Gambling wins and the IRS
Many people look at gambling as a means of making quick cash, but paying taxes is an important part of the transaction. Let's say you go to a casino and get lucky. If you walk away with $600 or more at a race track, $1,200 or more at slots or bingo, or win $1,500 or more at keno, the IRS wants to know. The first step is to have a Social Security number and file the win on your taxes.
Gambling in the US
Some of the gambling world is still in limbo due to the debates of legalizing and regulating the hobby. The UIGEA of 2006 was the first step in the gambling world, but it proved to fail at managing it. In effect, the UIGEA stopped gambling operators from functioning legally in the US and that pushed gamblers to start using offshore gambling companies. Billions of dollars were channeled out of the country.
Now US legislators are smarter and want a piece of the gambling pie. Many legislators are working to amend the UIGEA and create new gambling laws that take advantage of the huge taxable dollars moving through the market. The recession left many states with huge deficits and few ways to fund various programs like education, public works and development. Lawmakers are hoping to capitalize on the millions of US gamblers and use their money as a means of meeting 2010/2011 budgetary shortfalls.
Poker is a game of skill
Poker is up in the air in terms of "gambling" because many are arguing that to be classified as gambling, a game has to be a game of chance. Poker, on the other hand, is a game that involves skill and can be taught and learned by players. Some believe that makes it a game of skill and therefore it should not fall into the same taxing or laws as gambling games do. Although the argument may hold up in court, according to the IRS funds won from poker are still taxable. In fact, any poker tournament operators who award over $5,000 have to report the winner's information for taxation. Those wanting quick cash from gambling are in for a big surprise. Informing the IRS about a win normally means you pay about 25% in upfront taxes. If you withhold the information by refusing to supply an operator with your social security number, the casino can take 28% upfront.
The W-2 form
If you win enough, the casino will supply you with a W-2G form to post winnings. This is a form that chronicles your wins and makes it clear to the IRS what their portion of your good luck is. If you don't make enough to warrant a W-2G form, the IRS still wants to know what you won. It may be $25 at poker, but the taxpayer still has the responsibility to report it.
Filing out tax forms
Filing out tax forms is simple with gambling. Though there are taxes to worry about, there is also line 28 on a Schedule A. It's the Miscellaneous Deductions line and this is where losses from gambling are reported. You can claim up to the total amount of winnings and that will wipe out your taxable gambling income altogether. The IRS instructs gamblers to keep some record of their games that include dates of wagers, location, amounts of each bet, type of game and wins along with losses. You should also keep any lottery tickets and bingo cards in case you need documentation.
Gambling and your taxes
Gambling is a great way to earn quick cash, but you have to remember that any income is considered taxable by the government. Keep track of winnings and losses and be sure to post them on your return or your W-2G. It may seem like a small amount, but the IRS wants to know about all earnings.
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