Reporting Gambling Wins (losses)

[Jesse]

Casual Gambling winnings and losses from wagering transactions:

For simplicity’s sake gambling money is in a separate pocket and this is your activity for the entire year. A log should be kept for the entire year.

Example: 7 days at the casino:

January 1 start with $50, end with $40. Realized loss of $10

January 2 start with $40, end with $25. Realized loss of $15

January 3 start with $25, end with $80. Realized win of $55

January 4 start with $80, end with $60. Realized loss of $20

January 5 start with $60, end with $30. Realized loss of $30

January 6 start with $100, end with $1000. Realized win of $900

January 7 start with $100, end with $0. Realized loss of $100

Actual net income(loss) = $455(spent) - $1,235 (received) = $780 income

Reported:
a.) Income reported on line 21 = $955

Federal Schedule A loss = $175

OR

b.) Income reported on line 21 = $1,080 (Gross winnings)

Federal Schedule A loss = $455 (Total spent)

OR

c.) Income reported on line 21: $780 (Net amount won)

OR
d.) None of the above: $____________

[okie1tax]

Gambling

I make it - Line 21 - $1235, Schedule A - $455

[New York Enrolled Agent]

Gambling winnings and losses:

For simplicity’s sake gambling money is in a separate pocket and this is your activity for the entire year. A log should be kept for the entire year.

Reported:
a.) Income reported on line 21 = $955

Federal Schedule A loss = $175

You did not indicate the type of gambling activity. If the taxpayer is playing the slots and is a casual gambler (certainly this appears true in your post) then the IRS Chief Counsel has determined that a) is the appropriate way to report the activity. See AM 2008-011 on the IRS website.

[Jesse]

I make it - Line 21 - $1235, Schedule A - $455

I see how you came up with that.

This seems such a confusing issue for people and I am trying to put together an example to show clients. My understanding is answer a.

From Wisconsin FAQ's explaining Federal treatment:

For taxpayers who gamble as a hobby, Wisconsin has adopted the federal "session" method of determining gains and losses for tax reporting purposes. A “gambling session” is a period of continual play with only a short break in play (restroom break, beverage break, table/machine change, game change, etc.).

The taxpayer determines the net amount of gains or losses for each gambling session. The taxpayer then reports the net gains from all winning sessions for the year in Wisconsin taxable income if the winning sessions have a situs in Wisconsin. If the taxpayer has losing sessions, the net losses from those sessions are not deductible for Wisconsin income tax purposes.

[Jesse]

You did not indicate the type of gambling activity. If the taxpayer is playing the slots and is a casual gambler (certainly this appears true in your post) then the IRS Chief Counsel has determined that a) is the appropriate way to report the activity. See AM 2008-011 on the IRS website.

Casual Gamblers only is what I mean to imply in this example.

[Davc]

The former.

[appelman]

What does the W-2G show?

That might be the determining factor.

[Jesse]

The W-2G should not be the determining factor in what to report. That is were I run into problems with confused clients. If they receive a W-2G for $1,000 often that is all they want to claim and too often the response is "I lost way more than that".

When trying to explain the netting process, which I'm my opinion is the correct way to report wins/losses for the casual casino visitor, many people just don't understand. I wanted to create an example to show the client in black and white to hopefully help clear up some of the confusion.

I'm just curious as to other opinions on how they would report the win/losses. I thought a poll would let anonymous answers so more would respond, but there are lots of views and only 5 votes.

[New York Enrolled Agent]

The W-2G should not be the determining factor in what to report. That is were I run into problems with confused clients. If they receive a W-2G for $1,000 often that is all they want to claim and too often the response is "I lost way more than that".

When trying to explain the netting process, which I'm my opinion is the correct way to report wins/losses for the casual casino visitor, many people just don't understand. I wanted to create an example to show the client in black and white to hopefully help clear up some of the confusion.

I'm just curious as to other opinions on how they would report the win/losses. I thought a poll would let anonymous answers so more would respond, but there are lots of views and only 5 votes.

I'm really at a loss to understand your desire for opinions. Doesn't the legal advice from IRS Chief Counsel give you what you want? The wording and examples in that advice are quite clear - show that document which gives a huge break to taxpayers to your clients.

[Jesse]

Didn't intent to make a big deal out of nothing -

I'm really at a loss to understand your desire for opinions. Doesn't the legal advice from IRS Chief Counsel give you what you want? The wording and examples in that advice are quite clear - show that document which gives a huge break to taxpayers to your clients.

Yes, the legal advice from IRS Chief Counsel does help, and I have printed out several copies to hand out as needed, thanks for push in that direction. I still would like a more simplified straight forward example to show clients, if there is such a thing. So many casual players are retired, set in their ways, and seem to have group discussions at the casino as to how so and so says they got to reported all of their losses or what not.

Like I said, I was just curious as to how others would handle or I guess even more so how others might try to explain this to the client.

[taxmom34]

casual casino gamblers

can ask casino for win loss statement for the year. i go to casinos once a month and play the slots, you need to know that when playing you win some and let it ride so it's possible to win $500 and put it all back, so how do you account for that? do you add it to start monies? and no i never took home winnings where they sent me a W2G.

[Gary2]

The W-2G should not be the determining factor in what to report. That is were I run into problems with confused clients. If they receive a W-2G for $1,000 often that is all they want to claim and too often the response is "I lost way more than that".

When trying to explain the netting process, which I'm my opinion is the correct way to report wins/losses for the casual casino visitor, many people just don't understand. I wanted to create an example to show the client in black and white to hopefully help clear up some of the confusion.

I think you're trying to come up with the wrong explanation. The reason they only want to claim what's on the W-2G is that they figure they'll be taxed on anything else they'll claim, but the IRS will never find out about the $50 winning lottery tickets for which there was no W-2G.

You can either say that they're required to claim all their winnings, but you'll deduct the losses so it won't matter (much - they probably don't want to hear about above the line versus below the line). Or you can say that you'll claim the W-2G but won't take any deductions because inevitably their records are never good enough.

[S T]

What about

The CP2000 Notice matching on W-2 G forms.
I understand the prior posts - but nothing will match the W-2G forms reported - so then the CP2000 notice and explanations.

Do we report based on the "Log" if there is one on events of wins/losses, or report based on W-2G forms, with added income and then reporting added losses?

I currently have an issue on a CP2000 for W2G forms not matching the tax return, and am having a difficult time in having IRS accept the documentation presented.

Sandy

[Jesse]

I attach an explanation - I've only had it happen on a couple occasions last year and haven't had a CP2000, (yet). I emailed the state of Wisconsin to ask if my understanding of the reporting requirements are correct and I received a response late yesterday afternoon confirming and stating that they don't require an attachment for this, but anything that would help explain the discrepancy in taxable income is a welcome attachment. It may prevent the taxpayer from receiving a letter from us asking for clarification.

[Jesse]

I think you're trying to come up with the wrong explanation. The reason they only want to claim what's on the W-2G is that they figure they'll be taxed on anything else they'll claim, but the IRS will never find out about the $50 winning lottery tickets for which there was no W-2G.

You can either say that they're required to claim all their winnings, but you'll deduct the losses so it won't matter (much - they probably don't want to hear about above the line versus below the line). Or you can say that you'll claim the W-2G but won't take any deductions because inevitably their records are never good enough.

I think most want to report the correct amount, it's just a matter of teaching them what is the correct amount.