Gambling winnings -- advice, please!

[FEDUKE404]

Never mind.

[ATSMAN]

I have a MFJ client where both spouses are in my opinion heavy gamblers. They have access to 3 casinos within 50 mile radius. Some years they have between $5K to 10K in winnings. I ask them to bring me the win/loss statements from each casino and also their record of lottery and scratch tickets. They have a shoe boxes filled with losing tickets. They have friends/family who actually give them losing tickets.

I don't want to be a nuisance, but I do want to follow the general IRS rules of reporting all gambling winnings and then offset, up to the amount of reported winnings,

I offset gambling winnings by losses NOT to exceed winnings. There can not be a negative number on Sch A. In my state for state return, gambling losses are not recognized, except for the cost of the lottery/scratch tickets.

[rbynaker]

IRS has a pretty good "plain language" pub here:

https://www.irs.gov/pub/irs-pdf/p4706.pdf

See if IRS Notice 2015-21 helps you any:

https://www.irs.gov/pub/irs-drop/n-15-21.pdf

As far as I know, there were never any actual regulations proposed, just the "we're thinking about writing some rules" notice. But the rules in the Notice are based on actual (taxpayer favorable) court cases so I think if you follow the proposed session rules in the Notice the IRS will leave you alone. The annual report from the casino(s) may or may not give you enough information to reconstruct a session report but it's a starting point.

Also, casinos are now allowed (but not required) to report using the aggregate reporting method (scroll down to (g)):

https://www.law.cornell.edu/cfr/text/26/1.6041-10#f

Doesn't sound like that's what you have here, but it's worth at least getting a basic understanding of the rules.

Every session with a positive number (winnings) is taxable income. Sessions with a negative number (losses) can go on Schedule A (assuming they itemize) up to the amount of winnings.

I would allow spouses to offset each other on a joint return but I don't know that there's any guidance on it.

Rick

[ATSMAN]

Reminds me of olden days at a store-front tax place where folks would literally "share" some SSN cards because they could only use 2 (or was it 3?) for the EITC. I don't miss those days at all. .
.

Good old days! When I was a dependent on my parent's return they did not need soc for me. Just put the kid's name on the paper form and count how many kids you had!

I believe when Congress changed the rules and wanted Soc, half the kids in America disappeared overnight!

[TAXNJ]

IRS has a pretty good "plain language" pub here:


" …….I would allow spouses to offset each other on a joint return but I don't know that there's any guidance on it."

Rick

See if this helps?

26 CFR § 1.165-10 - Wagering losses

https://www.law.cornell.edu/cfr/text/26/1.165-10

[rbynaker]

See if this helps?

26 CFR § 1.165-10 - Wagering losses

https://www.law.cornell.edu/cfr/text/26/1.165-10

That settles it, thanks. That's gotta be the shortest Reg I've ever seen! I'll just copy/paste:

"Losses sustained during the taxable year on wagering transactions shall be allowed as a deduction but only to the extent of the gains during the taxable year from such transactions. In the case of a husband and wife making a joint return for the taxable year, the combined losses of the spouses from wagering transactions shall be allowed to the extent of the combined gains of the spouses from wagering transactions."

Rick