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Reporting Gains and Losses from Gambling

Posted by Admin Posted on Sept 30 2015

Going to the casino can certainly be fun but we all know how unpredictable winning and losing can be. Reporting these “winnings” and “losses” on your tax return can quickly become confusing especially if you go to the casino fairly often.

This can get even more confusing when you have been issued a Form W-2G from a jackpot that you may have won. More times than not, the amount shown on your Form W-2G is NOT the amount you won that night or even what you actually left the casino with.

For example, you start your session of play with $1000.  On your last pull with that original $1000, you win a $3000 jackpot. You receive a Form W-2G for the $3000 and decide to keep playing.  After you spend another $1000, you decide to pack up and leave the casino.

Ask yourself, “does the Form W-2G accurately reflect your winnings for the night?”

NO!                                                        

You spent $2000, which means you won only $1000 (referred to as your “wagering gain”).  Now comes the tricky part….how do you report that on your tax return???

The IRS receives a copy of your Form W-2G, and it states you won $3000. The IRS wants to see you put $3000 on the front page of your tax return.

So, you do what a majority of people do….put $3000 on Form 1040, Line 21 and put $2000 on Schedule A Itemized Deductions Line 28. Easy, right?

But what if Schedule A doesn’t apply to you because the Standard Deduction is higher?

What if you collect Social Security and your Social Security gets taxed more because you have $3000 on Line 21?

There is much more advantageous way to report this. Following IRS Chief Counsel Advice 2008-011 is the reference material you’ll need to properly report “wagering gains” and “wagering losses.”  And, if you aren’t interested in reading that, then simply come see us.

Record keeping is very important, so here’s a few tips:

  • Keep a log sheet of each visit to the casino (include date and how much you came into the casino with).
  • Log your wagering gain or loss per visit to the casino.
  • Maintain copies of all Forms W-2G.
  • Obtain a players card to assist with record keeping, and request a year end statement from the casino.

 

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