When are chips taxable?

I'm not asking the amount at which they become taxable. We all know it's out patriotic duty to report all our income.
My question is When do they become taxable?
Lets say I keep a saftey deposit box in Vegas. I win $25,000 chips in December 2009 but don't cash them out until March 2010.
Which year do I report the income?

Ask your accountant.

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Keep in mind that any transaction over $10K will trigger a bank cash report.

On the other hand, what if you traded the $25K for a check?

what if you got a check for $25K in December but didn't deposit it until January?

I'm fairly certain you would have to report the income when "earned". If you are going to "defer" your taxes, you are essentially cheating the IRS anyway should they find out. That goes the same should you elect to cash a check in the following year. The timing happens when the money is earned.

My advice is to either not report the income at all or be completely above board with it.

Most of us are on the accrual basis rather than the cash basis. An example of the accrual basis is getting paid in January for work performed in December -- it counts as the prior year's income.

Reporting winnings in the year they are won (IOW, the year the gambling event occurred that caused the chips to be won) is consistent with the accrual method. I am not an accountant so cannot say for sure whether the cash method is possible. You may be able to get away with it for the purposes of income smoothing, etc. But the accrual method would likely raise the fewest eyebrows.

Just to state the obvious here. You only need declare the $25,000 if that is your net winnings for the year. If earlier during the year you lost $25,000 or more then there is no net income to report.

Mark

I was always under the impression that gambling related income in the US was taxed under Gross income, not Net income, so you would still have to report the $25,000 win and be taxed on it regardless of earlier or later losses.

But I'm English so I could be wrong, and please correct me if I am.

Quote: Croupier

I was always under the impression that gambling related income in the US was taxed under Gross income, not Net income...

Nope. It's net gambling income.

You can deduct gambling losses - but only up to the amount of reported gambling wins.

One way people get in trouble is by reporting only documented wins.

For example, many slot machines have a $1199 prize. That may or may not be the top prize for that machine, but is one of the prizes. Why such an odd number? Because $1200 and over generates a tax form.

People tend to only report the total of the various tax forms that the may receive, thinking the IRS is stupid enough to believe that there was no other winnings.

I say, go ahead and report additional, undocumented winnings. But also declare additional losses.


But, to keep things clean in the event of an audit, you really should have a gambler's diary.

thanks for the correction. Ilike to be informed of the facts, and it was something i never really understood, but as someone hoping to emigrate to the USA at some point in the future, US laws and procedures is something im extremely interested in.

Nope. It's net gambling income.

You can deduct gambling losses - but only up to the amount of reported gambling wins.


That is true for Federal, but different states have different laws. I live in one, where you can't deduct gambling losses. Rather not say which one, but you should investigate your state laws as well.