Mississippi Gambling Income

[Burke]

Client won $5,000+ gambling in MS. MS income tax withheld. However, it says in TTB AllStates, page MS-6 -- "W-2G's should not be included because gaming withholding cannot be claimed." Is this correct? So no point in filing NR return as no refund will be available? Only income in MS was gambling. Brings the question, can Out-of-State tax credit be taken in residence state. Have to attach MS income tax return to get it.

[David1980]

True. Mississippi wants their money on gambling period.

How the other state handles it for the credit for taxes paid to other states depends what that other state is. I've seen one I did this year where the instructions specifically allowed the W-2G to be sent instead of the state tax return for Mississippi.

[Burke]

Interesting. Thanks for prompt response. She is coming in tomorrow. Will have to check further on resident state, but never seen an exception to out-of-state tax return being required. PS: What was the state that allowed the W-2G's?

[Nashville]

Tunica and Others

Didn't used to be this way. MS withheld 5%, which was at the top of their taxation bracket. I'm told from Jackson that several hundred thousand non-residents filed a return and their bracket was nowhere near that high. MS had to not only refund the money, but also process as many non-resident returns as resident returns!!

This didn't last very long. They got smart, and withheld only 3%. The refund was then so small that almost all the non-resident gamblers did not bother filing a return. Mission accomplished. My MS non-resident returns went from maybe 10 to 0.

Now TTB All-States says the non-residents can't take credit for gambling withholding. Not sure that would hold up if someone decided to sue MS, but probably gets the state off the hook for having to process any gambling-only returns whatsoever.

[JohnH]

http://www.mstc.state.ms.us/taxareas/individ/GamblingWinnings.htm

If the taxpayer lives in a state which imposes an income tax, then it seems the only issue is whether the taxpayer can demonstrate that they "filed a return" in Mississippi since that is usually the standard for claiming a credit for taxes paid to the non-resident state.

I have handled several of these in NC and I found that photocopying the W-2G onto the statement on the Mississippi web site was sufficient when attached to the NC return. Since the boilerplate from the Mississippi site clearly says that "The document provided by the casino is considered the income tax return", that should satisfy the requirements of the home state that return be filed in the non-resident state.

I also highlight the relevant part of the Mississippi notice, just in case the people in Raleigh don't see it. I've filed a couple of dozen over the years and never had one questioned. (Now that I've said that, and since NC is short of money, I bet I'll get one bounced back this year).

[Burke]

Thanks. Got an inquiry into my state on this. But will try your method. All they can say is "no.'

[Larmil]

Thanks. Got an inquiry into my state on this. But will try your method. All they can say is "no.'

The worst they can say that is not an actual "income tax" based on the way in is imposed.

[ChEAr$]

here's the skinny, Burke

Thanks. Got an inquiry into my state on this. But will try your method. All they can say is "no.'

The MS gambling tax is an excise tax and is collected at the source. It is not subject
to MS income tax.

However, you may take an income tax credit for it, at least on the Alabama state tax
return, and I suspect most of the others. The credit is simply the 3% withheld at source.