Tag: IRS

  • Gambling Income is Taxable

    According to IRS section 61, “Except as otherwise provided in this subtitle, gross income means all income from whatever source derived…” This includes gambling sources of income. There are many assumptions about when to claim the winnings received from casinos. While most understand that the winnings are taxable, many assume that they are reportable only if the casino presents them with a tax form to be filed with their returns. The correct assumption by the taxpayer should be that ANY and ALL winnings should be included in their returns, regardless of the documentation given to them by the casino. In fact, in the event of an IRS audit, a taxpayer having only those tax documents given to them by the casino risks losing all of their claimed gambling loss deductions and potentially paying tax on more than the winnings reported on their provided W-2G.

    IRS Publication 529 cautions casual gambling taxpayers to be diligent with maintaining proper documentation of all gambling activities. Yes, this means another log book to keep up with. The information suggested by the publication to be documented includes, the date and type of specific wagering activity, the name and address of the gambling establishment, the names of other people present with you at the establishment, and the amounts of your winnings and losses. Maybe, the most important information to have recorded is the winnings and losses…listed separately. That’s right, no netting the totals at the end of the year and throwing that figure in your tax return, especially if you are among those reporting only losses. So, how are we to delineate our winnings and losses and at what point in time?

    The Internal Revenue Code (IRC) does not offer specific guidelines on how to determine when winnings and losses occur, but does state that end-of-the-year netting is not allowed. Thankfully, Federal tax law gives guidance in George D. and Lillian M. Shollenberger v. Commissioner of Internal Revenue, T.C. Memo. 2009-306, and Szkircsak v. Commissioner, T.C. Memo. 1980-129.Gambling activity should be accounted for by “sessions.” According to the courts, the beginning and ending of each session, or transaction, as it is described in the Shollenberger v. IRS case, is critical in determining the net win or loss to record. With no specific rules defining a session in the IRC, we can infer from the courts that it would be too cumbersome to expect a gambler to log each pull of the lever at a slot machine or each hand played at the poker table as an individual session, but rather the net outcome of a series of lever pulls or hands played in a single session. The net total from that session is then recorded as the win or loss. These session wins are logged separately from session losses and are then recorded on the individual’s tax return, with total winnings reported on line 21 on Form 1040 and total losses reported on Schedule A of the 1040. Remember, deductions for losses greater than winnings are not allowed.

    Complying with the reporting rules of the IRS can be somewhat burdensome, but with the increased number of gambling establishments in recent years, it is inevitable that more and more audits are going to be directed at those tax returns with reported gambling income. Keeping documentation for gambling income and deductions follows the logic used in requiring documentation for other types of income and documentation such as standard W-2s and Form 1099s, receipts for purchases, and mileage reimbursement logs.

    It is wise to seek further advice from a tax professional to plan your tax strategy before you decide to take a chance with the casinos.

  • Casino Tax Refund

    A win in the lotteries, casinos, gaming tournaments, horse and dog racing, game shows, keno and other wins in the USA can make you ecstatic but usually this feeling is dampened by the IRS. Whatever you win is subject to casino tax and the IRS withholds 30% of it. This at times could prove to be very expensive. One could be even compelled to think of the IRS to be taking what lady luck has blessed with. During these times of recession and reduction of wages 30% of the win means a lot of money.

    There are people who do not know that 30% of the wining sum withheld by the IRS as casino withholding tax can be claimed back; one just needs to comply with the legal formalities stipulated by the law. If you are ignorant about this casino tax rebate clause it is neither the fault of the judiciary nor the IRS. It is your ignorance that is responsible for the financial loss.

    One need not worry about the 30% of the win just because there are firms that can get one the whole or at least a part of the money that is with held by the IRS. One can claim the casino rebate within 3 years from the date of winning the amount. So if you have won the money within the last 3 years you can claim the refund from the IRS.

    There are companies that offer professional assistance to avail the casino tax refund. One needs to first check the authenticity and genuineness of the company offering these services. There are transparent companies that reveal all the ins and outs of this service on their websites. One should study this information in detail and then avail the services. The quality of the service and the service charges levied by the companies are also of prime importance.

    A simple click on the websites of these companies makes you go through a series of simple steps and brings your money back from the jaws of the IRS. A bit of market research and chatting with your friends can reveal that there are many trustworthy companies that can help you at casino tax rebate.

    There are companies that will help you at casino tax refund even if you have won in the games in other countries too. The list of countries, that allow casino tax rebate refund on the money won, include France, Italy, Hungary, Japan, Ireland, Austria, United Kingdom, Czech Republic, Denmark, Finland, Russian Federation, Spain, Slovak Republic, Slovenia, South Africa, Tunisia, Lithuania, Luxembourg, Netherlands, Latvia, Sweden, Turkey, Germany, and Ukraine.

  • Lady Luck Was on Your Side – Now You Owe Uncle Sam

    Winning Big: Gambling is addictive. If you took a trip and won some cash, you might think you’re on easy street. But you’ll be in from a rude awakening if your earnings were not reported to the IRS. Yes, believe it or not, Uncle Sam wants a cut of those gambling winnings.

    They want it all: So it’s established. The IRS wants to know every little detail about your income. That means if you win money from casino, report those earnings. And even cash prizes won from raffles, lotteries, and Sunday Night’s bingo round need to be reported. They are all considered income by the IRS.

    Didn’t Report It: So what is the fate you suffer if Uncle Sam isn’t privy to your winnings? You’ll be in debt to the IRS. You’ll have to pay what you owe, plus interest and penalties if the debt was ignored for long enough. That means all that money you earned can be gone in a flash. Here are some methods the IRS may use to collect from you:

    Asset Seizure: Already spent your winnings on luxury items? Now they’re in danger! If you ignore the IRS, the might come and seize the assets to satisfy your debt!

