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Gambling Taxes

by Jerry "Jet" Whittaker

March 10, 2006

 

The Internal Revenue Code which is a kind of taxing agency monitored by government is very unkind to winners. The gambling winnings at the highest rates allowed are shrewdly taxed by the federal government. Sometimes the top tax bracket is about 50 percent in some high-tax states. Governments take 50 cents out of every additional dollar. You can always ditch the tax collector though but it is very difficult to do so. IRS knows that there are not many people who will voluntarily report their good luck in case they win an all-cash amount. As a result there are a number of agents deployed by IRS to monitor the casinos. Form W-2G is process of reporting big winners. Form 5754 reports the split in the winning amount. IRS receives nearly four million Forms W-2G and 5754 each year. This shows how much big business Gambling has become. Also this tells it that there are nearly four million big waiting to be taxed. The IRS and government do not always wait and make sure they get paid. And there are certain rules which allow winning player to lower the bite of the income tax.

Rules of gambling taxes

Gambling winnings are taxed by the IRS (International Revenue Code) and also by many states. All forms of gambling wins are taxable and must be declared as income on your tax return. A file of self-employed business using Schedule C is held by Professional gamblers. Wins and losses are reported only in the year as the way they occur. The winnings in other years cannot be offset by Excess losses and they cannot be carried forward. Married couples must combine their winnings and their losses, and report only one figure for each. Lumping is unacceptable as per the issued instructions of IRS. Lumping is about reporting one net win figure and no losses, or reporting nothing if your net from gambling is a loss. The reporting of the total of winning sessions separately from the total of your losing sessions is must. A record must be maintained for substantiating your wins and losses. The IRS also requires supplemental records. Form W2-G is issued to players by the IRS. It is also sent to the IRS by the casino for certain gambling winnings. Winnings from table games such as blackjack, craps, pai gow, baccarat and roulette do not require W2-G forms. Casinos and card rooms must report aggregate cash transactions of $10,000 or more in any one day to the IRS.



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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