W2G Winnings and Losses

[S T]

Curious question! Have not thought of it before.

Married Joint T/p- $67,000+ in gambling winnings, and $83,000 in losses. total between both spouses. Wife won $64,000 with $59,000 in losses, husband won $3,000 with more than $3,000 in losses. Community Property State.

Would you allocate the husband's losses to his winnings and the spouse's losses to her winnings.

could make a difference on whether any part would be subject to taxation.

Reports from the Casinos are in each separate name.

Sandy

[Jesse]

Sorry

I don't have an answer to your question, but I was just pondering this same issue. One client has enough losses to offset but brought in both her and her husbands casino slips.

Another question I have is - on the casino transcript it has proceeds paid "in" and paid "out" to track the persons account. So technically, is a person suppose to claim the winnings even if it is not reported on a W-2G? This could really cause issues if a person cannot itemize deductions to take the losses or in a State that does not allow the miscellaneous deductions. Or am I reading too much into the casino transcript?

[BOB W]

Just a.......

.......... quick note> those loss reports are only guess-a-mates.

[Dervis]

Gambling losses

For any other item on a joint return that I can think of, one spouse's loss can be used to offset the gain of another, so I don't see why gambling should be any different. For example, if one sold a stock at a loss and the other sold a stock at a gain, they would both be reported on Sch. D and offset each other. If one had a Sch. C loss and the other a Sch. C gain, these would just offset each other. Why would gambling losses be different?

[GIMoe]

Report winnings

...So technically, is a person suppose to claim the winnings even if it is not reported on a W-2G?...

Technically, all gambling winnings, whether reported on a W-2G or not, is taxable income and should be reported on the tax return, regardless of whether the taxpayer can itemize or not.

[Bird Legs]

Gambling winnings & Losses

Maybe I am misreading the question, however, here goes. Gambling losses do not offset the winnings. Winnings are reported on line 21 of the 1040. Losses, to the extent of the winnings are reported on Sched. A , not exceeding the winnings. and not subject to the2% limitation.
And yes the winnings would be combined and the losses would be combined.

[Jesse]

Technically, all gambling winnings, whether reported on a W-2G or not, is taxable income and should be reported on the tax return, regardless of whether the taxpayer can itemize or not.

I realize that, but is winning always income? For example on the casino activity report it has activity by day:

On 4/1/06 the Dollars in = $5,000 and the Dollars Out = $4,900 for Win/Loss of ($100)
On 4/8/06 the Dollars in = $ 950 and the Dollars Out = $ 980 for Win/Loss of +$30

When I get down to the Grand total I have $55,865 Dollars In and $54,765 Dollars out for Win/Loss ($1,100).

I have one W-2G for $2,000. How much do I report to the IRS?

[gkaiseril]

Felling lucky today?

Too late to move to Nevada, Texas, or Florida for 2006!

Are your shoes starting to pinch?

What do you recommend to your clients?

How lucky do your feel?

Since Wisconsin starts the computation of the state taxable income computation with the federal AGI this is an ethical question wit real consequences.

How lucky do you feel?

On a federal audit you could have to provide support for the gambling losses and if you used the casino's records, the IRS auditor would adjust your total federal income and federal AGI but not your federal taxable income and federal tax. But the state taxman is waiting on the cliffs and will know of the change and zero in on you like the eagle eyed auditor he/she is for the Wisconsin piece of the pie and a little more since he/she had to read the federal audit results.

Since you encourage your clients to honestly report their income, you should do the same.

[GIMoe]

Same Casino?

I realize that, but is winning always income? For example on the casino activity report it has activity by day:

On 4/1/06 the Dollars in = $5,000 and the Dollars Out = $4,900 for Win/Loss of ($100)
On 4/8/06 the Dollars in = $ 950 and the Dollars Out = $ 980 for Win/Loss of +$30

When I get down to the Grand total I have $55,865 Dollars In and $54,765 Dollars out for Win/Loss ($1,100).

I have one W-2G for $2,000. How much do I report to the IRS?

Is the Activity report from the same Casino as the W-2G? If it is, add up all the days they actually came out ahead (had winnings). If it is from the same Casino, the total should be $2,000. If it is from a different Casino, then the total you came up with are winnings in addition to the $2,000 and should be reported as such. If TP can itemize then you can use the losses that show on that report as a deduction (up to total winnings, of course).

