Taxing Gambling Winnings

Factual Questions
21

Yeah, you do. Income is Income from whatever source derived. Only a few things are excludable, and craps ain’t one of them. However, you are right in that at craps (or similar games) they almost never report your winnings by 1099 to the IRS.

However, just because the casino doesn’t report that win on a 1099 doesn’t mean you are home free. A Pit boss may get audited and rat on you, or the IRS does have undercover agents at the casinos (mostly to count tips, admittly, but they will note other things of course). It is easy for the Casino to ID you to the IRS, and then when you don’t report that large win, it’s audit time, and perhaps even handcuff time.

And like **pulykamell **said, even if no-one rats you out-you then have a large amount of money to account for. And, I want to tell you this- you might get away with not reporting it. You could show a pattern of large losses during the rest of the year and make a case that your net for the year was a loss. But, you will *not *get away with laundering it. They look upon you like a terrorist or drug dealer when they search for money laundering. Many dudes have gone to jail for laundering cash that they wouldn’t have served any time for by simple non-reporting. (The Tax Court is actually fairly pro-taxpayer. The “I wuz stupid, I am sorry, I’ll pay it all back and not do it again” defence works much better than you’d expect, and few dudes actually go to prison for *simple *tax-evasion. Money Laundering, however, is tried by Federal *Criminal *courts, and they don’t seem to buy that defence.) Thus silenus is completely wrong. His postings could land one in jail.

Back to taxation in the USA on Gambling Income.

In theory, any gambling winnings get reported above the line. Gambling losses (only to the extent of winnings) are itemized deuctions, or “below the line”. In reality the IRS knows that few ever come out ahead in the long run, and allow most dudes to net their losses vs their winnings (per tax year) and thus report nothing (since in the long run, most dudes are losers, and gambling net losses are not deductable).

However, I said “most dudes”. Some few dudes get a windfall- that Lotto megabux win, that huge slots payoff, the “pick six” and so forth. In general, those lucky few simply can not lose enough to offset that one time windfall in just a year, so the IRS requires a 1099 and often with-holding.

But, if I won more than $10,000 at craps, and it was a one time lucky streak, not offset by other losses, I’d recommend (or in reality, my Bro the Tax Pro recommends) I’d consult my Enrolled Tax Preparer and do what he said.

22

Not unless you request it. You may opt to take your $65,000 in cold hard cash.

23

You mean $100,000. We’re talking winnings that are not taxed at the table. Otherwise, $65,000 with the IRS already taking its cut is no problem for anyone.

Still, if you get that $100K in cash, you can’t exactly just deposit it without leaving a paper trail. Deposit $10K or more and you have to fill out a form. I suppose you can keep it in a safe that the IRS never has to find out about, but other than that, I wouldn’t have the balls to risk it, because an audit will turn up that money, and you’ll have to account for it one way or another.

24

It has been well documented already that you are giving factually incorrect answers here (without citation I might add), all gaming winnings are taxable, though on federal income tax statements you may also deduct losses, so that only gambling profit is truly taxed. However there is also the matter of state income tax, and since noone else has mentioned it I will tell you that some states tax winnings and do not allow any deduction for losses (and I know from experience that at least one state really wants the money.) That is, winnings are fully taxed.

In addition, money laundering rules require a SSN for any cash exchange greater than $10,000 in a gaming day, whether you are buying in or buying out. You can bet these reports find their way to the IRS. The law also makes room for the unscrupulous by requiring Suspicious Activity reports to be file in cases where a person might repeatedly cash out say $9000 in a gaming day. If you are playing on credit you can bet there are reports being made as well somewhere. A casino GM in Oklahoma was personally fined $1,000,000 for helping “customers” avoid the reporting requirements.

25

Something you did not ask about but could be relevant to you if you make a big score somewhere is that the fair value of casino complimentaries or “comps” is added to the plus side of the ledger when reporting those winnings. It is always advisable to keep a record of wins and losses for while the IRS will take a casino’s record as evidence of a loss it would be a rare occurrence where the casino’s records are completely accurate.

