Tax Refund Casino Winnings
If the amount withheld is overpaid, a refund of the difference will be issued or credited. You must file Form IT-540B, Nonresident and Part-year Resident Return, to report your winnings and withholdings to Louisiana. To obtain a copy of the return, visit LDR’s Forms page or call (888) 829-3071 and select option 6. About Form W-2 G, Certain Gambling Winnings About Form W-2 G, Certain Gambling Winnings File this form to report gambling winnings and any federal income tax withheld on those winnings. The requirements for reporting and withholding depend on.
Taxes are probably the last thing on your mind during an exciting gambling session. However, they inevitably come up following a big win or profitable year.
You may have two main questions at this point:
- Do I need to pay taxes on my wins?
- If so, how much do I have to pay?
The following guide discusses whether your gambling wins are taxable and other important topics regarding this subject.
The Short Answer Is Yes
I’ll cut right to the chase: yes, you do need to pay federal taxes on gambling winnings in the United States. This is especially true when you net a big win and receive a W-2G form.
According to the IRS, a gambling establishment should issue a W-2G when you win an amount that’s subject to federal income tax withholding (24% of win).
Slot machines present a famous example of when you’ll receive a W-2G form after winning so much. Casinos must issue a form when you win a prize worth $1,200 or more through slots or video poker.
As for the second point, a sportsbook or racetrack must withhold federal taxes when you win a bet worth 300x your initial stake. If you wager $5 and win $3,000, for example, then the bookmaker will issue a W-2G form and withhold $720 (24%).
Here’s a broader look at the W-2G and tax withholding threshold for different types of gambling:
- $600+ through sportsbooks and racetracks (provided it’s 300x your stake).
- $1,200+ through a slot machine, video poker machine, or bingo game.
- $1,500+ through keno.
- $5,000+ through a poker tournament.
All Winnings Are Subject to Taxation
Technically, you’re supposed to report any gambling winnings—big or small. Even if you win $20 in an office betting pool, the IRS wants to know about it.
If you want to stay above board, then you should report all wins on Form 1040 (under “other income”). As I’ll cover later, you can deduct losses from winnings as well.
Furthermore, any amount that’s withheld by a casino, poker room, sportsbook, or racetrack is deducted from what you owe. Gambling establishments keep 24% of a win when they do withhold money.
W-2G Forms Don’t Apply to Table Games
You’ll receive a W-2G when earning big wins through most types of gambling. However, casino table games are an exception to the norm.
Unlike a jackpot game (e.g. video poker) or a poker tournament, casinos have no idea how much money you start with in a table game. Therefore, they can’t really determine when you do and don’t experience big wins.
Examples of table games that are exempt from W-2G forms include:
- Baccarat
- Blackjack
- Caribbean stud
- Craps
- Roulette
- Three-card poker
The IRS still expects you to pay taxes on profits earned through table games. Again, though, the casino can’t issue a W-2G because they can’t tell how much money you’ve actually won.
Some States Tax Gambling Winnings
Most states tax your income, including gambling winnings. Depending upon where you live, you’ll probably need to pay taxes to both the IRS and your state.
For Example:Michigan features a 4.25% flat income tax. The Wolverine State expects you to pay this same 4.25% rate on gambling wins.
West Virginia, on the other hand, doesn’t tax your winnings. Casinos/sportsbooks in the Mountaineer State only withhold federal taxes (when necessary).
Assuming you travel to another state to gamble, you may have two states wanting taxes. Luckily, though, you won’t be subject to double taxation.
Instead, your home state will give you credit for whatever taxes are paid to the state where the winnings occurred.
Can You Deduct Losses?
You can deduct gambling losses from winnings. However, these deductions are itemized rather than standard deductions.
Here’s an example to explain:
- You win $5,000 through sports betting.
- You lose $4,500.
- You must report the full $5,000—not $500 (5,000 – 4,500)—under other income.
- Meanwhile, the $4,500 is reported through various itemized deductions.
In short, itemized deductions are expenses that reduce your taxable income. The standardized variety includes flat-dollar, common deductions.
You may be able to save more money through itemized deductions. However, standard deductions are easier to deal with and also have the potential to save you more money.
Regardless, you must use itemized deductions when dealing with losses. This means spending more time on your tax returns or working with an accountant.
