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Gambling and Taxes

My YouTube team recently shot another new episode for our tax tips video series. In this episode, host James Owens discusses the importance of understanding the tax implications of gambling. You can watch the embedded video below but be sure to check out my YouTube channel to subscribe to my future videos.

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…

Gambler Gets Nearly 4 Years In Tax Scandal

From the Washington Post.com:

Connie Alexander was a compulsive gambler who must have thought she hit the jackpot when she met Harriette Walters, who showered her with lavish gifts and even helped pay for Alexander's 2006 wedding at a Las Vegas hotel.

Yesterday, the marker came due in what turned out to be a high-stakes crime.

Alexander, one of 10 people prosecuted for helping Walters embezzle millions of dollars from the D.C. tax office, was sentenced yesterday to almost four years in prison for her role in the massive fraud, which cost the District government almost $50 million.

Appearing before U.S. District Judge Alexander Williams Jr. in Greenbelt, Alexander, 53, of Bowie, apologized to her family, to the court, to the government and to the "people of D.C."

"I know sorry doesn't make it all go away, but I am truly sorry," she told Williams.

All 11 defendants in the case have pleaded guilty, and all have been sentenced except Walters, who is scheduled to learn her punishment next month in federal court in the District.

Alexander was the first defendant in the case to come forward to cooperate with government investigators, and her attorney, Aitan D. Goelman, asked the judge to impose only probation.

Williams, who has sentenced seven other defendants in the D.C. case, rejected that request, saying Alexander's actions, which netted her more than $3 million, called for "punishment."

"This is not a probation case, under no stretch of the imagination," Williams said. "No one has gotten probation, and no one should have gotten probation."

But the judge appeared to be moved by the defense presentation, which included the testimony of a gambling addiction expert from New York, letters from Alexander's friends, colleagues and relatives, and a tearful statement from Alexander.

"I'm not going to throw the book at her," the judge said, noting that Alexander appeared to be truly remorseful.

Alexander was working in a casino in 1992 when she met Walters, who was a regular patron of the gambling hall. The two became friends, and Walters would give her gifts of money that averaged $5,000. It was not until some time between 1998 and 2000 that Walters enlisted Alexander in the scheme, which involved issuing fraudulent property tax refund checks and by then was several years old.

At the direction of Walters, Alexander endorsed and deposited eight such checks totaling more than $1.5 million. Between 2000 and 2007, Alexander received 92 payments totaling almost $3.2 million.

Alexander had pleaded guilty to receiving stolen property and conspiracy to commit money laundering, and with credit for her cooperation, the sentencing guidelines called for a sentence of 46 to 57 months.

Goelman had argued that the extent of Alexander's cooperation merited more credit than other defendants in the case had received. But Assistant U.S. Attorney Jonathan C. Su, while acknowledging that the assistance was truthful and complete, declined to ask for additional credit, and Williams said he did not see cause to give Alexander a further break.

As part of her plea, Alexander agreed to a restitution order of $3.1 million and to forfeit goods including a 2000 Mercedes-Benz automobile, a 2002 Harley-Davidson motorcycle, a 2003 Cadillac Escalade sport-utility vehicle, three projection televisions, designer handbags, 62 pieces of jewelry and eight fur coats.

IRS Raids Vegas Casino As Part of Investigation Into Former Fry's Executive

From The Mercury News:

The Internal Revenue Service (IRS) has expanded its investigation into a former Fry's executive, with agents seizing financial records and interviewing employees from at least one Las Vegas casino last week.

Federal agents on Thursday visited the Venetian, a casino and hotel along the Vegas Strip which Ausaf "Omar" Siddiqui, 43, had frequented, IRS spokeswoman Arlette Lee confirmed Monday.

She declined further comment, saying the search warrants have been sealed.

Siddiqui was charged in mid-December on allegations that he was part of a $65 million kickback scheme, where he supposedly charged vendors exorbitant fees to place their products on Fry's shelves, and pocketed the money to pay off huge gambling debts. He was formally charged in January on nine counts of wire fraud and money laundering. The Palo Alto resident is on house arrest and is scheduled to appear in San Jose's federal court Wednesday morning.

John Beckmann, 47, of Las Vegas and Siddiqui's "casino host" at the Palms Casino, told the Mercury News on Monday in an exclusive interview that he was questioned for "a couple of hours" by two IRS agents Wednesday afternoon. Beckmann essentially catered to Siddiqui's every need when he gambled at the Palms for three years.

Poker Tournaments Must Withhold Taxes

According to Tax Foundation, the IRS has added a new regulation, 26 C.F.R. § 31.3402(q), requiring that sponsors of poker tournaments withhold for taxes 25% of a players' winnings above $5,000. The sponsors must then provide this information to the IRS so that they can properly determine the taxpayer’s income tax liability. The regulation is set to take effect on March 4th 2008. However online and offshore poker games are not subject to the regulation.