[Jesse]

They are all from the same casino but the total will not be the same as the W-2G because the casino only issues the W-2G for the larger winnings. The $2,000 is from the day that the client played the $5,000 - the $2,000 went right back into the machines.

The way I understand it is if I walk into the casino with $100 and stick it into a slot machine this is cash in and as I play my total is tracked for what I might win/loose. If I keep playing off my credits and get up to $150, yet keep playing until I loose all my credits, my cash out is $50. My total win/loss is now <$50>. So now I am out $50 but my activity reads that I won $50.

Is this income to be reported? Or am I misunderstanding this win/loss activity report?

[Bill Tubbs]

ALL winnings

The way I understand it is if I walk into the casino with $100 and stick it into a slot machine this is cash in and as I play my total is tracked for what I might win/loose. If I keep playing off my credits and get up to $150, yet keep playing until I loose all my credits, my cash out is $50. My total win/loss is now <$50>. So now I am out $50 but my activity reads that I won $50.

My take would be that you have at least $50 of winnings that day that needs to be reported as income. What's the difference if I win $50 on the first pull and leave (so I'm up $50 that day) and come back the next day and lose $100; vs. if I win $50 then lose $100 in the next hour? Either way there was a win of $50. If you would say that just since they lost $50 when looking at the day as a whole that there are no winnings reportable, then you would be netting all the day's gambling together -- why not just net the entire year's gambling all together then (which is clearly not allowed). My viewpoint is that every pull of the slot is a separate gamble, and each $0.25 winning is taxable income, even if that $0.25 is gambled away, either the same day or the following month.

Bill

[gkaiseril]

They Makle You Feel Like a Winner Even With a Loss

The casino log does not show your initial investment since they do not know it and they want make you to feel like a winner. And that is why one should keep a separate log of their gambling expenditures including lottery bets. Gambling losses from all gambling activities are combined to determine the total gambling loss. In your example you have a net loss of at least $50.00. That net loss of $50.00 is not a deductible, but the losses up to the amount of winnings is deductible on Schedule A not subject to 2% of the AGI.

The requirement is to report all winnings irregardless of their being reported on a W-2G or not as other income. So all the winnings reported on the casino statement and over the counter lottery winning are reported as other income. You then get to deduct all your loses up to the amount of the winnings on Schedule A not subject to the 2% limitation up to the amount of winnings.

This generally makes the gambling winnings appear tax neutral on the federal return. That is, the gambling winnings appear not to increase the federal tax for those with a net gambling loss. The taxpayers taking the standard deduction end up paying additional taxes, since they have lost the difference between standard deduction and their interminable deductions.

As previously posted, if you reside a state with state income tax the starting point for the state tax computation will determine whether you will owe state income tax on your winnings or not. Further the gambling winnings can be taxed in the state where won and the state where you reside but you should get a credit for taxes paid to the state where your won the winnings.

[BP.]

the gambling winnings appear not to increase the federal tax for those with a net gambling loss.

The increase in AGI may have an impact on tax breaks that are AGI limited.

[GIMoe]

Total winnings....

The way I understand it is if I walk into the casino with $100 and stick it into a slot machine this is cash in and as I play my total is tracked for what I might win/loose. If I keep playing off my credits and get up to $150, yet keep playing until I loose all my credits, my cash out is $50. My total win/loss is now <$50>. So now I am out $50 but my activity reads that I won $50.

Is this income to be reported? Or am I misunderstanding this win/loss activity report?

I suppose that would depend on how you would define a gambling 'session' or 'activity'-- some would define each individual pull of the slot as a seperate session, I would not. If you start with a $100 and while on the same slot, you work your way up to $150, then all the way back down to $50 before you stop, then you have a loss of $50 for that activity. You step away and come back later that day or the next, that's a seperate activity. You start with $100 again and this time when you get to $125 you stop. Now you have winnings of $25. This $25 must be reported, the loss can be taken on Sch A, Misc deductions, not subject to 2% but only up to the amount of the winnings.

While this may seem like a negative, or null tax effect, it is important to do this, because, as someone else has already stated, the increase in AGI may have an impact somewhere else on the return.

Hope this helps.

[Luis Mopeo]

You can also get hit with state AMT on the winnings.