U. S. Taxes or Screw The Gambler

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toolman1

Active Member
I recently read 2 articles relating to taxes on gambling winnings with some rather disturbing ramifications. I’ll just note the parts of the articles that are relevant to this post.

Attorney Robert Loeb wrote:
The biggest development in tax treatment of gambling in the past year came in an IRS memorandum covering the definition of a session, especially for table players. … last year the Office of Chief Counsel of the IRS issued a memorandum which stated that a session which creates a win or loss for tax purposes is calculated when a player redeems his chips at the cage at the end of a play at that casino. …

Jean Scott wrote when pushing her book:
… how to report your gambling wins and losses to Uncle Sam (no, you can’t cancel a win with a loss and report nothing) …​

The implication from these 2 articles seems to be that one must run a total of the “session gains” and a second total of the “session loses” from one’s “log”. The session gains would then be reported as income on one’s 1040 and the session losses taken as a deduction on Schedule A (Itemized Deductions). Taking the losses is the problem.

Some taxpayers do not have enough Schedule A deductions so they take the “standard deduction” thus losing the “gambling loss deduction”. Other taxpayers are in a high enough income bracket so that much (if not all) of their Schedule A deductions cannot be used to reduce their taxable income. As for state income tax, many states do not allow any deduction for gambling loses so one ends up paying taxes on “session gains” but gets no break for “session losses”.

Any comments?
 
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Toolman: How good is your accountant?

Is (he) agressive or Timid? Which commonly accepted practices does (he) interpret?
How large of a one time win? Or how many smaller consistant wins is one willing to claim?

Haven't had a substatial win to worry about lately, so haven't followed "rule" changes.

But in the course of a good run, took the stance of being a "pro" which allowed for dollar for dollar deductions of expenses related to winnings under Schedule C. This with the complicity of a CPA. This stance also allows for gaming income to be listed as "earned income "at the lower rate, rather than "other income "at the higher rate.

Now someone with a one time jackpot or table session win, which required a 1099R or G issued by the casino would be stuck under the circumstances you outlined unless they would want to claim "Pro for a year" and had significant activity. Otherwise the one time win is similiar to winning a car, or house raffle, etc.

All comments to be taken as that: "Comments" and by no means represent legal advise. Only intended as discussion extenders.
 
1099

For 2008, I got a 1099 from one of my local casinos. During the year I made it into the money four times in their quarterlies. Only small amounts 225, 300, 300, and 500. I was told any wins totaling $1200 or more in their tournaments (for the year) was sent a 1099. This was something new from the IRS starting 2008. Anybody else have this happen to them?
 
The tax rules concerning gambling have always been ridiculously unfair. I avoid most of the unfair portions myself by filing Schedule C for my gambling. However, for a typical gambler that's not an option.

For the regular gambler, the tax law makes it almost impossible to comply with the law and still have a profit. In those states that don't allow deduction of losses for state income taxes, I would guess that it is completely impossible.

How about the poor retirees drawing Social Security? If they don't lie about their gambling winning sessions, they'll see their Social Security reduced drastically due to the income limits.

For casual gamblers of any age who play high stakes, the effect is particularly brutal. Imagine if you have a million dollars worth of W2Gs in a year, and you break even overall. Now, when you file your taxes you'll be reporting a million dollars or more of wins, which goes straight into your adjusted gross income. A seven-figure AGI guarantees that your ability to take deductions or credits for anything will be severely limited, including the very place you are supposed to claim your million dollars in losses! Ridiculous.
 
KenSmith said:
The tax rules concerning gambling have always been ridiculously unfair. I avoid most of the unfair portions myself by filing Schedule C for my gambling. However, for a typical gambler that's not an option.

For the regular gambler, the tax law makes it almost impossible to comply with the law and still have a profit. In those states that don't allow deduction of losses for state income taxes, I would guess that it is completely impossible.

How about the poor retirees drawing Social Security? If they don't lie about their gambling winning sessions, they'll see their Social Security reduced drastically due to the income limits.

For casual gamblers of any age who play high stakes, the effect is particularly brutal. Imagine if you have a million dollars worth of W2Gs in a year, and you break even overall. Now, when you file your taxes you'll be reporting a million dollars or more of wins, which goes straight into your adjusted gross income. A seven-figure AGI guarantees that your ability to take deductions or credits for anything will be severely limited, including the very place you are supposed to claim your million dollars in losses! Ridiculous.
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The only comment I have is related to your statement about a retiree on Social Security. If I'm not mistaken, once a person reaches "normal" (or what some call "full benefit") retirement age, benefits are not reduced in relation to income earned. However, there's another catch. The higher the income for a person on Social Security, the more of that person's Sociality Security income is taxed - age is not a factor for that rule. So the retiree is still subject to getting screwed. :eek:

BJMAILMAN said:
For 2008, I got a 1099 from one of my local casinos. During the year I made it into the money four times in their quarterlies. Only small amounts 225, 300, 300, and 500. I was told any wins totaling $1200 or more in their tournaments (for the year) was sent a 1099. This was something new from the IRS starting 2008. Anybody else have this happen to them?
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BJMAILMAN, I have run across this type of situation for years in several casinos - its not new. I think it's the rule for the casinos rather than the exception. Also, it seems to me they use $600 rather than $1,200 for the cut-off point so the person telling you the cut-off point is $1,200 is probably not well informed - what else is new. The $1,200 rule mainly applies to wins from slot machines - I think.
 
