Gambling Income Tax Reporting

$1,200 or more in gambling winnings from bingo or slot machines; $1,500 or more in proceeds (the amount of winnings less the amount of the wager) from keno; Any gambling winnings subject to federal income tax withholding. Gambling winnings are fully taxable and must be reported on your tax return. If gambling happens to be your real profession then, your revenue will be tagged as regular earned income hence, it will be taxed at the normal effective income tax rate of a taxpayer. Keep in mind that your income and expenses compulsorily must be recorded on Schedule C, if you are self-employed.

Inrecent times, the number of people who travel to gambling centers orregions where gambling is a lucrative business is on the high side.Reno and some cities of Las Vegas welcome several travelers for thispurpose.

Justso you know, if you win big while gambling, you do not get to keepevery cent to yourself. Now someone is asking, why? Well, gamblingwinnings are taxable! …it’s as simple as that!

So,just before you embark on any journey for the sole aim of gambling,take some lessons on tax laws relating to gambling and be sure tounderstand every piece of information you find therein just so youavoid the Internal Revenue Service (IRS) and its stress.

A little explanation of why gambling income is taxable.

Now,you’ll ask … “is gambling income taxable?” well, don’tstress it, the answer is not far- fetched!

Yes!Gambling income is taxable and just before the smiles on your facedisappears into thin air, there is good news for you as an earner…hang in there!

Unlikenormal income taxes, taxes placed on gambling are constant. That is,not progressive.

So,you have nothing to worry about. Be it winning a $3 million at thepoker table or $1500 at the slot machine. So, when you hit a big one,25% of your big win is to go to whichever game you play.

Plus,you will be provided with an IRS form which is also known as a W2-Gto enable you to report your earnings and winnings to the government.Keep in mind that this threshold depends on the type of game.

Anothersuitable question to ask is this, “do these games report theirgambling earnings? Definitely!

Aquick look at some examples; for specificity, in the casino, in orderfor your winnings to be reported, there is one inevitable thresholdthat should be declined.

Anotherexample is the slot machines; for winnings above $1200, it isrequired of you to report them.

Forthat of horse tracks, winnings that are greater than $600 or that are300 times your initial wager must be reported.

Thecase is not different for bingo as it is similar to the slot machine.Every winning from $1200 should be reported.

Thepoker tournament is no different as every winnings Greater than $5000must be reported.

Inspite of all these, it is not required of Casinos to hold taxes orissue a W2-G that was mentioned earlier in this article to playerswho win big amounts at some table games. For example, roulette,blackjack, craps.

Thereason for this kind of segregated requirement made by the IRS isunknown to us perhaps but known to them.

Froma well-observed point of view, in the table games, a level of skillis required whereas the slot machines are merely a game of chance.So, it is not expected of casinos to ascertain for sure the amountyou begin with when you cash in your chips from a table game.

Nowyou ask, “What happens when a W2-G is not sent to me or whathappens when I do not get a notification? Your question might also beasked in this form… What happens if my taxes are being withheldfrom blackjack winnings?

Beforeyou raise your hands high in the air while smiling thinking you canoutsmart all these, just a gentle reminder, not receiving a W2-G formor having withheld taxes does not relieve you of your duties toreport whatever is been won to the IRS.

Thenext question that should readily come to mind is “what should Ido in cases like this?” It’s simple! Do it yourself! You willsave yourself a whole lot of mess by filing your taxes alongside yourother taxes for the year rather than at the casino where you claimyour winnings.

Now,someone is saying, “oh! I’m a professional gambler, gambling iswhat I do for a living, mine is quite different, how do I report mytax?”

Ifgambling happens to be your real profession then, your revenue willbe tagged as regular earned income hence, it will be taxed at thenormal effective income tax rate of a taxpayer.

Keepin mind that your income and expenses compulsorily must be recordedon Schedule C, if you are self-employed.

Hereis a poser. Ever wondered if individual states tax gambling winnings?Well, to answer the poser, certainly, they do.

Insome states, it is required of gambling winners to claim theirwinnings in the state where they were won irrespective of your placeof domicile. Also, your state of residence will require you to reportyour winnings but, at the same time give a deduction for the taxesthat have already been paid in the non- resident state.

