Page 23 - February 2006 • Southern California Gaming Guide

Taxes and Gambling: The W-2G
by Jean Scott
Editor’s Note: Tax Help for the Frugal Gambler by Jean Scott and Marissa Chien, E.A., who is a trained tax preparer, experienced in handling tax matters for gamblers, is easy to understand and covers more information on W-2G forms as well as many other issues that face gamblers at tax time. e book discusses questions about gambling sessions, ling as a professional, deducting losses, and keeping records. You can order this book and
Yother helpful products at www.FrugalGambler.biz.
ep, it’s tax time again – and if you have done some gambling in a casino this year and got lucky with a few jackpots, you may have some W-2Gs the casino gave you. And you may have a lot of questions about them when you think about doing your tax return.
by the IRS. Why not? In the majority of these cases, people actually pay more in taxes than they would have if they’d kept the required records and kept track, as they should have all year, of all their gambling session wins and losses separately. A W-2G jackpot total is not the same as a winning- session total. Most gamblers readily admit that they don’t always end up a session with the whole jackpot intact. Sometimes they lose it all back and some more out of their pocket!
Marissa Chien, the co-author of Tax Help for the Frugal Gambler, adds this note about this subject: “ e other problem with using your W-2G totals as your win totals, without any yearly diary, is that if you’re audited, the IRS may question you about other gambling sessions. ey’ll assume you had other winning sessions when no W-2G was issued and will start looking for other evidence. You say you lost on all the other days? e burden of proof for losses is squarely in your lap—and although you may
be able to get some kind of statements from casinos, these may not always be accepted as proof without a detailed diary. Tax court decisions have supported the idea that gambling records are much more believable when they include both W-2G and non-W-2G wins.”
If you want to learn more about getting comps and how to get more of them, you might want to read two books by Jean Scott: The Frugal Gambler and More Frugal Gambling. Go to her Web site (www. FrugalGambler.biz) to see the contents list for both books and other products that will make you a smarter gambler.
1. What is a W-2G and when does the casino give them to you?
From my book Tax Help for the Frugal Gambler “A W-2G (the G stands for gambling) is the tax form that any for-profit organization gives you (and sends a copy to the IRS) when you win a specified
amount while gambling. For horse and dog racing, jai alai, state lotteries, and some other kinds of wagering, this form must be given for any winnings that are at least 300 times the amount of the bet. However, there’s a special rule for bingo and slot machines; you get a W-2G for any one gross win that is $1,200 or more, no matter how much your original bet was. And to make it more complicated, keno has its special rule: a W-2G for any net win of $1,500 or more.”
Note: is does not mean that if you cash out more than $1,200 on a slot machine after a period
of play, you have to be issued a W-2G. It is required only for a win of $1,200 or more on one hand.
2.
Do I have to pay taxes only on wins on which
I receive a W-2G?
Wrong! You are responsible for reporting all gambling wins, and whether you get a W-2G or not has no bearing on that. Just because many people don’t report gambling wins when there’s no W-2G “evidence,” that fact will not help you in an IRS audit. You’re supposed to keep a diary of all your gambling sessions.
3. Well, what if I didn’t keep a gambling diary and I just have my W-2Gs from slot machine jackpots that were $1,200 or more? Can I just count the total of the W-2Gs as my gross win?
Probably thousands, even hundreds of thousands of people do this every year and don’t get audited
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