Follow up to House Bill 3962

On Nov 6 2009, on the other site, the Wiz posted about the above House Bill that, I think, maybe had been passed at that time by the House of Representatives. That Bill stated, in order to fund health care, that gross winnings above $1MM gambling would be taxed at 5.4% regardless of any offsetting gambling losses. Thereby screwing people, say, high-roll slot players, who may generate thousands of W-2G's a year and would have to pay tax on GROSS winnings, maybe only on those gross winnings that actually exceded $1MM?, rather than NET winnings. The way I understood the original language was that any winnings upto $1MM could still be offset by losses. (Don't know if that's correct or not.)

I hope I summed up the gist of that bill at that time more or less anyway correctly.

I was just recently wondering whether the Wiz or anyone else, now that some kind of Health Care bill has actually been passed into law, I don't know if it was still under H.R. 3962 or not, knows whether or not this revenue-funding provision ever survived the final bill after the Senate got done with it.?

Where I looked I couldn't see that it had but I was just wondering. It appeared to me this "revenue-funding" provision may have been dropped.?

Would it now be safe to say this provision never made it into law? And that if I have to do a tax return of someone who has $1.1MM in W-2G's but offsetting losses of greater than that amount that he would owe no tax on his "winnings"?

Apologies if this is not the right place to ask - I'm not all that familiar with this new site - the question I'm asking really relates to a question on the other site.

Either way, I thought maybe the Wiz may want, if the final outcome is actually known or not, to post a follow-up on the Nov 6 2009 post on the other site.

This sounds grossly unfair. It also rapes the rich. Therefore, I have absolutely no problem believing it is true.

We've got to fund Obamacare by screwing SOME people over, and "the rrrrrrrich" are an easy, popular target. Of course, this "revenue creation" scheme, like all such schemes, will wind up DESTROYING revenue as whales who--golly gee!--don't cotton to paying taxes on their LOSSES take their business offshore, and the Treasury garners less tax revenue from US casinos as a result.

Duh!

First of all you don't have all the facts straight. It's not $1million in W2G's, it's $1million in Gross Gambling Winnings. We're REQUIRED to report ANY winnings, even if it $300k in W2G's today and $45 tomorrow without a single W2G.

I don't have a problem with the law because it targets fools who have a problem staying away from the high limit slots. Of course, I'm also in favor of $10/gallon gasoline to help keep junkers and punks and those with too much time on their hands from just driving around to show off or to kill time, making it overall more dangerous for the rest of us. I also favor a $10 per pack tax on cigarettes just to feed the idiots who smoke some PAIN for being so stupid.

Well I think I said gross gambling winnings and I think I agree with you that any win is, in theory, taxable. With or without a W-2G. The practical matter is that only winnings paid to you that show up on a W-2G are what the Feds require you to report as income without getting into trouble.

Perhaps you are a $100 BJ player playing 100 hands/hr 300 hrs/yr. And never received a W-2. Good for you for voluntarily including in income only those hands you won. Probably over $1MM in gross winnings that were not reported to the IRS as income. Apparently, in addition to the fools who may play high-limit slots, you also don't have a problem with the fools who may happen to wager $2-$3MM/year playing BJ.

You have my nomination for the Most Honest Taxpayer Award since I assume if you played only 1 $45 hand of BJ in 2010 and won you will include that $45 win in your income and pay tax on it.

Regardless, I interpreted the original bill that said "In the case of a taxpayer other than a corporation, there is hereby imposed (in addition to any other tax imposed by this subtitle) a tax equal to 5.4 percent of so much of the modified adjusted gross income of the taxpayer as exceeds $1,000,000. -- Section 59C(a) page 337 H.R. 3962" as only proposing to tax those gross winnings that exceded $1MM at a 5.4% surcharge.

As for $10/gallon gas, probably most of that cost would likely be federally imposed tax anyway. In which case maybe go to an Indian casino that can sell gas on their land which would be exempt from fed gas taxes. (I think?!). Even better make it a $100 tax/gallon so most of us can all be thrown back to the Stone Age and ride our bicycles. Perhaps that will be enuf to eliminate all the junkers and punks from just being able to drive around just because they feel like it thereby allowing you to be perhaps the only guy left who can still afford to drive in America making the rest of our lives ever so much safer. Even better, just ban the sale of all cars so we all, including you, can be protected from these dangerous junkers and punks with, obviously, too much time on their hands.

