From the racetrack to the slot parlor to the poker table, legalized gambling has been taking hold in states across the USA. Enticed by the idea of high tax revenue, state legislatures from coast to coast have been dropping their resistance and opening the doors of casinos.
As a result, many people are gambling for the first time, and the laws of mathematics guarantee that some of them will come out on the winning end. If you had a lucky day (or two) at the casino, you can revel in your good fortune but only for a little while.
Before you know it, tax filing season will be here, and with it comes the need to settle up with the IRS. As with every other penny you earn, the tax agency will want a piece of your good fortune at the slot machine or gaming table. Here are some tips for paying what you owe:
• If you won big, you might get a 1099-G form. The 1099-G form is used to document and report your gambling winnings, both to you and the IRS. The amount that triggers the issuance of a 1099-G varies, from as little as $600 for certain casino payouts to as much as $5,000 for cash won during poker tournaments.
• Even if you do not receive a 1099-G in the mail, you are still required to report all your gambling winnings. If you are unsure of how much you need to report, contact the casino for a detailed breakdown of your wins and losses.
• You can use gambling losses to offset your big win. Speaking of losses, you can use them to reduce the net amount you owe. Be sure you follow the rules precisely, as failing to do so could land you on the wrong side of the IRS.
• Be sure to report any withholdings. For large jackpots the casino often withholds money for taxes, so be sure to report that amount. If you fail to report the money the casino withheld, you could pay more taxes than you need to.
• Keep scrupulous records. Whether you visit the casino once a year or nearly every week, keep scrupulous records of your wins and losses. It might not making gaming any more fun, but it is important. Gambling winnings can sometimes increase the risk of an audit, so the accuracy of your records is absolutely critical.
• Don’t forget state and local taxes. The IRS is not the only taxing authority with an interest in your gambling winnings. Depending on where you live, you might owe state and local taxes on the jackpots as well, so check the rules carefully and make sure your reporting, and your payments, are accurate.
Being a big winner at the casino feels good, and it’s always nice when you beat the odds and leave the table with more money than you started with. If you were a lucky winner at the casino, it’s important to understand the tax consequences and filing responsibilities. The tips listed above can help you settle up so you can avoid the wrath of the IRS.