Gambling Winnings

[Maria]

Hi,

My client received an IRS notice on their 2008 return. It appeared that they did not report $3,200 of gambling winnings.

I am going to file an amended return showing gambling loss equal to the winning of $3,200 since my client said they never won any $ from the gambling. When I file the amended return, should I attach a letter stating that their loss more than their gains, and should I attach the receipt? Will this triggle IRS audit? What kind of evidence should they have to provide to prove that they spent more than $3,200?

Thank you and happy holidays!

[ChEAr$]

Hi,

My client received an IRS notice on their 2008 return. It appeared that they did not report $3,200 of gambling winnings.

I am going to file an amended return showing gambling loss equal to the winning of $3,200 since my client said they never won any $ from the gambling. When I file the amended return, should I attach a letter stating that their loss more than their gains, and should I attach the receipt? Will this triggle IRS audit? What kind of evidence should they have to provide to prove that they spent more than $3,200?

Thank you and happy holidays!

While not triggering an audit, it will raise some eyebrows if you don't itemize deductions in order to claim the loss. Remember, you can't just net out winnings and loss on the other income line.

[taxxcpa]

Netting

While not triggering an audit, it will raise some eyebrows if you don't itemize deductions in order to claim the loss. Remember, you can't just net out winnings and loss on the other income line.

There was a discussion about this recently. I believe the net winnings for each day can be reported rather than the gross amount. It might be best to show "other income" for the full amount, then on a second "other income' line show the losses.

I've always shown the losses on Schedule A.

[appelman]

If the IRS is showing 3200...

...that better go as other income. Any losses up to that figure go on Schedule A as a Tier 1 miscellaneous deduction.

[AZ-Tax]

Suggest TP put something in writing

Maria, I would get something in writing from the TP that they lost at least $3200 (per what TP told you verbally) and put in physical or electronic file.

[OtisMozzetti]

one-shot winnings

With certain types of one-shot gambling winnings, such as winning the lottery even if that were (might be) what this $3200 consists of, it is hard for me to believe that the gambling losses in truth come up to the same amount as the winnings.

IRS asserts that taxpayers are supposed to prove their gambling losses with a daily diary or log book. I wonder how many gamblers keep that sort of records.

[JG EA]

What Otis said.
So, if you have daily proof of no winnings on that particular day, then you can put in the $ on other and take it out on other. But if you only have proof of overall losses to that amount, then you need to put those on A. But be sure to ask them if they had other winnings and with an amended I'd ask them if they have in their possession the proof of losses. What if the IRS then requests proof? You need to cover your representation on the tax return. Can they now get printouts? Some places provide them.

Everyone says they didn't win anything. But as we know that is not how the IRS looks at it. Also realize that if you put in the Gamgling winnings on other and take them off on A, they could still have a larger tax because of how that particular return shakes out.

One client came to me with a list of the years' transactions on gambling with an overall loss because she thought a gambling loss would help her on her taxes! In the past she always answered no to any gambling. After I put in the winnings and took them out again on A it was $800 more in taxes. The daily thing would have been worse.

[taxea]

Hi,

My client received an IRS notice on their 2008 return. It appeared that they did not report $3,200 of gambling winnings.

I am going to file an amended return showing gambling loss equal to the winning of $3,200 since my client said they never won any $ from the gambling. When I file the amended return, should I attach a letter stating that their loss more than their gains, and should I attach the receipt? Will this triggle IRS audit? What kind of evidence should they have to provide to prove that they spent more than $3,200?

Thank you and happy holidays!

Maria
Your client needs to get a win/loss statement for 08 from each casino he/she gambled at. The statements are then entered into the program. This is the only way the client can properly show his/her win/loss. If the client does not use casino cards to gamble then he/she will have to have some kind of a log that was used to keep track of win/loss for the year. I would ask the client to provide one or the other and keep a copy of it in your client file, as well as attach a copy/s to the amended return.

[Gary2]

There was a discussion about this recently. I believe the net winnings for each day can be reported rather than the gross amount. It might be best to show "other income" for the full amount, then on a second "other income' line show the losses.

I've always shown the losses on Schedule A.

Does the "net daily winnings" apply across all types of gambling? Or is it just for table games, where it makes no sense to track individual hands?

For that matter, do casinos even issue W-2Gs for table game winnings?

[RLymanC]

Forget NET winnings

Talked to thr Indian casinos,,,they must report GROSS winning

[NotEasy]

Maria
Your client needs to get a win/loss statement for 08 from each casino he/she gambled at. The statements are then entered into the program. This is the only way the client can properly show his/her win/loss. .