Seemslike we are missing out on something really important which happensto be our big question for this article.

Everthought of what will happen if you do not report your gamblingwinnings? Well, enough of the rambles and mumbles as your eye-rollinghas confirmed the answer. Well, we know it’s a “No” simplybecause when that thought crossed your mind, you waved it off withthe back of your hands.

But,guess what? Dust your rackets as we will be hitting off some balls ofquestions as regards that.

Itis quite easy to shrug off the idea of reporting your gamblingearnings whenever that thought creeps into mind because we all wantto enjoy our bucks without any external force trying to snatch itfrom us.

Sosad! Now might not be a perfect time to let that slide as you do notwant to get involved with the IRS. Bet it could get messier thanimagined.

Aswe all know that the most difficult thing in the world to understand,as stated by Albert Einstein, is the concept of income taxes.

However,it is pertinent that you report the full amount of your gamblingwinnings as “other income” on line 21 of form 1040 asstated by the IRS. Also, you must distinctly claim your allowablegambling losses.

Itis unknown to many that the IRS does not permit reducing or netting,gambling winnings by gambling losses and just reporting thedifference. Well, it is considered that such a person owes the IRSback taxes, interest and penalties.

Justso you know, gambling losses up to your winnings must be claimed asan itemized deduction on Schedule A, under the heading “othermiscellaneous deductions”. Where the problem lies is that asidesnetting, there are more than 65% of taxpayers who don’t itemize theirdeductions and can’t deduct gambling losses pay more tax on grosswinnings than they won.

Besides,losses accumulated from gambling cannot be moved forward tocounterbalance winnings in another year.

Incase you haven’t heard, the IRS takes a hard line on gambling income.Hence, in an audit, without providing enough documentation, the agentwill fail to believe you’re losing all winnings. That is, you musthave sufficient documentation to prove your loss so, keep your losingtickets alongside all other important documents you’ve got.

Whatwill a proper record-keeping require of you?

Aproper record-keeping will require a date, the type of gamblingactivity or wager, the name of the gambling establishment, theaddress of the gambling business and the number, list of peoplepresent with you plus the inevitable, amount won or lost.

Insome cases, it will be of utmost importance for you to keepsupplements hotel bills, gas cards, and airline tickets just to provethat they were not part of ATM gambling funds.

Sometimes,the IRS fails to take into consideration the credibility of the ATMreceipts forgetting that the ATM cash receipt could have been used topurchase the nondeductible like cinema bills, spa treatment, salon,restaurant meals.

So,we urge you to input all the ATM funds received to fund the gamblingsessions as evidence for your gambling records.

Keepin mind that the IRS kicks against the player’s reward card as it ismost times an ingenuine way to prove gambling loses because othergamblers have used the card.

Youridentity and evidence that you were the only one using the cardshould all be in your gambling records.

Yourgambling log is being supported and given credibility by document andwin-loss reports. So, put your journal to substantiate the player’scard at every gamble.

Inconclusion, we urge you to be careful just in case because manystatements do not provide substantiative evidence simply becauseestimates are being used. Also, do not hesitate to report every ofyour gambling winnings.

Cheers!

Winning while gambling is fun; however, most people agree that payingtaxes is the opposite.

If you’re an Illinois resident who wins a jackpot while gambling, unfortunately, the IRS and the state of Illinois will demand its cut of your profit.

Uncle Sam and the Land of Lincoln consider gambling winnings personal income, regardless of how you acquired them.

So, whether you buy a winning lottery ticket, have a lucky pull on a slotmachine, win at the craps table, make a clever sportsbet, are the last person standing in a poker tournament, leave a video lottery terminal happy or have a good day at the racetrack, this rule applies.

Most Illinois gambling companies will automaticallywithhold a portion of your winnings for tax purposes. However, that doesn’t necessarily mean you won’t owe additional money when you file your tax return.

While tax professionals best handle specific situations, there are tax guidelines for all Illinois gamblers to follow.

Firstly, you should know when you should report your winnings on your returns.

Do I need to report my winnings to the IRS?

Yes. A failure to report gambling winnings could put you at risk of underpayment, which could lead to fines and interest payments.