Really, I'm most interested whether such a provision that was passed by the House in 2009 ever made it into law.

Quote: Curiousguy11

Well I think I said gross gambling winnings and I think I agree with you that any win is, in theory, taxable. With or without a W-2G. The practical matter is that only winnings paid to you that show up on a W-2G are what the Feds require you to report as income without getting into trouble.

Perhaps you are a $100 BJ player playing 100 hands/hr 300 hrs/yr. And never received a W-2. Good for you for voluntarily including in income only those hands you won. Probably over $1MM in gross winnings that were not reported to the IRS as income. Apparently, in addition to the fools who may play high-limit slots, you also don't have a problem with the fools who may happen to wager $2-$3MM/year playing BJ.

You have my nomination for the Most Honest Taxpayer Award since I assume if you played only 1 $45 hand of BJ in 2010 and won you will include that $45 win in your income and pay tax on it.

Regardless, I interpreted the original bill that said "In the case of a taxpayer other than a corporation, there is hereby imposed (in addition to any other tax imposed by this subtitle) a tax equal to 5.4 percent of so much of the modified adjusted gross income of the taxpayer as exceeds $1,000,000. -- Section 59C(a) page 337 H.R. 3962" as only proposing to tax those gross winnings that exceded $1MM at a 5.4% surcharge.

As for $10/gallon gas, probably most of that cost would likely be federally imposed tax anyway. In which case maybe go to an Indian casino that can sell gas on their land which would be exempt from fed gas taxes. (I think?!). Even better make it a $100 tax/gallon so most of us can all be thrown back to the Stone Age and ride our bicycles. Perhaps that will be enuf to eliminate all the junkers and punks from just being able to drive around just because they feel like it thereby allowing you to be perhaps the only guy left who can still afford to drive in America making the rest of our lives ever so much safer. Even better, just ban the sale of all cars so we all, including you, can be protected from these dangerous junkers and punks with, obviously, too much time on their hands.

Really, I'm most interested whether such a provision that was passed by the House in 2009 ever made it into law.

No, there's some confusion here. I play only slots. If you do have an audit (and I've had one a few years ago where I learned the hard way) you need to produce a gambling log of your daily results/activity. IF you choose only to report on W2G winnings, the auditor will ask you if you think he's stupid because you have somehow NEVER seemed to win anything other than big wins. Then he will not accept your log and the problems begin. They expect honesty and most of all, mutual integrity.

For BJ, this is what they expect: A daily log of your overall results FOR THE DAY AT EACH CASINO PLAYED AT. One simple entry of a win or a loss, regardless of size and regardless if you received a W2G on any big win or not. Your personal gambling log is the gospel for both of you. Screw it up or have holes in it then it wll be rejected and you will find yourself in a world of hurt. I understand the 5.4% proposal and I like it.

I'm left wondering why you didn't opine about the smoking tax.

Thanks Jerry for your reply.
I wonder too why I didn't opine on the smoking tax - apologies - I can get a little off-topic late at night.
Anyway here is the original Nov 6, 2009 post from the original Wiz site:
"I have heard that to finance the health care bill, a surcharge will be imposed on GROSS income above a certain point. This will have a big impact on high-level slot players, who accumulate hundreds of W2-G forms, like me. Do you have any insight? — Joe from Denver
Here is what the bill says:
In the case of a taxpayer other than a corporation, there is hereby imposed (in addition to any other tax imposed by this subtitle) a tax equal to 5.4 percent of so much of the modified adjusted gross income of the taxpayer as exceeds $1,000,000. -- Section 59C(a) page 337 H.R. 3962 (PDF — 3270 KB) or CNN.com
The surcharge would be applied before the gambler could deduct any offsetting losses. I verified this with Marissa Chien, co-author of Tax Help for Gamblers. For high-level slot players, it is not difficult to rack up W2-G forms in the millions per year. Most of these players will still have a net loss on an annual basis. Past the million point in gross income, the player will pay a 5.4% tax on any win of $1,200 or more, even if there is a net loss for the year. This is just my opinion, but I think that isn't fair. If we must tax gambling winnings (which they don't in Canada), it should be on the net, not the gross winnings, on an annual basis. Should this become law, it will ruin high-level slot play in this country. "

