I’ve been lurking around here for a couple weeks, and I finally have a question that needs answering.
Background: I’m an American citizen. Last night, I went up to Casino Windsor in Canada. Thanks to the magic of the blackjack table, $100 (Can) became $1800 (Can), or a little under $1200(Am). The casino has signs plastered all over it declaring it a “Tax Free Gaming Zone.” I took a quick look around the internet for info on whether or not I will have to pay taxes on my winnings, and I got some conflicting info. So…
My questions: Does “Tax Free Gaming Zone” only apply to Canadian taxpayers? Do American taxpayers have to pay taxes on money won in other countries? If so, have I even won enough money to have it taxed?
IANAL. Generally speaking, the IRS has the power to collect taxes on income from any source unless prohibited by law from doing so. I’m not aware of any laws which prohibit the IRS from taxing your winnings from a Canadian casino, if you report them.
Check out www.irs.gov for more information and ways to contact the IRS to ask.
As a U.S. citizen, you are required to file tax returns that report your world-wide income, regardless of where it is earned. You are therefore required to report those winnings on your U.S. tax form.
Whether the amount is enough to actually be taxed depends on what other income you have during the year, what deductions you have, family size, etc.
The “Tax Free Gaming Zone” probably means that you do not have to pay Canadian tax on that money, nor file Canadian tax forms solely on account of those winnings. However, I am not an expert in Canadian tax.
The broader questions of tax treatment across national borders are complex. The U.S. has tax treaties with many other countries, to avoid double taxation. Generally speaking, a U.S. citizen who lives and works in another country for more than 90 days in the tax year, and earns income in that country, must file both a US tax form and a tax form for that country. How much the tax is depends on lots of factors, including the tax treaties. Tax accountants who specialize in this area are highly valued specialists.
Maybe you should change the question you’re asking to: “Do I have to report as income the proceeds from the Windsor Casino?”
Yes, you due have to report it on your federal, state, and Detroit (if applicable) tax returns.
What it looks like everyone is stepping around saying is that you only have to pay the tax if it’s reported. If you take your money without filling out Canadian government forms, it looks like you’re not being ratted on and you’re responsible for declaring the income yourself. Or, uh, not declaring it yourself.
What Windsor Casino’s ad slogan means is that they won’t do it for you and Canada won’t tax you. It’s the honor system. You are supposed to. Do you have to? No, but you’d be breaking the law and could make life for yoursefl miserable down the road.
My thought is that if I ever hit it big in Windsor, I’d report it. It wasn’t mine anyway. The hassle is not worth keeping money that wasn’t really mine in the first place.
The casino, on Canadian soil, gave you cash for your chips and did not make you fill out any forms that used your SSN. You crossed the border to go home and did not declare the cash at customs. Therefore, you have $1800 cash on hand the govt knows nothing about, and will not know unless you tell them.
Your normal income is tracked by the govt using your SSN. In an IRS audit, the govt will see how much money you make, and usually spend. $1800 deposited into your checking account un-accounted for by reported income would make an auditor smell blood.
So, here’s the tradeoff. Would you rather have $1800 of money that is only good for “unaccounted-for-off-the-books cash purchases” or ~$900 that you can pay your bills with? If you don’t report it, you can’t use it for -anything- that’s tied to your SSN -or- creates a paper trail -or- modifies your normal habits. Even if you pay cash for your groceries for several months, an auditor would notice the change in habits and wonder why. You can’t pay your bills with it, businesses keep records and will show that you paid cash for those transactions.
That leaves things like movie tickets, lunch out rather than brown bag, and trips to Chuck E Cheese for the kids or even back to the casino. Nice, but it has its limits.
Me, I’d probably report that amount and pay bills with half and save the other half for taxes.
In CANADA, lottery and casino winnings are not taxable. If you win $1800 at the tables or $10 million in a lottery, it’s all yours. You don’t pay a cent of tax.