Residency

As Ken suggests, your state of residency is a big factor. Mine for now is one of the ones that doesn't allow any washing (losses to offset wins). They get 6.5% off the top of all W2-G's and/or 1099's.
This alone encourages many people to move to states having no income tax (I think NV, FL and some others?).
Politicians here say the quality of life justifies the cost. They're selling, of course and I'm still buying. That could change!

Billy C
 
unfair taxes suk!

I play at one casino that does not withhold taxes from tournament winnings. Their oppinion is that the prize pool is made up of player entries, not a penny from the casino. Therefore, NO withholdings, NO 1099's. Also, they pay winners with casino chips.

I think that is how it should be in all tournaments that are just returning player entry fees back to the players.

tgun
 
Taxes are ALWAYS unfair!

It seems that there are different laws depending if the event is guaranteed or based on entries. AND believe it or not, wether there are free entries involved.

No free entries and NOT guaranteed by the promoter, they would not need to fill out any tax forms. Of coarse this is BS (not basic strategy) as a blackjack session could net you over 600 of the casino's money and there would be no forms. BUT do not do that on a machine or a lottery ticket!!!

I won 1400.00 2 times at one casino, no forms, same year different casino but same corporation, I won 75.00 and got a form!!! Was paid in cash by both, not chips.

For poker win 600 in a cash game, no forms but a tournament you get a form. No logic at all...typical government results...

Seems if you could learn poker and play in cash games, you could beat the system. I am working on that...

Yes, BillyC, my strategy is "GET LUCKY" I will share it with you at no charge!!!
 
Taxes

At two of my local casinos, that I played poker and blackjack at, when you win in a BJ tournament any amount you have to sign for it. In the poker tournaments they just pay you. It has only been small amounts like the BJ tournaments last year. The BJ tournaments are payed for by the players pool and the poker tournaments by the entries. That seems to be the same.
 
Taxes, taxes, taxes

I live in AL., gamble in Miss. and am taxed for any amoont over 1200 by the feds and both states.

The Miss. tax is a flat rate at 3% and is not refundable for out of state gamblers. W2GS are given to the gambler or may be held by the casino through the reporting year and then mailed to the winner.


A 28% federal tax plus the state tax will be taken from the winner if he desires. I might suggest that anyone playing video poker frequently and has some large wins,have the casino take the 28% occasionally. I had some rather large wins at VP and had the fed. tax taken by the casino. Glad I did, as I will receive a refund from the IRS,.


Don't know for sure, but I think 1200$ is the amount the feds require for a minimum win at non-table games. A win at 1200 gets a W2G. Some casinos set a machine win of 1199$ to avoid the tax.

I have been taxed on tournament wins of 600$. Don't know why, but the tax rate may vary between casinos. Maybe it is different interpretation of the tax laws.

Good luck, may you all receive a snapper on the last hand. Joking here.

MIKE
 
Incentive

Big incentive for the drug dealers-------all cash transactions and NO taxes. Probably a good living if you don't have a conscience and there's always the risk of being caught or a bullet in the head (deserved)!

Billy C
 
Aw Shucks

Billy C said:
Big incentive for the drug dealers-------all cash transactions and NO taxes. Probably a good living if you don't have a conscience and there's always the risk of being caught or a bullet in the head (deserved)!

Billy C
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You mean having their limbs chainsawed off in the movie, "Scarface" was just fiction? Darn! :eek::laugh:
 
Taxes

One more goofy example. Just cashed in a poker tournament in a Louisana casino Monday night. I and five other players chopped the top six places prize money. We got $3453 each. One player had to sign for and got W2G for first place money of $8600 and one for second place of $5200 even though we all got $3453 No one else received W2Gs. The two low stacks agreed to sign to get the chop.
 
Can't beat the deal!

tomlw said:
One more goofy example. Just cashed in a poker tournament in a Louisana casino Monday night. I and five other players chopped the top six places prize money. We got $3453 each. One player had to sign for and got W2G for first place money of $8600 and one for second place of $5200 even though we all got $3453 No one else received W2Gs. The two low stacks agreed to sign to get the chop.
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I'd let someone else pay my taxes anytime.

Billy C
 
Just like AIG

Monkeysystem said:
You whispered in my ear during last night's tournament that you LOVE paying taxes!:joker:
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I must because I certainly keep doing it! Look at the hoodlums at AIG. If they're taxed at 90% on the bonus money they got, it's still criminal.

Billy C
 
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