Keep in mind that you won’t receive a tax refund for gambling losses. Instead, you can only deduct an amount equal to your winnings each year. If you win $3,500, for example, then you can’t deduct more than $3.5k and expect a return.
Keep Records on Wins & Losses
The IRS may take your word at face value when it comes to gambling. Of course, they also have the ability to audit you when they deem it necessary.
That said, you don’t want to guestimate on your wins and losses. Instead, you want proof through the form of records.
Journals offer a great way to record your gambling activities. You can log the following for each entry:
- Date of gambling session
- Location of the establishment
- Game played
- Starting bankroll
- Ending bankroll
Such entries don’t guarantee you’re being honest. However, they at least show the IRS that you’re making a legitimate attempt at recordkeeping.
You can take your recordkeeping efforts even further by holding onto any other relevant documents. Betting slips, winning tickets, canceled checks, bank statements, W-2G forms, and anything else of relevance are all worth saving.
What Happens If You Don’t Report Gambling Winnings?
The IRS fully expects you to report gambling winnings and especially annual profits. They don’t take kindly to you failing to report these wins.
Of course, you’re unlikely to draw an audit for winning a $25 sports bet. You stand a higher chance of being audited, though, if you win enough for a W-2G form.
In this case, the casino/sportsbook/racetrack also sends a copy of the from to the IRS. The latter features reliable software that can match up your reported income with documentation of nonreported income.
Assuming you fail to report gambling winnings, then the IRS may do little more than send a letter and issue a small fine. You should definitely pay up, or at least work out a payment plan, in this case.
You’ll face more serious consequences, though, if you fail to report a huge win and lie about the matter when/if caught. Refusal to pay and/or heavy efforts to cover up the deceit will lead to bigger fines and possibly jail time.
Gamblers Stand Increased Chances of an Audit
Nobody likes attracting an audit from the IRS. Unfortunately, the chances of being audited increase for gamblers.
This is especially true when you net a big win and receive a W-2G. Of course, you can reduce the odds of being audited by claiming anything on the form.
The IRS may also become suspicious if you claim big losses on your tax return. You’ll put the taxman on increased alert when winning a huge prize (e.g. $50,000) and claiming a matching amount of losses.
Also, you can’t write off hotel stays, meals, and entertainment as a casual gambler. You must be a professional to claim such itemized deductions.
How Do Professional Gamblers Report Winnings?
Pro gamblers claim winnings on Schedule C as a self-employed person rather than as other income on Form 1040.
Even as a professional, you can’t deduct more losses than winnings in a year. You’re stuck in a tough situation with treating gambling as a day job, yet not being able to file losses that exceed winnings.
As mentioned before, though, you’re able to deduct business expenses like hotel stays and meals. These expenses just need to be a legitimate part of your business.
Conclusion
In answer to the original question, yes, you’re supposed to claim real money gambling winnings on federal tax forms. Even if you end up losing money on the year, the IRS wants to see your wins and losses.
Of course, tax collectors don’t care a great deal when you win $200 on the year. They spend most of their time looking for bigger winners.
The times when you want to be especially diligent in this matter include:
- When you book a large win and receive a W-2G form.
- If you win a significant amount of profits throughout the year.
- When you win 600x your bet with a sports or horse wager.
Again, the IRS and your state (if applicable) expect all gambling winnings to be reported. But you can use some commonsense in deciding when reporting wins are truly necessary.
Please enable JavaScript to view the comments powered by Disqus.Tips for Claiming Tax Back from US Casino Winnings
You won big in Las Vegas, Atlantic City, Reno, or one of the other gaming destinations in the U.S. Once you win a jackpot, you’re faced with a very unpleasant revelation: you are immediately taxed on your winnings. However, Refund Management Services advises that there is a way to get all or a portion of your taxes back from the IRS.
You can win a lot of money gambling in the United States. Of course, that means you’re also subjected to a casino winnings tax.
If you’ve made a trip to the U.S. and your gaming winnings are high enough or you win a prize and take the cash equivalent, the IRS will deduct 30% off of your winnings. Nobody wants Uncle Sam to withhold their winnings.
Still, there’s no reason to avoid the gaming tournaments or slots when you’re south of the border. Here is what you need to know about before you travel to the US to gamble and how to claim and get tax back from us casino winnings.
