According to IRS section 61, Except as stated in this subheading, gross income means all income from which source originates This includes gambling income sources. There are many assumptions about when to win the winnings from casinos. While most people understand that profits are taxable, many assume they can only be notified if the casino presents them with a tax return to be submitted with the return. The taxpayers correct assumption should be that all and all winnings should be included in their return regardless of the documentation given by the casino. In fact, in the case of an IRS audit, a taxpayer who only has the tax documents given by the casino risks losing all their claim for loss of deductions and possibly paying taxes on more than profits reported on their W-2G.
IRS Publication 529 ensures casual game taxpayers to be diligent in maintaining proper documentation of all gaming activities. Yes, that means another logbook to accompany. The information proposed by the publication to be documented includes the date and type of specific betting activity, the name and address of the gaming institution, the names of other persons present on the site and the amounts of your winnings and losses. Perhaps, the most important information that has been recorded is profits and losses. listed separately. Thats right, no netting of totals by the end of the year and throw that figure in your return, especially if youre among those who only report losses. So, how should we define our profits and losses and at what time?
Internal Revenue Code IRC does not provide specific guidelines for determining when profits and losses occur, but it is stated that the net ending is not allowed at the end of the year. Fortunately, federal tax legislation provides guidance in George D. and Lillian M. Shollenberger against Commissioner of Internal Revenue, T.C. PM. 2009-306, and Szkircsak against Commissioner, T.C. PM. 1980-129.Gambling activity shall be reported by sessions. According to the courts, the beginning and end of each session or transaction, as described in Shollenberger against the IRS case, is crucial for determining net profit or loss for registration. With no specific rules defining a session in the IRC, we can assume that it would be too difficult to expect a player to log every move on the lever of a slot machine or any hand played on the poker table as an individual session, but rather the net result of A series of levers or hands is played in a single session. The net of that session is then recorded as a gain or loss. These session wins are logged separately from session losses and then recorded on the individuals return with total winnings reported on Line 21 on Form 1040 and total losses reported on Schedule A in 1040. Remember, deductions for losses greater than profits are not allowed.
Adhering to the IRS reporting rules may be a bit heavy, but with the increased number of games in recent years it is inevitable that more and more revisions will be directed towards these returns with reported game income. Keeping documentation for game revenue and deductions follows the logic used to require documentation for other types of revenue and documentation, such as the standard W-2s and Form 1099s, receipts for purchase and repayment of mileage.
It is wise to seek additional advice from a tax secretary to plan your tax strategy before deciding to take a chance with casinos. For more information on this and other tax strategies,