Question about tax on a casino jackpot.

[thelurkinghorror]

@jakesteele

Each state has its own peculiar rules that govern the casino. In a lot of ways any reasonable rule can be instituted. In Washington State, any win from $1,500 up gets taxed.

Technically, in any state which allows gambling, any win from $0.01 up gets taxed. Below a certain amount ($1500 in your case), you have a responsibility to report it to the state, but the IRS doesn’t get any forms showing your winnings.

[x-ray_vision]

@Anamorphic

No, you won $1600. Once you placed the money in the betting circle, it was no longer yours.

From the OP:

Why do I receive tax papers on an $800 win?

He won $800 and that’s what he’s being taxed on. Why the OP had to fill out any tax papers at all when he believes in Delaware gambling establishments aren’t supposed to require you to fill out any tax forms unless the actual winnings are over $1200 is another matter. From Gfactor’s link:

Report gambling winnings on Form W-2G if:

1. The winnings (not reduced by the wager) are $1,200 or
   more from a bingo game or slot machine,
2. The winnings (reduced by the wager) are $1,500 or more
   from a keno game,
3. The winnings (reduced by the wager or buy-in) are more
   than $5,000 from a poker tournament,
4. The winnings (except winnings from bingo, slot
   machines, keno, and poker tournaments) reduced, at the option
   of the payer, by the wager are:
   a. $600 or more, and
   b. At least 300 times the amount of the wager, or
5. The winnings are subject to federal income tax
   withholding (either regular gambling withholding or backup
   withholding).

My guess is that either the gambling establishment has different amount requirements for when you receive anything requiring you to pay tax that is different from when you fill out a W-2G on your own or that the requirements are the same as listed in #1 above and the electronic blackjack game is being treated as a slot machine.

[Fantome]

@dracoi

But, as a general rule, the casino is supposed to report on the 1099 whatever you leave the table with. Its up to you to document how much it cost you to get that money.

Do you have a cite for that? That can’t be right. Buying in for over $1200 is not going to get the casino to have to have you leave with paperwork if you end up leaving with a little more than that $1200.

[King_Friday]

Upon closer inspection on the W-2G document prepared for me, it states on the back: “Box 2: Any federal income tax withheld on those winnings is shown in this box. (the box on mine states 0) Federal income tax must be withheld at the rate of 25% on certain winnings less the wager.”

…25% on certain less the wager.

In my case, the wager was $800, the winnings $1600. Nowhere on this paper does it state what my wager was. It does however have my Gross Winnings as $1600. Whats to stop me from declaring that my wager was $1500? Besides ethics of course, but we are talking about gambling.

[dracoi]

@Fantome

Do you have a cite for that? That can’t be right. Buying in for over $1200 is not going to get the casino to have to have you leave with paperwork if you end up leaving with a little more than that $1200.

From http://www.irs.gov/pub/irs-pdf/iw2g.pdf

Reportable Gambling Winnings
Report gambling winnings on Form W-2G if:

1. The winnings (not reduced by the wager) are $1,200 or more from a bingo game or slot machine,
2. The winnings (reduced by the wager) are $1,500 or more from a keno game,
3. The winnings (reduced by the wager or buy-in) are more than $5,000 from a poker tournament,
4. The winnings (except winnings from bingo, slot machines, keno, and poker tournaments) reduced, at the option of the payer, by the wager are:
   a. $600 or more, and b. At least 300 times the amount of the wager, or
5. The winnings are subject to federal income tax withholding (either regular gambling withholding or backup withholding).

So, in one case, the wager is not a factor, in two cases, the wager does reduce the winnings and in one case, it is up to the casino to decide how to do it.

[Dallas_Jones]

@HelloNinja

I knew somebody who in order to deduct gambling losses equal to what he’d win, would collect losing lotto tickets (scratch tickets laying on the ground in the supermarket parking lot, mostly) up to that amount. He’d have piles and piles of them as proof that he’d lost $x gambling.

