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.

Continue reading at RDTC.com…

Taxes and the World Series of Poker Tournament

Yesterday marked the beginning of the World Series of Poker tournament, and according to reports over 800 people were turned away. Although the potential players all had their $10,000 buy in, the tournament’s organizers put a tight cap on the number of people who could participate.

"We are sorry, and I am sorry," claimed the World Series of Poker commissioner Jeffrey Pollack. "The last thing that we ever want to do is deny people entry into our events."

According to the Associated Press there were 6,494 players competing for a part of the $61 million prize pool. The top prize is estimated to be a staggering $8.55 million, but remember that all gambling winnings are technically taxable income.

The IRS’ website claims that all gambling winnings “must be reported on your tax return. You must file Form 1040 (PDF) and include all of your winnings. Gambling income includes, but is not limited to, winnings from lotteries, raffles, horse races, and casinos. It includes cash winnings and also the fair market value of prizes such as cars and trips. For additional information, refer to Publication 525, Taxable and Nontaxable Income.”

“A payer is required to issue you a Form W-2G (PDF) if you receive certain gambling winnings or if you have any gambling winnings subject to Federal income tax withholding. All gambling winnings must be reported irrespective as to whether any portion thereof is subject to withholding. In addition, you may be required to pay an estimated tax on your gambling winnings. For information on withholding on gambling winnings, refer to Publication 505, Tax Withholding and Estimated Tax.”

For more information on taxes and gambling – including how to deduct losses – check out this page on IRS.gov.