- Once your US casino winnings pass a certain threshold (which differs by casino, but is often $1,199) you will be subject to withholding tax. When this happens, you will be issued a W2-G or 1042-S slip.
- Don’t wait more than three years to claim gaming winnings on a tax return; that said, if you’ve won in the current year, we will be filing a claim at the beginning of the next calendar year. Most of our customers typically contact us within a few days of returning to Canada or their country of origin, so we can begin preparing the paperwork for them to get the refund that is rightfully theirs. If you delay submitting your claim, you won’t be entitled to a refund after 3 years.
- Keep track of all your US wins and losses every time you go, reporting your losses will maximize your return.
- It’s not just US casino winnings that are taxed, other gaming activities can be taxed like lotteries, raffles, and races.
- Remember that you can also claim taxed gaming winnings on a variety of games, such as lotteries, raffles, and horse races.
- When it comes to getting tax back from US casino winnings, you have a few options:
How To Get Tax Back From US Casino Winnings
Nearly four million gamblers win big in gambling cities across the U.S. and the IRS deducts taxes from all of them. However, as a non-resident of the U.S., there is a way to get your casino winnings back from the U.S. by hiring Refund Management Services to go through the process of obtaining a casino winning tax refund from the IRS. RMS is the easiest way to get your money back.
If you win $1,199.00 or more, contact Refund Management Services and we will obtain your taxed gaming winnings by filing a tax return. Take the stress out of the process by letting our trained experts handle it for you!
At the end of the day you have two options:
Option 1: Claim Tax Back from US Casino Winnings On Your Own
It is possible to file your own withholding tax return. While this may save you a small amount of money, it is only advised if you feel confident in your withholding tax filing skills. Much like your annual tax return, with so many opportunities to leave money on the table or make costly mistakes, claiming tax back from US casino winnings on your own can leave you in a costly position. Every year we deal with clients who have been denied their withholding tax refund by the IRS after filing independently. It is complicated, time consuming, and expensive to appeal this decision, so it’s often not worth the risk.
Option 2: Use a Withholding Tax Refund Professional
These folks make it their business to get your tax back from US casino winnings. Although there is a fee associated to using a withholding tax professional, they will ensure you don’t make any costly mistakes. To make sure you make the right choice, look for the following in your withholding tax professional:
1. Relationships with Casinos & Gaming establishments:
To start your claim process, you will need the IRS form 1042 from the casino you were playing in. If you misplaced it, that won’t be a problem for a reputable withholding tax refund professional since their relationship will allow them to easily recover it from the casino you were playing in. Even if you haven’t misplaced your form 1042, this is still a good quality to look for in your withholding tax refund professional.
2. Honest About Your Refund Timing
Tax Refund On Us Casino Winnings
Although speed is of the essence when you’re looking to get your refund, due to the IRS wait times it is important to know that you’ll be waiting 6 months at a minimum but usually a full year before receiving your US casino winnings tax back. This is AFTER the claim is submitted. Any agency that tells you you could receive your US casino winnings tax back sooner is being misleading to get your business.
3. Agent of the IRS
Agents of the IRS are people or companies that are allowed to certify your ID, a requirement when claiming tax back from US casino winnings. This means one less chore for you when making your claim.
Nys Tax On Casino Winnings
4. Excellent Track Record For Claim Approvals
California Tax On Casino Winnings
The firm you use to claim tax back from your US casino winnings should boast at least a near perfect record when it comes to rightful claim approvals.
5. Owned and Operated by a Canadian Chartered Accountant
When claiming your tax back from US casino winnings, ensure the withholding tax specialist is a Canadian chartered accountant. This ensures your return is being handled by people with the appropriate expertise to be handling taxes. It will also provide you with insurance that your sensitive information will be handled professionally.
6. A Withholding Tax Industry Veteran
We are the longest standing withholding tax agency in the industry for a reason. Avoid leaving your refund in the hands of someone less experienced by choosing a withholding tax specialist who is tried, tested, and true.
7. Makes Casino Winnings Tax Refunds Easy
If you find you’re filling out multiple forms, your withholding tax professional is not earning their fee. The point to using a service when getting tax back from casino winnings is that they do all the leg work and make sure it’s done right.
RMS is the leading provider of withholding tax services for non-US residents. Learn why RMS is the right choice for claiming tax back from your US casino winnings and apply now for free.