Trying this is an open invitaion to be charged with tax fraud. They must be YOUR losing tickets in order to write off the losses. Here is one case, there are several others:

http://www.gamblingandthelaw.com/columns/145_taxes.htm

Many bars and gambling establishments save up the losing tickets so that they can be given to a winner to use as proof of gambling losses. There was a case in Oregon a couple of years ago where a guy went around to all the local bars and collected the losing Keno tickets and was found guilty of tax fraud. The tickets are dated and timed by the machine that prints them and the IRS was able to show that he could not have bought the tickets. They have the retailer number on them and you just can’t buy a ticket 5 minutes and 50 miles apart.

The IRS is wise to this. If the IRS thinks it is being scammed they will subpeona things such as your time clock punches from work and prove that you could not have bought the ticket while you were at work.

[Fantome]

@Fantome

Do you have a cite for that? That can’t be right. Buying in for over $1200 is not going to get the casino to have to have you leave with paperwork if you end up leaving with a little more than that $1200.

@dracoi

From http://www.irs.gov/pub/irs-pdf/iw2g.pdf

Reportable Gambling Winnings Report gambling winnings on Form W-2G if: 1. The winnings (not reduced by the wager) are $1,200 or more from a bingo game or slot machine, 2. The winnings (reduced by the wager) are $1,500 or more from a keno game, 3. The winnings (reduced by the wager or buy-in) are more than $5,000 from a poker tournament, 4. The winnings (except winnings from bingo, slot machines, keno, and poker tournaments) reduced, at the option of the payer, by the wager are: a. $600 or more, and b. At least 300 times the amount of the wager, or 5. The winnings are subject to federal income tax withholding (either regular gambling withholding or backup withholding).

So, in one case, the wager is not a factor, in two cases, the wager does reduce the winnings and in one case, it is up to the casino to decide how to do it.

That cite does not back up what you said. You said (bolding mine):

But, as a general rule, the casino is supposed to report on the 1099 whatever you leave the table with. Its up to you to document how much it cost you to get that money.

IME, casinos only have make you fill out tax papers on big wins, not a bunch of small wins. Regardless, they certainly aren’t required to make you fill out paperwork just because you bought in for a large amount and left with a few bucks more.

[dracoi]

@Fantome

That cite does not back up what you said. You said (bolding mine): IME, casinos only have make you fill out tax papers on big wins, not a bunch of small wins. Regardless, they certainly aren’t required to make you fill out paperwork just because you bought in for a large amount and left with a few bucks more.

Well, let’s see…

For slot machines, I was exactly right. The OP was asking about a game that’s considered a slot machine.

For everything but keno and poker, I was right. The general rule is that casinos must report the gross, except in the specific case that they know the wager and choose to exclude it.

Finally, I didn’t offer the cite to back up what I said. I prefaced my first post by saying that I didn’t know the details from the casino’s perspective, and I followed the cite by illustrating how it differed from my initial, general opinion. The cite provides the details.

[Fantome]

@dracoi

Well, let’s see… For slot machines, I was exactly right. The OP was asking about a game that’s considered a slot machine. For everything but keno and poker, I was right. The general rule is that casinos must report the gross, except in the specific case that they know the wager and choose to exclude it. Finally, I didn’t offer the cite to back up what I said. I prefaced my first post by saying that I didn’t know the details from the casino’s perspective, and I followed the cite by illustrating how it differed from my initial, general opinion. The cite provides the details.

You said this:

@dracoi

Casinos only report gross winnings. They have no way to identify how much of that money on the table was your stake and how much was previously unreported winnings. For all they know, you came in with $1 and doubled your way up to $1600.

You’re wrong. If you go to a table and leave it with $1600, the casino does not make you fill out tax papers because you might have won it all. Your cite does not defend your assertion and you said what you did before you were aware the OP was playing an electronic game. In another post you said the following:

But, as a general rule, the casino is supposed to report on the 1099 whatever you leave the table with. Its up to you to document how much it cost you to get that money.

You’re still wrong and your cite again does not support your assertion that a casino is supposed to make you fill out tax papers for anything you leave a table with.

For everything but keno and poker, I was right.

You were wrong. Walk in a casino with $1200, cash it in for chips and play blackjack at a $25 all night and even if you end up with $1000 profit, the casino is not under any obligation to have you fill out any tax forms.