An evening at the casino is an entertaining way to spend time. In some cases, those who stop in may leave with big winnings. Those who win at the casino may wonder if they can simply walk away with a little extra money lining their pockets, or if they need to report these winnings. Although it may be tempting to keep this windfall a secret from the Internal Revenue Service (IRS), it is important to know that casinos are pretty tight with Uncle Sam. Unfortunately, this is one of those situations where what happens in Vegas does not always stay in Vegas. Casinos track their players and are known to report winnings to the feds.
What does the IRS expect?
Generally, the IRS expects taxpayers to report substantial winnings. Does this mean that a large win at a blackjack table that is lost later in the evening on slot machines should be reported? Generally not. The IRS looks at the trip as a whole. However, if someone wins big at a casino and leaves with a large windfall, the IRS will likely expect that gambler to report these winnings as income on their tax returns.
Are there any exceptions?
There are some. If, for instance, the same taxpayer had gambling losses in the same tax year they can likely deduct these losses from their overall gains. However, the taxpayer must be able to back up this claim.
As tempting as it may be to burn records connected to a big loss at the casinos and move on, it is best to keep a record of the losses in the event you need to make a claim on your tax filings. It is also important to note that taxpayers cannot deduct more than their actual winnings.
Is there anything else taxpayers should know about deducting gambling losses?
Figuring out that you can deduct a gambling loss is only the first step. Taxpayers must next determine where the deduction goes within their returns. There are generally two options: Schedule A or Schedule C. Those who gamble as a hobby must chose one, while those who can claim gambling as part of a trade or business may be able to take both. A failure to meet the IRS’ expectations regarding gambling winnings can result in additional questions. Those who find themselves the subject of this type of tax audit are wise to seek legal counsel. The attorneys at Goldburd McCone are familiar with these matters and can deal with the IRS on your behalf.