Taxes on Gambling

by Jerry "Jet" Whittaker
June 25, 2006

To be honest how many gamblers do you think have made a big hit in the establishment and somehow or the other have failed to, or dodged reporting it as income to the IRS? The fact is that gambling has become such a big business involving huge transactions in cash and kind that the IRS not only expects you to report all your winnings as well as your losses but have virtually turned the gambling establishments into agents of the IRS. So the next time you make a big win on the slot machines or rake in $1,200 or more and the casino folk run up to you to congratulate you, rest assured they will have a piece of paper for you to fill up with your personal information to pass on the folks at the IRS. Of course you will get several copies of the document.

The Basic’s of gambling tax:

Winnings from all forms of gambling are viewed as income and must be declared as such on your tax returns. Winnings are taxed in many states as well as the IRS. You may deduct your losses from your taxable winnings but only to the extent of your winnings. These losses cannot be carried forward to the next year. Winnings and losses are must be reported in the year they occur and cannot be carried forward. Losses and winnings are to be reported as combined figures for married couples. ‘Lumping’ is the technique of reporting one figure as winnings and no losses and reporting nothing if the result is a net loss. This is disallowed by the IRS and you must report the total of winning sessions separately from the losing sessions. This report must include a diary that contains the date and type of the wager/s; the name and location of the gambling establishment; the names of the opposite party and the amounts you won or lost at the wager.

In order to substantiate the claims in your report you must submit the W-2Gs if any, the tickets and receipts, credit card records and any receipts provided by the gambling establishment as also your bank records. Usually the gambling establishment sends in the information to the IRS if your winnings exceed a certain sum but never the less you are required to do the same. All gambling establishments are bound by the ‘money laundering rules’ and report cash transactions that exceed $10,000 on a given day. They can even report suspicious transactions that exceed $2,000 and once they have your SSN and ID on their records they can report these transactions without your knowledge. So it always pays to be honest and fair with the IRS even if it does not feel fair to you.

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