on your 1040 form. The FMV for free play is no different than winning a car/airfare/hotel where the value of the car is MSRP even though you could never get that value.

I recommend that our companies issue 1099's for all prizes issued because it is possible that the same person may win more than a total of $600 worth over the course of the year. If we didn't issue them for each prize we would have to keep track of each individuals totals across all properties in case they reach $600. I find it is easier to issue them for each win and not force the separate locations to have to figure out who has won more than $600 throughout the year.

Quote: zoobrew

It is a 1099-MISC form, from IRS website.
Also enter in box 3 prizes and awards that are not for
services performed. Include the fair market value (FMV) of
merchandise won on game shows. Also include amounts
paid to a winner of a sweepstakes not involving a wager. If a
wager is made, report the winnings on Form W-2G, Certain
Gambling Winnings.

The free play was from a drawing/sweepstakes. Most likely what the person was signing was that they accepted the prize. Most likely the casino does a lot of small drawings and the IRS told them they need to track annually their winners to see if they reach the $600 threshold for reporting.

Free play is valued at face value (FMV) for the 1099-MISC form, how you do on the free play would be recorded on W2-G forms and/or itemized on your 1040 form. The FMV for free play is no different than winning a car/airfare/hotel where the value of the car is MSRP even though you could never get that value.

This sounds about like what was happening.

Quote: DRich

I recommend that our companies issue 1099's for all prizes issued because it is possible that the same person may win more than a total of $600 worth over the course of the year. If we didn't issue them for each prize we would have to keep track of each individuals totals across all properties in case they reach $600. I find it is easier to issue them for each win and not force the separate locations to have to figure out who has won more than $600 throughout the year.

https://www.youtube.com/watch?v=b2dewDwIQyM (-:

Quote: EvenBob

They have to give you a copy for your records.
I'm thinking they want you to refuse to sign,
then they don't have to give you what you
won. It's a scam.

EvenBob is correct, at least on the first part of his statement. They must either hand you a copy of the 1099 form that they intend to file or mail (or email) to you a copy of any 1099 form they submit to the IRS by Jan 30 of the year that follows the year in which you won the money that is reported.

No one could possibly file an accurate 1040 form with the IRS if casinos were filing 1099 forms reporting various sums of cash you have won and not providing you with a copy! That is nuts.

Remember that a 1099 form reports cash transactions as if you were a business - the IRS expects that "business expenses" and/or "business losses" will offset some or all of your "business revenue." Substitute the word "gambling" for "business." Make sure you keep hotel receipts (and airfare and parking receipts) for any gambling trip. Create records of your gambling losses. You can also charge Meals & Incidental Expenses for your gambling trips at the rate that the IRS specifies (on the internet). You should have no trouble offsetting all of your 1099 reported gambling income.

I found this article about how you can go about lowering the Fair Market Value of your prize. It seems like a lot of work and risk of audit, and I am not sure how it would work with free play. Is free play, cash or a product?

OK, we know that winning things can be fun. And we’ve just seen two different reactions to the related tax issues. What should you do if you win something other than money — and get a 1099-MISC for the fair market value (FMV) or manufacturer’s suggested retail price (MSRP)?

We turned to Greg Rosica, contributing author to the Ernst & Young Tax Guide 2014, for advice. Rosica says that you don’t have to pay taxes on the retail value. He recommends that you find data on the real selling price of your prize. With the magic of the Internet, you can find all kinds of sites where trips, cars, and other high-ticket items are sold. Print out the page that has a product similar to yours and a price that an objective buyer would be willing to pay to an unrelated seller. Use that as the amount on which to pay the taxes.

Rosica suggests that you contact the issuer of the 1099-MISC to get a corrected 1099 issued. In real life, you’re unlikely to get that. After all, they want to write off the higher amount. Rosica says that you can call the IRS’s customer service line and have them use an internal form (Form 4598) to get a corrected 1099-MISC for the actual value. According to IRS spokesman Bruce Friedland, that form is now obsolete. So, what are you to do? Friedland refers us to page 32 of Publication 525. However, that will only have you paying too much tax. So here’s what to do:

1. On line 21 of your tax return, report the full amount as shown on the Form 1099-MISC as Other Income, since the IRS computers will be looking to match that on your tax return.