However, that “tax-free zone” doesn’t extend across the Ambassador Bridge.
A friend of mine works at Casino Windsor… he says they have sort of bank accounts there for regular players. Apparently they are quite popular with US citizens who win a lot… they take out $9999US at a time because you’re allowed to cross the border with less than $10,000 and not declare it. Although you may be obligated under US law to declare it on your tax return, you’re safe to cross the border with less than $10K from my understanding… as was stated by RickJay, any winnings of any kind are tax free in Canada.
Although this is not intended as specific tax advice, I’d also note that gambling losses are deductible - to the extent of gambling winnings. That is, if you won $1200 one night, but lost $300 last month, and $700 in August, you could claim both your income and losses - in that case, a net income of $200. However, if you also lost $500 in Vegas in January, you couldn’t claim the complete $1500 loss for the year, since you only had $1200 in income.
No offense, but we’re talking about $1800 here, not $18 million.
I’ve never been thru an audit and I pray to all that is holy that I won’t have to, but I think this is extreme. Everything I’ve heard about audits leads me to believe that the way it works is A) They tell you to come down to their office, B) You get all your shit together and truck it down there, C) They crawl up your ass with a microscope. HOWEVER, I’ve never heard of an IRS auditor coming out to someone’s house and checking off all the major appliances verses the checking account and asking for receipts or proof-of-purchase.
What’s to stop this guy from taking his $1800 or whatever out to Best Buy and buying the biggest TV he can get? How is the guy at the IRS gonna know what’s in my living room? How’s he going to know this from down at the office and why is he going to care? Does the IRS really spend this much time chasing the tax on $1800??
Given an audit situation, I would think they would chase anything they thought they could catch. Since they get to make the determination of both what should be chased and what is caught, it strikes me that discretion is the better part of valor when thinking about how things might look to an auditor.
Nothing, of course. Thanks for enlarging the list of cash transactions that are unlikely to involve your SSN. However, I wouldn’t underestimate the subpeona power of a mad auditor if he thinks that you’re living outside your means.
<< What it looks like everyone is stepping around saying is that you only have to pay the tax if it’s reported. >>
Correct, and we’re also saying that it is illegal not to report it.
NOTE: This Message Boards does NOT allow people to offer advice on how to break the law, so please be careful in what you say in this thread.
If you are asking what the odds are of not getting caught if you cheat on your income tax, I’d say it depends on lots of things, like how you cheat, what your other income amount is, whether there is someone likely to turn you in, what the paper trail is, etc. There are lots of opportunities to cheat on income tax – you could easily lie about charitable donations, for instance.
That’s not the point. The point is that it is cheating, and it is illegal. If you want to break the law to your financial advantage, why bother with a petty $1800? Rob a bank or – better yet – mug someone and steal his/her credit cards and go on a fast but stupendous spending spree.
Sorry, C K Dexter Haven, that was me that you quoted, and while I know the board rules don’t allow explicit instructions on breaking the law, I was trying to clarify what some of the others were saying, as opposed to saying, “go ahead, do it, and this is what you have to do to get away with it.” In contrast, we’ve had numerous threads about “getting out of” speeding tickets, for example, and while obvious that a law was already broken, it’s permitted to discuss escaping the consequences.
So to reword, yes, legally you probably have to declare the income (unless you can convincingly find that the US government is overstepping its bounds of soveriegnity of imposing its laws in other countries), which means paying your fair share of the tax. This isn’t advice to break a law, but a warning: if it’s not declared, paying the tax would only confuse the IRS. The chances of getting caught are negligible, because the IRS only audits a small percentage of all returns (amazingly, most are taken at face value regardless of what you claim). These are typically done electronically (you receive a letter telling you to pay up or contest). A small percentage of these are manually audited and you get a letter from the IRS requesting a personal appearance and all of the allegedly bad things that comes with it.
I’ll clarify – and certify if necessary – that I stay honest with my taxes.