    Bank Levy: The IRS can actually freeze your bank account! All the money will be gone in 21 days if you don’t contact them and work out a solution for payment.

    Wage Garnishment: Payday’s here. But it’s an unhappy day for you if you owe the IRS. The IRS can legally seize a portion of your paycheck to pay on your debt. They’ll leave you with just enough money to pay for your basic needs. (Like buying food and keeping a roof over your head.)

    Reporting Losses: The tables have turned. You can use the IRS’s rules about reporting gambling wins and losses to your advantage. You can deduct gambling losses. But the losses may only be deducted if you itemize deductions and you also have gambling winnings. To claim the gambling losses use Form 1040A. But keep in mind, the losses you deduct may not be more than the gambling income you report.

    Don’t Forget: You have to prove it! You have to provide receipts, tickets, statements and other records to show both your winnings and your losses.

    Playing it safe: If you are already in debt because of not reporting your earnings, there’s still hope. Don’t think you can get away with saying you didn’t know the tax rule. Because ignorance of the law is never considered an excuse. Instead, actively find a way to pay the debt off. If the IRS isn’t cooperating with you, consider hiring a tax professional that can help you pay the lowest amount possible.

  • Don’t Let Your Big Prize Turn Into an Even Bigger Tax Debt

    Jackpot! If you’ve got a gambling spirit, chances are you’ve probably invested a good amount of time into casinos. But if you win big in Vegas, don’t let the thrill of victory cloud your head. If you’ve won money from gambling and you didn’t report your winnings to the IRS, you could be in for a disturbing wake up call.

    Beating the House: Whenever you win money through gambling, you must report it to the IRS. The IRS wants to know everything about your finances. Not only do you have to report money won through a casino, but also raffles, lottery, and even bingo. The reason these winnings have to be reported is because the IRS considers them a form of income.

    Snake Eyes! What happens if you owe the IRS money because you didn’t report the winnings, or if you can’t afford to pay them what you owe? Well, as an IRS Hitman I can tell you it’s not going to be pretty. Soon, you may even be regretting your winnings. It will be you against the IRS and unless you have a good arsenal, they’ll take you for everything you’ve got!

    Stealing the Pot…The IRS has several ways of collecting on your tax debt and the most effective by far is the wage garnishment. This means the IRS can start taking money from your paycheck. And guess what? Neither you, nor your employer can do anything about it. The IRS can actually garnish up to 75% of your gross pay and that can put in a large financial hardship.

    Play it Safe: If you’re already in this unfortunate situation, there are still ways of getting help. You can speak with a reliable tax professional who will give you the facts on how to resolve your tax debt once for all. The House may be a scary thing when it comes to the gambling industry, but the IRS’ House is even bigger. So remember, the next time you’re in Vegas, don’t go all in.

  • Claiming Gambling Losses on Your Tax Return

    If you make any winnings in the gambling, you need to report the full amount of the winnings for the year on line 21 on Form 1040. You can deduct the losses you make from gambling for the year, on line 28 of form 1040 on Schedule A. However, you cannot deduct the losses from gambling which are more than your winnings! Also remember, this facility is not available to the non-resident aliens. They cannot deduct losses on gambling in schedule A.

    In order to claim losses on gambling you need to know certain basic rules of IRS on the subject. Suppose you make a winning in gambling of $1000 and in the same year you make losses of $500, you cannot reduce your winnings by your gambling losses and the report the difference of $500. You have to report the full amount of your winnings as your income and then you can claim losses equal to the amount of winnings as an itemized deduction. So your records for gambling activity should show your winnings separately from your losses.

    In order to claim losses in gambling, you need to keep proper records. You must keep a diary entering details of all the losses and winnings from gambling. The diary should contain the following information

    The date and the type of your wagering activity.
    The location of the gambling establishment indicating the name and address.
    The names of persons present with you at the gambling establishment.
    The amount won or lost.
    The maintenance is just one part of IRS requirements. In addition to the diary you must keep all the related documentation. This can include form W-2G (declaring Winnings from Gambling), Form 5754 (It’s a Statement by person who receives winnings from gambling), tickets for wagering, the credit card records including the bank statements showing withdrawals or receipts, payments slips provided to you by the gaming establishment.

    These records are just suggestive. The tax liability depends on the facts of a particular winning or losing and the related circumstances.

    Keno – the copies of the Keno tickets purchased by you and validated by a gambling establishment, copies of your casino credit records, and copies of your casino check Cashing records are required to be produced for winnings and losses from keno activity.

    Slot machines – If you’re playing on these machines, a record of the machine number and all the winning date and time the machine was played.

    Table games (including blackjack, poker, roulette, wheel of fortune etc) – the number of the table you are playing, Casino credit card details showing the credit issued.

    Bingo – You should keep a record of the games you played, the cost of the tickets purchased and the amounts collected on winning tickets, any receipts from the casino and other relevant records.

    Winnings from racing – a record of races you played, the amount of wagers, the amounts collected on winning tickets and amounts lost on losing tickets need to be produced.

    Winnings from lotteries – a record of tickets purchased, the dates of purchase, winnings and losses are required to be kept. You can also keep unredeemed tickets and payments slips in support of your claim.

    Many people never realize that winnings from gambling are taxable. And those who know it, tend to ignore it. However you should remember that the legal betting options like state lotteries, casinos and horse racing tracks are regulated by government agencies and IRS keeps a close track with these agencies. In fact that is the reason why the bells ring when you hit the slot. They’re shouting that someone is there to report your gambling information to the IRS.

    There are all sorts of financial decisions you take in your life. You make gifts to your children; you make investments and acquire real estate. Do you really know the tax implications of these decisions, which can save you thousands of dollars?