Taxes is not something you think about while gambling, but after you have won or lost, you will need to report your earnings or your losses to the IRS. It hurts, but that is what the law says. That raises the question: What activities are included in gambling?
According to the IRS “Gambling income includes, but is not limited to, winnings from lotteries, raffles, horse races, and casinos. It includes cash winnings and the fair market value of prizes such as cars and trips.”
To report taxes on gambling, the payer will need to issue you Form W-2G, Certain Gambling Winnings, if you win in gambling. The amount you win also matters. The IRS puts down the figures:
“The payer must give you a W-2G if you receive:
- $1,200 or more in gambling winnings from bingo or slot machines;
- $1,500 or more in proceeds (the amount of winnings minus the amount of the wager) from keno;
- More than $5,000 in winnings (reduced by the wager or buy-in) from a poker tournament;
- $600 or more in gambling winnings (except winnings from bingo, keno, slot machines, and poker tournaments) and the payout is at least 300 times the amount of the wager; or
- Any other gambling winnings subject to federal income tax withholding.”
Not all is lost if you lose because you can claim the losses in gambling as deductions at the time of filing of your income tax returns. You will need to show the winnings separately and the losses separately.
The next time you roll the dice, do not forget to leave the casino without the receipts, tickets and documentation of your winnings and losses because the IRS will not forget to remind you of it when you do not pay taxes on your earnings from gambling.