Gambling winnings -- advice, please!

[FEDUKE404]

I think the phrase "too much information" is appropriate, especially with the (excellent!) information provided by Rick.
My clients are hardly the high-rollers, and basically spend some weekend time chucking coins or whatever into the slots. I'm not even sure what options the "gambling establishment" offers to its patrons.
The MFJ issue is resolved, and my guess is once I hear more from the client the W-2G income (only) will be reported, the standard deduction will reign, and I will avoid any/all professional gamblers.
Thanks to all who responded!
FE

[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

[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

[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!

[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

[FEDUKE404]

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 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.

Thanks for the input. My clients are nowhere near the level you mentioned. . .hardly above the bingo level so I don't want to create too much of a stir.
My guess is the Form W-2G amount (only) will show up as income, and whatever losses they "find" will just evaporate with the Schedule A standard deduction wind.
Got a chuckle out of your "loss support team." 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. . .

[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.

[FEDUKE404]

Married couple regularly visits casino at nearby facility in Virginia. Activity is primarily playing slot machines.
In 2019, husband got lucky and won ~$2k on a slot machine. The required Form W-2G for that single event has been generated.
The couple has also provided me with a his/hers "Win/Loss Statement for 2019" from the casino. The one for the husband shows (only) +$10 gain and the one for the wife shows a -$1,700 loss. At the bottom of each report is written "Positive number indicates patron beat the house." These are not high-tech documents, to say the least. My position is they have little, if any, relevance to income tax matters and constitute not much more than an annual "report card" to the gamblers.
Of course, the IRS rules clearly state you must report all winnings and may use documented gambling losses on Schedule A to offset an amount up to the reported gambling earnings. (It is unlikely they can break the >age 65 MFJ standard deduction.)

Question #1: How should I deal with the other "winnings" for both husband/wife in 2019? I have gently made them both aware of the reporting requirements.
Question #2: Assuming they can find some (documented) losses, can the wife's losses be used to offset the husband's Form W-2G income on a MFJ Form 1040, Schedule A? (Remember, the casino documents show husband has NO loss and wife has large loss.)

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, the documented losses using Schedule A.
The client is stating the loss on the wife's "statement" can offset virtually all of the reported winnings on the husband's Form W-2G (she wants to report net gambling income of only a couple hundred dollars), but of course that is incorrect in many ways. She has also stated they both "log in/ log out" while gambling at the casino. But I have doubts as to how accurately petty slot machines wins/losses are (ever) tracked by the facility.

So, to parody that famous TV commercial. . ."What would YOU do?"

Thanks in advance.

FE