I had one of the leaders of one of the craps sites I’m on PM me and ask me contact some one who’s wife had received what he called Casinos 1099s and the guy wanted to handle them correctly.
After phoning the guy and verifying what the facts are I told him I’d get back to him. However, since it’s been a while since I’ve discussed gambling win/losses on the site I decided to summarize it on the site.
To make it simple, all gambling wins are reported on page one of the personal Form 1040. A literal reading of the IRS Code and regulations leads to a conclusion that each bet is separate and the total of all winning bets are to be reported as income on the Form 1040, without deducting any losses except as itemized deductions.
Two examples of this literal readings will illustrate what I am saying. A craps shooter has a pass line bet and has the following roll betting the table minimum with a $1 craps check on each comeout roll at a $10 table. 7, 11, 2, 3, 6, 6, 10, 7. So he had come out winnings of $20 on the 7 and 11. Won $10 on making the point of 6. Lost $10 on the point of 10. Lost $20 on the pass line 2 and 3 rolls. However won $14 on the two craps checks that hit. If my math is any good he made a total of 12 different bets for a total of $66 (6 $10 passline bets and 6 crap checks). Won $44 and lost $34. For literal ax purposes there is $44 to be reported an page 1 of the Form 1040 and $34 to be deducted on Sch A if you itemize deductions.
Say you are playing $1 slots on a three reel machine, literal the results of each pull should be separated and the total wins reported as income and the losses deducted on schedule A.
If there is a $1,200 or more on slots or video poker the casino will issue you a Form W2-G reporting your winnings to the IRS. If you cash in with cash of $10,000 or more in a day, the casino is suspose to report that cash transaction to the Treasury, not the IRS. The wife had actually received in W2-G from the casino, not a Casino 1099.
An interesting Website to go to is WWW.irs.gov/ATI and follow the question on “Do I Need to Claim my Gambling Winnings and Can I Deduct my Gambling Losses”
One of the question is do you have a diary or similar record of winds and losses. If you answer “no” they tell you to report your winning and you can not deduct your losses.
This is as I said a “literal” reading of the IRS Code and regulations. In going through the ATI questions they reference other IRS sources to help you understand what you need to do.
I’ll post this now and follow up with what I feel is an acceptable approach for most visitors to casinos.
Replies:
Posted by: Mr Finesse on March 30, 2015, 12:55 am
Posted by: ACPA on March 30, 2015, 1:04 am
The courts have not enforced a literal reading of the law/ regulations and I doubt if very many people follow them correctly. However, I have worked with people who have been questioned about there gambling win/losses.
I think each the gambling websites I have been on encourage you to keep track of your gambling results. The use of a players card and getting your win/loss results from the casino is NOT sufficient documentation.
PUBLICATION 529 has a list of the requirements in your dairy for your gambling losses. In my diary for my craps play, I show the casino name, date, buy in and net results of each shooter I bet on that I record in a pad I have at the table for recording my own rolls. When I lived in Arkansas and was in Tunica on average 2-4 days a week. I summarized the daily results by casino and reported the total of casino win days on page 1 of the 1040 and the total of casino loss days on Schedule A.
There have been court rulings and interpretations that did not require a transaction by transaction literal interpretation. One specifically addressing slots on someone who went 10 day trips in a year that allowed the slot player to treat each day trip as a single transaction. You can read the four pages of that IRS counsels opinion by going to www.irs.gov and searching for AM 2008-011.
In the circumstances I’ve been involved with the IRS, no one has insisted on a literal interpretation of the Code/regulations. Ideally the diary or other supporting record should be prepared after each visit to the casino, not prepared when you start to do your return.
I know I would raise questions if the only income reported was from W2-Gs or if all the losses were recorded after the gain was won.
If you don’t itemize deductions, you are paying tax on all your wins. And even if you itemize deductions, there are situations when increasing your page 1 income still results in increasing your net tax.
State income taxes can be all over the board so I’m talking about them here.
Feel free to contact me if you have questions.
Noah
Posted by: Finisher on March 30, 2015, 7:02 am
Good Rolling. 🙂 🙂
