There are only two ways gambling can end, you can either win or lose. But winners could be losers if they have not paid all the requirements they owe to the state. IRS takes this pretty seriously and you shouldn’t mess with them by not paying taxes. Sure, gambling can be pretty fun since it provides a nice touch of adrenaline. However, all the cash you will is subject to central income tax.
Therefore, you will be required to account for these earnings as soon as you get a hold of them. In some cases, winnings could be subject to national taxes as well. Naturally, the prize money is considered an income. Therefore, it makes perfect sense. However, you will be able to keep a certain percentage for your losses. Prize money includes a wide array of different kinds of money, like lotteries, bets, raffles, and awards.
The same can be said both for live and online casinos. We can see that not many people don’t pay attention to taxes when they enter the place and win something while they are it. Chances are that the situation that doesn’t look like much at the beginning can turn out to be a pretty big problem. The same goes for online and live casinos. In case you are interested in taking a look at PlayAmo Casino Australia. Now, let’s take a look at some of the most important things you need to be aware of when it comes to gambling prize money and prizes.
1. Earnings Need to be Reported
It doesn’t matter the amount you’ve won, you need to report what you’ve won. Prizes are often reported as other income. The process is the same when you win a non-cash prize, like a trip or a car. Failing to report it can be a serious problem. Naturally, IRS will not hunt down people who won a small amount of money. However, if you are caught in the act, you will face some serious consequences.
2. Filing Out an IRS W-2G Form
If you’ve won six hundred dollars or more, the payout should be around three hundred times the total quantity of your winnings. The verges are different for different games. For example, bingo and slots have a limit of $1.2k, for keno $1.5k, and prizes you’ve made at a poker tournament is $5k. In case there’s a need for filling out a W-2g form, there are two forms you will need to fill out. As you can presume, you will need to have at least one photo, for easier identification. Plus, you will need to provide all other important data, like social security number. In case you don’t have one, you can give write your taxpayer ID number.
3. Losses can be Deductible
Surely, sometimes you will have a bad streak in a casino. Thankfully, there’s a way that you can save at least some percentage of the prize money. The reason is that losses can be deductible. However, there’s a catch. In case you are not a professional wagerer, you will need to itemize your winnings. That way you will deduct the gambling losses much easier. The tax reform, done in 2017, imposed a whole new different deduction. We can see that the standard has been doubled. This led to more people completely avoid itemizing. In case you decide to accept a standard one, you will not be able to save any money you’ve lost.
4. Illegal Gambling Can be Taxable
According to AGA, we can see that more than $100 billion are lost due to US sports betting. If you know the fact that the supreme court unlocked the door for legal sports betting. However, not all states are following this example. This means that it doesn’t matter what kind of prize money you’ve won, either legal or illegal, you will need to pay some taxes. Many people are not aware of this fact and this is a source of many problems. Therefore, you need to pay close attention in this case.
5. Report both Losses and Winnings
Many people are not aware of the fact that they need to report both winnings and losses separately. Let’s say you’ve made a couple of $100 bets on a super bowl. If betting turns to be a win, and you’ve won $500. You will need to file a report for the whole sum. Otherwise, it’s considered to be tax evasion. There’s no chance for you to lower the tax and report only a percentage of the prize. In case you opt for itemization, you can claim $400 for your loss. The most important thing you need to know is that you need to handle both losses and winnings separately to avoid consequences.
6. Audit Risks
In case you pay attention to W-2G, you will find out that it has a couple of boxes for local and state coverups and prize money. Your native state will tax all your gambling prize money. However, in some cases, it could happen that you will need to pay both of these taxes. As you can presume, this happens when you are in another state, and you have won something at a casino. Since the law is different in different states, sometimes you will not be taxed as hard as you might think, thankfully.
7. A Record of Income
As you can imagine, the moment you hear about taxes, this means that you will need to track them over the whole year. IRS will provide you with advice to keep some kind of diary to keep a record of your losses and prizes. Naturally, this means that you need to satisfy a certain standard. This means that you need to provide additional information, like specific wagers, dates, name, and location of the casino, and people who can be witnesses of you scoring it big or losing your money, and the amount. Naturally, you will need to preserve all the information like credit records, wagering tickets, and bank withdrawals.
The Bottom Line
Different from what you may think, you will need to pay close attention to the taxes and gambling winnings. Here, we’ve presented you with the most important things you need to know.