Thanks to an extremely lucky March, the IRS knows about a fair bit of gambling winnings thanks to some W-2Gs. Now, I’ve been tracking wins and losses via an app on my phone, but I’ve never had the ability to itemize losses up to winnings before. So there’s my phone app, the records of ATM withdrawals (done at the casino) and deposits (again, generally via ATM but also via teller) in the various accounts I’ve used, but no physical receipts except the W-2Gs. And, of course, not all winnings were immediately re-deposited. Similarly, I haven’t been keeping a paper diary with real nitty-gritty specifics like table number or machine number, just the basic type of game, date and time in/out, buy-in/buy-out, and casino. I know that a win-loss statement won’t hold up for the IRS. Am I basically just begging to be audited here, and am I likely to need more documentation than I have?
Then, because they didn’t withhold, I’m trying to readjust my withholding for the second time this month. Am I better off taking the additional money required out of my check or in making estimated quarterly payments for 2017?
Thanks in advance. I know we’ve got some fairly serious gamblers here.
Even though I live in CasinoTown, I don’t really gamble. But don’t player’s cards keep track of this for you? It is understandable if you do not want to give them your information unless necessary, of course.
Audit risk is hard to predict, and you don’t say how much is involved (though presumably pretty substantial if W-2G), but you’re doing more than most people as far as diligence. Keep it up.
Make sure your phone app keeps backups in case it crashes.
The end result is the same, though adjusting your W-4 can be a little more tricky to play with. Keep in mind that it takes employers a bit to adjust your paycheck, depending on when you submit, so for example your second adjustment would quickly be superseded. 1040-ES is easier to deal with, but of course you have to actually remember to send them in.
Well, the W-2G amount so far this year is a little under $20k. Total winnings is closer to $26k and total losses is about $7k, so true net is lower than reported W-2G.
My understanding is that a win/loss statement (via tracked play) is an estimate, especially with table games, and that the IRS does not accept them as evidence.
Nice thing about the app is that it can export to CSV for further backup and analysis.
I know several gamblers, and they play slots, no records of play at all. If they win five grand in a year (on W-2Gs), they write off five grand. They still have to pay state taxes which don’t have a write off. Nothing has to be sent in, it is only during an audit that you have to produce anything. All of them have been doing it for 20 years.
$20K should be an easy enough amount to write off. Since these losses are early enough in the year, collect a bunch of losing lottery tickets and horse racing tickets and save them in a bag just in case you get audited.
It’s pretty much impossible to predict whether or not you will be audited.
If you file as a professional gambler the IRS tends to accept a daily diary of win/loss if it appears to have been done daily and not just slapped together at some later date.
If you’re a casual gambler who got lucky, maybe you’ll get even later in the year.
If you gamble a lot, keep a diary of all your play. If you play slots, consider having the casino withhold tax on jackpots – that’s what the pros do – but if you are a casual player, it is unlikely you will be winning at the end of the year unless you hit some very large payouts.
Always use your player card when playing slots – the casino record of your play is the best evidence.
You really should try to keep some kind of log or diary, and not try to put one together later or use a phone app.
I am using an Excel spreadsheet to track losses to offset some winnings on next year’s taxes. And wherever possible keeping the paper tickets or receipts. You must itemize your taxes and can only claim the amount of losses up to the amount of your winnings. If you can show losses up to the amount of your winnings, it will only off set or negate the amount of taxes that you paid on those winnings. If you win $10,000 and have $3000 tax withheld and lose $20,000, all it means is that you get that $3000 tax back. The IRS is not going to further reward your gambling. It is about getting back the tax you paid on your winnings. It is commonly said that you can deduct all gambling losses. Not quite.
They can tell if you were tracking this as an ongoing log or whether you tried to put something together later for an audit. Here is the IRS page for info on what they want:
Oh, and most winning/loss tickets are time stamped or bar coded in a way that can be used to charge tax fraud if you attempt to use another person’s losing tickets. I have read of people being charged with fraud because they collected losing tickets from various places that they could not possibly have made purchases at.
Collecting other people’s horse race tickets is an old trick, I think I first heard about it 20 years ago. Which means that the IRS is certainly wise to it. I don’t know how much of a red flag or how often people get caught, but the odds of this happening go up significantly if you post about it in a public forum.