There are some general guidelines for gauging whether you need to report your gambling winnings on your personal tax returns, however. Those thresholds are:

• Your winnings from playing bingo or slots (not reduced by the wager) are at least $1,200.
• Your winnings from a keno game (reduced by the wager) are at least $1,500.
• The amount of your winnings from playing poker (reduced by the wager or buy-in) are at least $5,000.
• The amount of your winnings from any othergambling types (except winnings from bingo, slot machines, keno, and poker tournaments), reduced by the wager, are either $600 or more or at least 300 times the amount of your wager.
• Your winnings are subject to federal income tax withholding for any other reason (either regular gambling withholding or backup withholding).

Pay attention that these thresholds are for an entire tax year. For example, if you get a $200 profit on three separate occasions from betting on sports, that would cross the $600 level.

If you accrue winnings over any of these levels, you need to report them to the IRS and the Illinois Department of Revenue. For your federal tax return, the form you need is the W-2G.

Do I need to fill out a W-2G form?

In most cases, you shouldn’t have to fill out the W-2G form. That’s the responsibility of the casino, racetrack, off-track betting site, sportsbook or VLT machine operator.

Provided the operator has the correct information, each entity you gambled with during a tax year will send you a completed Form W-2G.

This form tells the IRS and you two things:

• Your total winnings from that source for the entire tax year.
• Any amount the entity withheld from your winnings for tax purposes.

If they have your taxID (like your Social Security number), it’s standard for casinos and other gambling companies to automatically withhold 25% of your winnings. Without that information, they may withhold as much as 28%.

If you’ve gambled with more than one company over the course of a tax year, you should get a W-2G form from each one. Don’t file your income tax return until you’ve received all the W-2G forms you expect.

How do I report winnings to the IRS using W-2G forms?

Once you’ve received all the W-2G forms you expect, you need to transfer the amounts shown on those forms to your federal income tax return.

The first step to doing so is adding up the amounts in Box 1 of all the W-2G forms you have.

Once you have that total, list it as “OtherIncome” on Form 1040, Schedule 1. The total of all income that fits that classification then goes on Line 7a of your Form 1040.

Attach Schedule 1 to your Form 1040. Box 2 on your W-2G form(s) show(s) the amounts that the entity or entities you gambled with withheld from your winnings for tax purposes during the year.

Again, add those amounts up if you have more than one W-2G. That total then goes on Line 17 of your 1040. Do not attach any of your W-2G forms to your 1040.

Keep these forms in your records for at least five years. At that point, you’ve completed your obligation to report your gambling winnings to the IRS.

Whether or not you will have to pay tax on your winnings depends on how much you won, how much the gambling company withheld, and what is the federal tax rate.

Now, it’s on to your state taxes.

Illinois state taxes for gambling winnings

The state of Illinois considers all gambling winnings to be personal income. Again, how much you will owe depends on how much income you collected from all sources during the year.

Currently, Illinois has a flat tax rate of 4.95% for all residents. That could change for 2021 and beyond, however, if Illinois voters approve of a constitutional amendment that would authorize a graduated tax.

If you’re a full-time Illinois resident, you should report your gambling winnings on Form IL-1040. If you won cash or a prize gambling within Illinois, you would need a Schedule M and a Schedule IL-WIT.

Schedule M lets the Illinois Department of Revenue know how much you made in profit from in-state gambling over the course of the tax year. Again, this is where your W-2G forms come in handy.

Add up all the amounts from Box 1 on all your W-2G forms. Then, put that amount on Line 11 of your Schedule M and denote it as gambling winnings. The total from Line 12 of your Schedule M goes on Line 3 of your IL-1040.

Attach the Schedule M to your IL-1040. Again, do not attach your W-2G forms to your state return. Schedule IL-WIT is how you report any amounts withheld from your winnings by a gambling company in Illinois.

Report each W-2G form on a separate line on the Schedule IL-WIT. Then, transfer your total from Line 11 to Line 25 of your IL-1040. Attach the Schedule IL-WIT to your IL-1040.

How do I report out-of-state gambling winnings?

If you won cash or a prize gambling in another state and that gambling company withheld state income tax there, you could claim that as a credit against your Illinois tax liability.

Use a Schedule CR for that purpose. Put your total non-IL gambling winnings in Column B, Line 15. Then, put the amount paid to another state on Line 51.

