Winning money at a casino, sportsbook, or via the lottery is a rollercoaster ride with its inevitable up and downs. Yes, it is undeniably exciting to win and stash a little extra cash in your pocket. But the downside that many forget in the heat of the moment, is that you owe taxes on those winnings, and if those taxes are not disclosed on your annual tax return or paid in full, you could end up with plenty of problems with the IRS. They will not hesitate to collect what is owed to them and more, should you profit from gambling winnings.

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• Taduran expressed concerns about the discrepancy, elaborating that some public operations were funded by taxes paid by casinos in the Philippines. Presently, there are nine casino companies in the Philippines with a combined capacity of 1,580 gambling tables and 9,895 slot machines.
• In some cases, taxes are paid on gambling winnings right away. The money is held by the casino and submitted to the IRS along with a W2-G form. This occurs mostly when people win a large amount of money, such as the $1,200 on a single slot machine pull or $1,500 on one game of keno.
• As for the Philippine Amusement and Gaming Corp. (PAGCOR) and the Philippines’ licensed casinos, they do not spend an income tax on winnings. People who winnings on horse race are to pay for a documentary stamp tax and a portion tax on winnings. Casino players, nevertheless, only pay a withholding tax on prizes more than PHP10,000.

What Constitutes Gambling Winnings?

Sharing Gambling Winnings. When two or more players share the gambling prize, they are required to fill out form 5754 pdf. When the casino has deducted the tax rate, it will divide the amount of the gambling winnings among the winners and then report the gambling winnings on form W-2G under the players’ names. Reporting Gambling Losses.

The IRS only requires people to pay taxes on a certain amount of the money that they win through gambling. These amounts vary, based on how the money is won. Here is a general breakdown to keep in mind when at the casino or racetrack:

• Sports Wagers– Any amounts won exceeding $600 are considered taxable, especially if the funds make up 300 times your initial bet.

• Slot Machines and Bingo– If you win more than $1,200 on either of these gaming machines or a jackpot at a local old-school bingo parlor, then that money is taxable.

• Poker– Winning a collective $5,000 on poker, regardless of the form of this classic card game, means that you must declare your winnings on your taxes and pay the IRS a percentage of them.

• Keno– $1,500 is the minimum amount won that you must pay taxes on when playing Keno.

All of these amounts are collective, so if you win $1,200 while playing a slot machine, and then another $1,200 the next time you are at the casino, you will owe taxes on all $2,400 of your winnings. Plus, if you’re playing the games at a casino or racing track, they will require you to fill out a form that reports your winnings to the IRS. Most places will keep 25% of the money that you won on behalf of the IRS, paying you the rest. Others will not, forcing you to set aside some of the money that you have won in order to pay your tax debt on time.

Of course, there are other games in a casino where you can also win money while playing. The money that you win at these games, such as roulette and baccarat, also must be declared to the IRS at tax time, so keep track of your winnings while you play.

Are Gambling Winnings Taxable?

The short answer here is yes. Your gambling winnings are taxable. The amounts listed above are some examples of what needs to be reported to the IRS, so they receive their share of your winnings. Gambling winnings are usually taxed at a rate of 25%.

It is important to note that not only should your winnings be reported on your tax return, but so should your losses. While you cannot report an amount of losses that is greater than your winnings, you can offset your winnings with your losses, thus lowering your tax liability on them.

How Are Gambling Taxes Paid?

In some cases, taxes are paid on gambling winnings right away. The money is held by the casino and submitted to the IRS along with a W2-G form. This occurs mostly when people win a large amount of money, such as the $1,200 on a single slot machine pull or $1,500 on one game of keno. The casino will keep the portion that you owe to the IRS and sent it to them with a form that you receive a copy of. Not every casino does this, but it is something to keep in mind the next time you are gambling.

Other cases, especially those consisting of smaller winnings that are won over the course of a year that add up to those larger, declared amounts, are a part of your yearly taxes. You must declare these amounts, as you will owe tax on those winnings when you submit your return to the IRS.

When Do I Have to Report My Winnings?

Casinos track how much you have won via membership or VIP cards. Every time you enter a gambling establishment and swipe your card, you will not only rack up points with them that can be used for various membership items, but they also use the information to see how much you have spent, won, and lost within their walls.