2. With your tax return, include a worksheet with a detailed note and a copy of your proof of the actual cost for the item. And, also on line 21, include an amount to reduce the FMV or MSRP to the actual price.

3. File your tax return on paper and include the attachments.

Incidentally, if you sell the prize in an arm’s-length transaction, it’s really easy to prove its value, right? It’s the amount you sold it for. So use that information to replace the printout from the Internet.

This may sound like overkill, but it will prevent your return from being audited.

http://www.marketwatch.com/story/you-win-and-now-you-owe-taxes-2014-03-12

A 1099 on free play is total bs. So say I win 500 free play on Jan 1. I get a 1099 for $500. I use my free play on slots and when I am done I cash out for $600. Right after that I quit gambling for the year. Now I pay taxes on the 1099 plus I pay taxes on my winnings of $600 so essentially I am being double taxed.

Since you have to use the free play there, you should only be taxed after you are done using it. I would have no problem at all if they gave you a tax form after you finished using the free play.

Someone mentioned paying taxes on game shows or winning a year supply of food. The difference in those are you won't pay taxes again after you get your free food or get your game show prize delivered.

I'm not trying to be difficult. I don't really care. But you don't sign a 1099-Misc, or any other 1099. There is no place for a signature on any 1099 form I found on the IRS website. I've issued literally thousands of 1099's for my business, never once has someone signed them. So they may be issuing a 1099 to you...but you are signing something else. Just saying.

Having said that the CYA practice of issuing 1099's for small prizes and listing them at some hypothetical retail value that they would never actually sell for is a bogus practice by the casino's. To inflate the value of their prizes/gifts, it's lame at best, and deceptive and potentially fraudulent at worst.

Quote: GWAE

A 1099 on free play is total bs. So say I win 500 free play on Jan 1. I get a 1099 for $500. I use my free play on slots and when I am done I cash out for $600. Right after that I quit gambling for the year. Now I pay taxes on the 1099 plus I pay taxes on my winnings of $600 so essentially I am being double taxed.

Since you have to use the free play there, you should only be taxed after you are done using it. I would have no problem at all if they gave you a tax form after you finished using the free play.

Someone mentioned paying taxes on game shows or winning a year supply of food. The difference in those are you won't pay taxes again after you get your free food or get your game show prize delivered.

You are always double taxed on casino winnings. You take your wages which are taxed and then you win at the casino and you are again taxed. Also if you take your year supply of food and sell it for a profit, which in a sense you are doing with your free play, then you have to pay taxes on your profits. In your example if you cashed out for $600 after playing $500 in free play, I would think that your tax would only be on $100 (600-500), but I am not sure about that.

Quote: zoobrew

You are always double taxed on casino winnings. You take your wages which are taxed and then you win at the casino and you are again taxed. Also if you take your year supply of food and sell it for a profit, which in a sense you are doing with your free play, then you have to pay taxes on your profits. In your example if you cashed out for $600 after playing $500 in free play, I would think that your tax would only be on $100 (600-500), but I am not sure about that.

I would think the tax would be the entire thing but I could be wrong. When figuring your daily winnings I would think you would go in casino with 1k and walk out with 1600, so you would take a $600 win.

I understand your point But double taxed but that is not always the case. It may be tax free money. The other problem with 1099 is that it could put you into another tax bracket if you are close to the next bracket, right? I assume this would count as earnings and could have a huge negative effect on your tax situation.

While I don't have a problem with the need to tax, go****n if the tax code could go to sales tax type simplification I'd be for it in a minute. I hate all the in and outs of it and the paper shuffling. Well now it's electronic, but makes it no better IMO.

The worst part, I didn't even receive my $100 in free play, they said it would be manually loaded in a few hrs but, i was in a rush. It probably expired even though they explicitly told me it would not. I have been through this crap at places before, it takes an act of congress to get them to reissue it. First they show you some rule "must be played withing 24 hr."Then you say," NO I WAS TOLD DIFFERENT."Then they have to call management. First a supervisor, then they have to call someone above them. Then they want to know who told you it was good longer. If you don't have a name they usually say sorry you got bad information,, but our policy is bla bla bla. They always assume you actually played it off but forgot.

Not worth the exposure and headache.