Page 19 - February 2005 • Southern California Gaming Guide

Tax Help: Casino Winnings and Taxes by Jean Scott
This month’s column is timely and necessary. Have you been lucky this year at the casino? Over the years players have asked me so many questions about gambling and taxes that I decided a couple of years ago to research the subject and write about it. I found the
subject so complex that I asked my accountant, a gambler herself, Marissa Chien, to help me with the technical details. Our e orts are in our book, Tax Help for the Frugal Gambler.
I found that most gamblers (and many tax preparers themselves) had erroneous ideas about taxes. Tax Help for the Frugal Gambler ($25) covers the basics, discussing what a gambling session is and how it can vary depending on personal circumstances, the games played, and what player record-keeping is necessary. Samples of my own gaming diary are included, as well as the following topics:
♦ Taximplicationsofcashback,comps,tournaments, and casino drawings
♦ Filing as a recreational gambler or professional gambler
♦ Information for the table game and slot player and live poker player, and for those who form gambling partnerships
♦ Federal tax regulations and requirements
♦ A chart giving information for residents of all 50 states and/or visitors who gamble out of their
home state.
e following excerpt on casino tournament and prize-winning is from Tax Help for the Frugal Gambler by Jean Scott ( JS) and Marissa Chen (MC).
Casino Tournaments
(JS) e tax treatment of tournaments is a touchy subject with gamblers. e IRS has ruled that tournament prizes of more than $600 must come with a 1099, without subtracting the tournament fee. erefore, you will have to count a $600 tournament prize as a “win,” even though you might have paid $1,000 to enter the tournament. ( is 1099 issuance is not consistent: Some casinos use
the $600 gure to issue 1099s for one tournament, while others add all the tournament wins of any amount for one person in one year and issue a 1099 for the aggregate prizes that total $600 or above.)
Some players can add the tournament fees to their losses if they itemize and can list gambling losses as a deduction, but often they reach the allowable loss amount before deducting the entry fees, thus they end up paying taxes and it becomes the “prize that costmemoney.”(Livepokertournamentshaveeven more complicated rules set by the IRS, and Marissa discusses these in the book).
Casino Prizes
(JS) The IRS treats prizes and awards as income. This includes awards and prizes given in goods or service; these must be included in your income
when I sold it back to the dealer, a lower amount than the sticker price listed on my 1099. In the case of a cruise we “won,” the casino put the “brochure price” on the 1099 issued, an inflated amount that no one ever has to pay. We attached a copy of a listing on the Internet that showed the same cruise at a much-reduced price, the amount we put down
SOUTHERN CALIFORNIA GAMING GUIDE
“The question for gamblers is whether they can add casino drawing prizes and tournament wins to their “regular” casino wins. This is not clearly stated by the IRS, but most gamblers put these in their log
just as they do for all their gambling wins.”
at their fair market value. This type of income, like gambling wins, goes on the line for ”Other Income.”
Fair market value can be evaluated in several different ways. The “real” value of most prizes is usually much lower than what tax accountants often call the “fictitious value.” For example, when I won a car in a drawing at the Stardust some years ago, I only had to pay taxes on the amount I got
as the fair market value. We also were careful to make a note of this, attached to our return, so that the larger amount on the W-2G wouldn’t trigger a letter from the IRS for undeclared income.
The question for gamblers is whether they can add casino drawing prizes and tournament wins to their “regular” casino wins. This is not clearly
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FEBRUARY 2005 Page 19
Column: Jean Scott, The Frugal GamblerTM