Winning a large amount of money all at once triggers a form called a W2-G. This is a form that the casino or track fills out that contains all of your personal information and the amount of your winnings. You will need that form on hand when you do your yearly taxes, although the casino will hold a portion of your winnings for the IRS and take care of them for you.

All of this collected information will help you at tax time, when you need to report your winnings alongside all the other money that you have made that year. There is a section on a long form tax return specifically for gambling winnings.

What Happens if I Fail to Report My Winnings?

Failure to report your winnings will get you into trouble with the IRS and unwantedly put you on their radar. You could be audited and forced to pay penalties on top of the money that you owe thanks to your gambling winnings. If you won a smaller amount, you may just receive a letter from the IRS informing you of your mistake and letting you know how much you need to pay in fines and penalties. In other cases, you will be audited, as they look for additional discrepancies on your tax return (which can lead to bigger issues).

Don’t Just Roll the Dice, Get Help

If you have won money gambling are unsure how to report your winnings on your tax return or have losses to offset a portion of your winnings, it is important to contact a tax professional to ensure your reported winnings are accurate. Since these details are reported on your tax return along with all of your other information from that year, such as your salary, investments, and more, it is crucial that your tax return is filled out properly.

If you have tax-related questions about your gambling winnings, the tax advisors at the Enterprise Consultants Group can answer your questions, discuss your rights, and provide actionable options. Please contact us online or at (800) 575-9284 today to schedule a consultation to see how we can help you.

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Gambling In America

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If you've ever won a jackpot in Las Vegas, you probably know that your excitement diminishes at least a little when the casino throws a W-2G tax form in your face. In fact, if you don’t provide your social security number, the casino will automatically withhold up to 30% of your winnings. The same goes for lottery and horse racing wins above $1200. Yet when playing online, paying taxes isn’t always so black and white.

Americans who play at US-based online casinos will usually have to deal with withholding taxes just like in Las Vegas. Yet that only represents a small fraction of your entertainment options. When playing at licensed offshore online casinos or poker rooms, American players usually won’t hear the words taxes mentioned at all.

Sadly, it is never safe to assume that your winnings are ultimately tax-free. It is true that Americans who play at internet gambling sites outside of the USA won’t be subject to withholding taxes when withdrawing their winnings. Yet you may be required to report these gains when you file your taxes in April. The greatest determinant is the number, size, and frequency of your wins. The actual threshold varies from state to state and whether or not you are an amateur or professional. For more information on reportable gambling winnings visit the IRS guide: https://www.irs.gov/instructions/iw2g/ar02.html

Professional Gamblers

Whether or not you qualify as a professional gambler doesn’t solely depend on your performance at the tables. The main litmus test is the expectation and probability of profit in the eyes of the Internal Revenue Service. Your success and whether or not you have a regular job on top of gambling may also be factors.

With even amateur gamblers having to deal with taxes, professional gambling does have benefits. You can actually deduct your wins from your losses when your treat your gameplay as a business. No matter what your current status is and how often you play, it's best to keep tabs on your performance to develop strategies, stick to a budget, and simply know where you stand. You can find this tip sheet courtesy of the IRS: https://www.irs.gov/taxtopics/tc419.html

Whether or not the IRS can actually track your winnings is another matter entirely. Yet you should be aware of your obligations. With a huge budget deficit and ballooning debt, the federal government is looking to fill their financial holes any way they can. Between the NSA and modern forensic accounting practices, covering your digital tracks is more difficult than it used to be.

Tax Obligations Outside Of The USA

The United States is a bit of an outlier when it comes to taxing gambling winnings. In the United Kingdom, the government taxes the gross profits of casino operators rather than players. Canadians can play the lottery, live casinos, poker and online games without paying taxes unless they are a professional. Likewise, Australians and New Zealanders can also gamble tax-free. To put things in perspective, Americans do pay some of the lowest personal income taxes in the first world. Things tend to even out in the end.

Like anything else, interpreting the rules is always a matter of debate. Here's an interesting tax perspective for Canadians: http://business.financialpost.com/personal-finance/tax-expert-a-gamble-over-poker-winnings

Things To Consider

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Keep in mind that Americans have to deal with both Federal and State taxes on most forms of income. Always keep basic records no matter how often you play or win. This will make things easier during tax season.

Accountants Have The Answers

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No matter where you live, it's always best to discuss your personal situation with a licensed tax professional in your area. You can usually get a short consultation for free with complete confidentiality. It's the best way to play by the rules while minimizing your tax burden.