26

Actually more than $100,000 since you probable had a bankroll of some size to start with, but talk about taking your life in your hands. A college athlete was murdered somewhere in the South recently and the 2 (or more) men charged with the crime were supposedly did so to rob him of $3000 he had recently won in a Mississippi casino.

27

So how does it work if someone from outside the US- say, Canada, Australia, or the UK- wins $100,000 on the slot machines or at blackjack or whatever in the US? Do they still get taxed, or do they get to keep the money?

28

I am fairly certain but not positive, that it makes no difference where you live.

29

Canadians don’t pay American income tax, and Canadians don’t pay tax on gambling winnings to their government. That, to me, means it’s a pretty big difference depending on where I live.

30

It is my understanding that you pay taxes in the jurisdiction where you earned the money. Canadians working in the US pay US taxes. Similarly, Canadians gambling in the US pay taxes on those winnings. If you had money withheld then went on to lose it at the craps table, you would need to file to get the withheld money back. I don’t know how they handle the fact that you don’t have a Social Security Number, but I suspect they assign you some sort of Tax ID.

31

Good point. Does NV tax gambling winnings? If you win (“earn”) the money in Las Vegas, you shouldn’t have to pay taxes in your home state. You would have to pay taxes on any gains you made on the winning if, for example, you earned interest on it in your local bank account.

In CA, you don’t pay State taxes on lottery winnings for tickets bought in the State but the Feds will take a cut.

32

Ah, someone please correct me, but it’s my understanding that in US casinos you don’t get paid in cash when you win. You get paid in chips of something similar to an e-ticket. You have to go to the cash booth to literally cash in your chips. So unless you win the $100k, insist on 100 $1,000 chips, and then cash then in one at a time to avoid having the tax taken out, the IRS will get its money. Or since you won $100k all at one, the casino will have you on tape and watch, as a normal course of doing business, and as evidence you might be trying to hide your winnings.

33

Richard Hatch apparently believed this theory as well.

34

At table games you don’t get cash. At slots, keno, sports wagering you are paid in cash. Al transactions involving a cash payout over $10,000 in a gaming day are reported. The casino recognizes who has their high denomination chips (as do many thieves) and if you walk out of a casino with more that 99 $1,000 chips it is entirely possible a suspicious activity report will be completed on you. (All casinos do not make $1000 chips available to anyone who asks.

35

Right.
If, however, you are a normal high roller who can document (and the casino can help you there, but it’s best to keep a log book) normal losses of $100K, then you may be OK.

36

Nevada has no state income tax.

37

Are you speaking from experience? Are you saying that you have won more than $1200 on a slot machine in the U.S and the casino withheld no taxes? Or made some other big score in the U.S. from which no money was withheld? Or are you just telling us that Canadians living in Canada do not pay U.S. tax on money earned there? What I was saying and maybe it was not clear is that I think that all winners in the U.S. have money withheld from winnings to cover potential tax liability. The Canadian that finished second in the World Series of Poker I can guarantee you had taxes withheld from his payoff (almost $1.5 million) and it did not matter that he was a Canadian citizen or resident except it was reported that, as a professional gambler he may also have to pay Canadian income tax on his winnings. Beginning in 2008 all poker tournament winnings exceeding $5000 will have 25% withheld by IRS order.

38

Is it bad that I’ve been waiting for someone to mention this on one side or the other?

The IRS has strangled this rule in its crib.

39

Baffle may not be saying that, but I will. I won $4000 in a video poker machine, and was handed all $4k in cash. The casino had me sign an IRS form, and I received a 1099 at the end of the year, but nothing was withheld at the time.

40

But the thing I’m trying to gather here- how would they handle an overseas visitor winning a large sum? OK, if someone from Australia or the UK won $100,000 they might have to do something about it (ie, withhold taxes), but what about a smaller sum- $5,000? $10,000?

More importantly, is the Casino going to care if that person says “I want 5 $1,000 chips” and came in each day for the next 5 days and turned them into cash?