Won a Big Blackjack Tournament, No Taxes???

Hey all,
I won a blackjack tournament over the weekend. They paid out in promo chips. While I was "washing" the chips in Baccarat, one of the pit bosses told me that this is much better than winning in cash, due to paying the 2%-3% to the casino in the end instead of paying tax. Is this true?? There are always CTR's on anything over $10,000, right??? One of the other finalist's was a poker player, and said the last tournament he won, he got the winnings in cash (as opposed to check or wire transfer), is that what I should have done??? (I got a check.) Thanks!!

I don't think too many people will be forthcoming with advice on structuring or tax evasion. Both are federal crimes.

Quote: MathExtremist

I don't think too many people will be forthcoming with advice on structuring or tax evasion. Both are federal crimes.

Agreed. If you go to casino. Place a 5$ blackjack bet, win and leave the casino... you are supposed to claim that when you file.

Cash check it doesn't matter. If it is over 10k it is going to be written up per Reg 6a. However it is in promo chips or any casino chips it will not, as it is not a cash transaction yet. Go with your conscience.

Quote: thlf

Cash check it doesn't matter. If it is over 10k it is going to be written up per Reg 6a. ...

Are you sure that is true? Perhaps I misunderstood -- what do you mean by "written up"? A CTR is a currency transaction report and should not apply to having a check issued to you or to you writing a check to the casino. The checks with their associated bank transfers provide the basis for tracking the movement of the money. There also shouldn't be a CTR for wire transfers in either direction. The CTR is the way they document the movement of large sums of money in cash form. I think the whole objective is to detect and to deter money laundering on a large scale. I don't even think that the existence of a CTR comes up very often in income tax matters, although it could. It is my impression that the W2-G forms are the main thing the IRS will be looking at. Don't we have a few accounting types on this forum?

To expand on what doc said, the purpose of CTRs is a prevention against money laundering. They do not necessarily imply gambling winnings. If you cashed a check, or made a cash bank withdrawal, for over $10,000 it would generate a CTR.

As was noted, casinos will usually agree to pay large amounts of gambling WINNINGS by check.

Yes, that is what the person at the cage asked prior to issuing a check, "is it all winnings?" Now I understand why.

I'm still not a 100% clear how this all works out, I've only just started gambling in the US this year - gambled previously only in Asia, mainly Macau, so I have no idea what the pit bosses were talking about. So they will be sending me a W2-G form? I've already checked my player account for the year, they have seriously skewed my winnings (in their favor). Thanks for all the advice so far

Quote: moogen

Yes, that is what the person at the cage asked prior to issuing a check, "is it all winnings?" Now I understand why.

You understand? I'm even more confused than before.

"Is it all winnings?" The answer is ALWAYS no.

Even if you're cashing in $10,000 after starting with a measly $10, it's not all winnings!

I'm not a tax attorney, so don't take this as legal advice. I'm also not a big-money gambler so I've never had the pleasure of dealing with 10k cashouts. That said, I believe the IRS considers each "session" a taxable event in and of itself. If you have a $300 winning session at dice, then a $300 losing session at blackjack, the letter of the law says you report $300 in winnings toward AGI and then deduct $300. The net is zero, but your AGI goes up. For anyone who breaks even but has lots of handle, because it means your AGI shoots through the roof even if you deduct it all. That tends to lead to lots of problems and phase-outs based on AGI.

In practice, no small-time bettors do this. But if you're a big-money gambler, keeping a session results journal is a very good idea. W-2Gs are reported to the IRS, but there's no equivalent for big losses, so the only way you can justify taking deductions is if you have some semblance of a records system.

The CTR is an unrelated issue. As others have said, the CTR is a check on money-laundering. It's only related to cash transactions, it's not reported to the IRS at all, and nobody cares how much of it was winnings. If you buy in for 9k at a dice table, win a yellow chip, color up and go to the cage, you'll get a CTR.

Quote: MathExtremist

... I'm also not a big-money gambler so I've never had the pleasure of dealing with 10k cashouts. ... If you buy in for 9k at a dice table, win a yellow chip, color up and go to the cage, you'll get a CTR.

I, too, have never had the pleasure of a $10k cash out, but I think that ending your session with $10k+ in chips only results in a CTR if you want it to. If you don't, then ask for a check or a wire transfer. If I were ever so lucky as to win enough to have $10k in chips (I certainly wouldn't have them from my buy in), I sure as heck would never walk out of the place with that amount of currency. I realize that some other people do, but I would have to consider it foolish behavior.

The Wizard made a comment about the casinos being willing to pay with checks if one has large winnings. Would they not pay out with a check if you bought in with a lot of cash and ended the session with a large amount left? I personally would consider carrying a large sum of cash into the casino to be foolish behavior too, though I have seen people arrive at the table with gobs of cash. I feel that if you are going to wager big time, you should transfer the funds in by some non-currency method (cashier's check, wire transfer, etc.) and depart with the casino cashier's check. Not that I'll ever have to implement that strategy.

Sorry, I meant "go to the cage and get cash." The "C" is for currency. Checks or wires don't trigger anything - there's already a paper trail there. If I ever get to the point where I'm betting with more than my wallet can handle, I'll use markers. That way they just EFT any winnings directly into your account, no wires or checks needed, and no suitcases full of cash either.

Thanks again for the advice all, especially you, mathextremist, this was all very enlightening advice. I think the best bet is to either hand it over to an accountant or a wealth management specialist. (Never was good with all the intricacies of this stuff :P )

There are two pieces to this.

The first is currency reporting. The CTR. If the casino feels that there is an "attempt to evade" reporting, they can file a report. Say, by going to the window with $5,500 in cash, then going back around to the window and dropping another $5,500, then THAT is reason alone to file the CTR. $10,000 in cash is the amount that is used, but the amount CAN go lower. The casino files, probably thousands of these every year. The act of filing means nothing. The pattern is what the Treasury folks are looking for. And the bad guys reveal themselves pretty easily.

The second is gambling winings. The W2G. They are not required to file them unless you get over certain amounts in a single win.
These limits are $1,200 for Bingo or Slot, $1,500 from Keno, or $5,000 from a poker tournament. Play at the general poker, roulette or craps tables may not generate a W2G. Play in a tournament, where a set number of folks go against each other, then you will get a W2G if you win more than $5k.

On dicedealer.com, there is a very detailed discussion of HOW the casino will track player play to insure that the CTR or W2G requirements are met. And they start tracking once you show more that $3-4k in cash. None of us are worth them losing the casino license over your desire to not have a reportable transaction.

And the gambling log should be standard for anyone who goes to the casino more than once a month. Track your buy-in's by game, and by day. That way you can report the losses properly.

Congrats on your win.

SFB

The only time a W2G is generated with table game play is when (1) the win is over $600 AND (2) the payoff was at 300 for 1 odds, or more.

Quote: MathExtremist

The net is zero, but your AGI goes up. For anyone who breaks even but has lots of handle, because it means your AGI shoots through the roof even if you deduct it all. That tends to lead to lots of problems and phase-outs based on AGI.

I can attest that this is indeed the case. For the past two years, I've phased myself out of my student loan interest deductions as a result of this situation.