What are you going to do with the win/loss statement? Suppose the statement says the taxpayer won (coins out) $10,000 and loss (coins in) $12,000 in the whole year, do you put $10,000 as other income on line 21 and then itemize the $12,000 (actually only $10,000 since it cannot exceed the gambling win) on Schedule A? I think that is the most appropriated way to report it.

But then I have serious doubt the win/loss statement is enough to substantiate the itemized gambling loss. The IRS specifically asks for daily dairy. Is the win/loss statement enough to fulfill the daily dairy requirement?

[taxea]

What are you going to do with the win/loss statement? Suppose the statement says the taxpayer won (coins out) $10,000 and loss (coins in) $12,000 in the whole year, do you put $10,000 as other income on line 21 and then itemize the $12,000 (actually only $10,000 since it cannot exceed the gambling win) on Schedule A? I think that is the most appropriated way to report it.

But then I have serious doubt the win/loss statement is enough to substantiate the itemized gambling loss. The IRS specifically asks for daily dairy. Is the win/loss statement enough to fulfill the daily dairy requirement?

If you use a tax prep program to do the return it will open up to a form that allows you to enter all the information from each win/loss statement. And yes you would only be reporting the amount of loss that does not exceed the amount won.

The IRS does not specifically ask for a daily diary...see this IRS tax topic

http://www.irs.gov/taxtopics/tc419.html

[newbie]

You must keep a diary or similar record.......

it may not specifically ask by your reference but if you do a little more homework:

http://www.irs.gov/publications/p529/ar02.html#en_US_publink100027013

Diary of winnings and losses. You must keep an accurate diary or similar record of your losses and winnings.

Your diary should contain at least the following information.

The date and type of your specific wager or wagering activity.

The name and address or location of the gambling establishment.

The names of other persons present with you at the gambling establishment.

The amount(s) you won or lost.

Proof of winnings and losses. In addition to your diary, you should also have other documentation. You can generally prove your winnings and losses through Form W-2G, Certain Gambling Winnings, Form 5754, Statement by Person(s) Receiving Gambling Winnings, wagering tickets, canceled checks, substitute checks, credit records, bank withdrawals, and statements of actual winnings or payment slips provided to you by the gambling establishment.

For specific wagering transactions, you can use the following items to support your winnings and losses.

These recordkeeping suggestions are intended as general guidelines to help you establish your winnings and losses. They are not all-inclusive. Your tax liability depends on your particular facts and circumstances.

Keno. Copies of the keno tickets you purchased that were validated by the gambling establishment, copies of your casino credit records, and copies of your casino check cashing records.

Slot machines. A record of the machine number and all winnings by date and time the machine was played.

Table games (twenty-one (blackjack), craps, poker, baccarat, roulette, wheel of fortune, etc.). The number of the table at which you were playing. Casino credit card data indicating whether the credit was issued in the pit or at the cashier's cage.

Bingo. A record of the number of games played, cost of tickets purchased, and amounts collected on winning tickets. Supplemental records include any receipts from the casino, parlor, etc.

Racing (horse, harness, dog, etc.). A record of the races, amounts of wagers, amounts collected on winning tickets, and amounts lost on losing tickets. Supplemental records include unredeemed tickets and payment records from the racetrack.

Lotteries. A record of ticket purchases, dates, winnings, and losses. Supplemental records include unredeemed tickets, payment slips, and winnings statements.

[joanmcq]

Usually people are only reporting what they got on a W2G. but each day you might have net winnings, yet never have a single win large enough for the casino to issue the W2G. Are you reporting those wins as well? Wins per 'transaction' (defined specifically by type of wager, whether you cashed out, went to a different casino, etc) can be netted against losses per 'transaction', with the wins reported on line 21 & losses on Sch A. For example, a 'transaction' ends if you stop playing slots and switch to poker. Cash in/out statements are not proof of losses, any more than they are proof of winnings.

[S T]

Casino and Player Cards

It is an issue, particularly with the California Indian Gaming Casinos
They will supply an annual win/loss, but there are no dailies provided, and guess what the client is not keeping dailies win/losses by slot machines as outlined

So far so good, based on reporting through 2008, remains to be seen for future win/loss reporting, I have about 3 clients that I have advised on the record keeping, and it is almost enough information for them to quit!

Gotta Luv this issue.

Sandy