It seemed to me that what got passed by the House back then was a proposal to tax as a surcharge 5.4% of any gross winnings over $1MM and such winnings were not subject to any offset of gambling losses, like most gambling losses normally would be.
So a guy who won $1.2MM in gross winnings and suffered $1.2MM in losses (in theory whether BJ or slots) would still owe a 5.4% tax on the extra $200,000 in gross winnings over $1MM.

If this interpretation is correct, it would perhaps be an incentive for any gambler to at least consider stop gambling at a $1MM gross winnings point due to the tax consequence.

Anyway, all I really originally wanted to know was if anyone knew whether anything like this ever finally made it into law when the health care bill got passed.

That's cool if you liked the proposal, the way I interpreted it anyway. I can't see how any gambler could be in favor of it but so what.

I have not heard, but assumed that the 1MM rule was dropped. Let me ask Joe from Denver about it.

The 1 million limit is only for those, who file a joint return. If you are single, it is only 500,000.
Also, it doesn't seem to be talking about gambling winnings specifically - all income is subject to this new tax.
So, if you make, say $400,000 a year in salary, you can only have gross winnings of 100K before triggering the rich tax (wagering $100/hand on BJ, it would be about four evenings of play).

Here is what Joe from Denver said to me:

Quote: Joe from Denver

As far as I know, it is still in the bill and I believe it was on gross earnings in excess of $250K, not $1M.

If this is true, at any cap, I'm surprised it is not front page news here in Vegas. It would be much more important than the Bellagio robbery, which gets lots of press. I've put in more questions to people who should know more about it than Joe. Stay tuned.

The following comes to me from the accountant of Joe from Denver.

Quote: Joe from Denver's accountant

The good news is that that provision, Section 59C was not included in the final bill. So the surtax on high income individuals did not pass. The bad news is that a new medicare tax on unearned income is effective for years after 2012. The tax is on adjusted gross income over $250,000 for a married couple. We do not know how this might apply to gambling winnings offset by itemized deductions. I am afraid it may apply. More to come as we learn more. At the end of each year, I outline the new tax laws for some speeches I make and am fairly on top of the changes.

So high-end slot players can relax for two more years.

As an aside:

If you are a Hi-Limit Slots player or other player, that spends ALOT of time in the casino,
then you SHOULD be doing what Jerry says, and have a gambling log.

And then, you should be reporting your winnings as a Schedule C BUSINESS, not going to line 7 of the 1040.

A little bit harder to do, but if your spending more than 20 hours a week in a casino, or have no other employment, you can end up just paying tax on your NET income from gambling, including comps, and deducting travel and other expenses.

If you go to a casino 12 times a year, you are out of luck with this method. Gross income to Line 7 and unlimited Itemized deductions. But your always behind in this method...

SFB

Quote: SFB

If you are a Hi-Limit Slots player or other player, that spends ALOT of time in the casino,
then you SHOULD be ... reporting your winnings as a Schedule C BUSINESS...If you go to a casino 12 times a year, you are out of luck with this method.

some time consideration determines if you are conducting gambling as a business?

OG:

Yes. The time committed is a significant factor in determining that you are gambling as a business.

Significant Time, And significant cash.

$20 a roll at the craps table doesn't get you there.

$200 a roll, for 4 hours a night, MAY.

Putting $50-100 though a slots machine per roll, MAY get you there.

I will post some additional info later. But its a big standard to get past...

According to the Supreme Court Standard:

A "professional gambler" is an individual, who pursues gambling full time, with regularity, and as a livelihood rather than as a hobby. Professional Gamblers must demonstrate a profit motive for it to considered a trade or business.

So, it is a high hurdle.

SFB

Interestingly, you could form a corporation to do the gambling, and have it pass through to your individual income tax return (probably a S Corp). A lot more headache, but worth it for the true person who makes it their profession. http://professionalgamblerstatus.com/