Once you’ve completed all the steps, put your amount from Line 55 on your IL-1040 on Line 15. Attach Schedule CR to your IL-1040.

All these steps are made easier with the all-important W-2G forms. However, if you don’t receive one, that doesn’t mean you’re off the hook for reporting your gambling winnings.

What if I didn’t get a Form W-2G?

Reporting Gambling Income On Tax Return

If you didn’t receive a W-2G form, you should contact the company where you won cash or a prize money while gambling.

The operator might have incorrect address information or there may have been some other oversight made that you can help them correct.

If that doesn’t get a Form W-2G in your hands, that doesn’t mean you’re off the hook for reporting your gambling winnings, however. At least some, if not all cases, the tax you would owe has already been withheld, so you’re only hurting yourself by not reporting.

If you underreport your income, the Illinois Department of Revenue and/or the IRS can levy fines against you, seize your assets, garnish your pay and charge interest against your back taxes. In the long run, you save money and time by following the law.

If you’re uncertain of how much you won, bank statements and gambling companies’ rewards accounts can be helpful.

Some winners also have similar questions about what to do regarding non-cash prizes.

What if all or part of my gambling winnings weren’t cash?

If you won a boat, car, house, etc., gambling, the IRS and the IL Dept. of Revenue do levy taxes upon those prizes. The entity granting the prize should submit a federal Form 1099 with your tax information stating the fair market value.

That amount goes on Line 21 of your federal Form1040.

For your state taxes, you would report it the same as you would cash winnings, again, using the gambling company’s fair market value on the 1099.

The same goes for if you win cash playing a multistate lottery game like MegaMillions or Powerball. The IllinoisLottery participates in those games, so you would report it in the same way you would report winnings from an IL lottery game.

If you’re part of a group of people who pooled your money to buy a lot of lottery tickets and split a prize, there’s a special procedure for that situation. It does require a little bit of work on your end.

What if I’m part of a group of people who won a prize gambling?

If you are among a group of people who split prize winnings, meet federal Form5754.

On that form, you’ll put information like addresses, names, and tax IDs about everyone in the group. Once you’ve filled it out, make a copy for everyone in the group.

Then, submit the original to the entity granting the prize. That company will use that information to send everyone an individual Form W-2G.

Once you’ve got that, you can go through the standard procedure of reporting those winnings to the IRS and the IL Department of Revenue. Do not attach the 5754 to your federal or state tax returns. Keep it for your records.

Now that we’ve gone through all the scenarios, there is a bit of good news. The IRS does afford you some wiggleroom on gambling.

What can I deduct from my taxes related to gambling?

You can deduct your gambling losses from your federal income tax liability, but only if you choose to itemize your deductions. It would still be beneficial to take the standard deduction even if you gambled regularly in some cases.

You can only deduct what you lost while gambling. If you stay in a hotel, eat at a restaurant, get something to drink, etc., while you’re gambling, those expenses are notdeductible.

Additionally, the IRS does not allow you to deduct more in losses than the winnings you report. Also, note that the Illinois Department of Revenue does not allow you to deduct gambling losses from your state liability.

If you do elect to itemize your federal deductions, calculate all your gambling losses from the year.

Place that total on Line 28 of Schedule A, Form 1040. Also, keep detailed records of the gambling losses you deduct for a period of at least five years.

Gambling Income Tax Reporting Rules

Once again, this is where joining gambling companies’ rewards programs can be helpful. The programs can provide you with a detailed list of your losses over the course of a year’s time. Online sportsbooks are great at making this easy.

Sports betting winnings and taxes

Online and retail sportsbetting is the newest form of gambling in Illinois. For tax purposes, however, it’s the same as any other form.

If your cumulative winnings over the course of a year surpass $600, you must report that as income.

Gambling Income Tax Reporting 2019

You should receive a Form W-2G from each sportsbook that paid out to you over the course of a year. Again, use the information on those forms to report your winnings to the IRS and the state.

Gambling Income Tax Reporting Statute Of Limitations

You can deduct the amounts you wagered and lost on your federal taxes if you itemize your deductions. You can’t deduct wagers from winning bets, however.

Regardless of where your gambling winnings came from, your tax responsibilities are the same. Once you’ve paid and reported, the rest is yours to enjoy as you please.