Monday, July 27, 2009

The Tax Implications of Gambling

Last week the Roni Deutch Tax Center – Tax Help Blog posted a new article explaining the tax implications of gambling. As many of you may already know, all winnings from gambling are viewed as taxable income by the IRS. To help anyone confused on how to report these winnings, check out the following article courtesy of the Tax Help Blog.

Get the Form

Whenever you win a “qualifying amount” at a casino, they are legally required to report it to the IRS. Therefore, they will collect your social security number and send you an IRS Form W-2G. As such you want to make sure to report these winnings on your tax returns because the IRS obviously already knows about them. Do not make the mistake of trying to avoid the taxes by giving the casino incorrect information as this is very illegal and could get you into a lot of trouble.

What Qualifies?

According to the IRS, a casino will need to report your winnings to the IRS if you win: $600 or more at a casino or horse track, $1,200 or more at bingo game, or $1,500 or more in a game of keno. Depending on your winnings the casino may even withhold taxes from your payout.

Smaller Fortunes

Although smaller winnings will not be automatically reported to the IRS, it is still your legal duty to report them. While the IRS may not catch you in the act if you do not report these smaller winnings once or twice, they may get suspicious if you report gambling winnings often, but only those that are verified by a W-2G Form.

On the 1040

You must report your gambling winnings, prizes, or non-cash prizes on your Form 1040 come tax season. They will need to be put on line 21, with "other income". 1040EZ forms cannot be used to report gambling winnings.

Gambling Losses

In addition to reporting your gambling winnings, you will also want to deduct your gambling losses. However, you cannot report gambling losses that exceed your total gambling winnings. When you deduct the losses, do so on Schedule A of the IRS Form 1040 as an itemized deduction.

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