Page 33 - February 2009 • Southern California Gaming Guide

Many casino players recommend Jean Scott and Marissa Chien’s book, Tax Help for the Frugal Gambler each year around tax time, saying that it is indispensable in understanding taxes and gambling. Many players also give the book to their tax preparers, for most accountants do not know the ins and outs of taxes and gambling.
Jean Scott, who is a legend among gamblers, is known as the Frugal Gambler and the Queen of Comps. She has been featured on “Dateline,” “Hard Copy,” “To Tell the Truth,” numerous Travel and Discovery channel documentaries, and “48 Hours.” She has created a legion of gamblers who look for added value in their pastime at the casino, seeking out casino comps that can stretch their gaming dollars. It was a natural progression in her approach to gambling, that she would compile a de nitive book on gambling and taxes.
And she chose a tax specialist co-author. Marissa Chien is an Enrolled Agent, certi ed tax consultant, and president of her own rm in Las Vegas that provides tax accounting and nancial planning. She’s also a self-described gambler.
Scott and Chien’s book, Tax Help for Gamblers—Poker & Other Casino Games has a wealth of gambling tax-related information. No matter what you play at the casino—slots, poker, blackjack, pai gow—if you go to the casino even a few times a year, this is a must-read.
Here is an excerpt from Tax Help for Gamblers on casino comps, including cashback and free play. is is a subject many players have queried us about. Do you have to include the receipt of comps on your tax return? Read on to nd out. e editor of Tax Help for Gamblers chose to let readers know who was saying what by clearly indicating each author’s name before paragraphs.
promotion based on machine play. We thought it would be considered a comp, just like the free rooms, food, and other bene ts we’d received from this casino in the past, comps we’d “earned.” However, we were issued a 1099 and Marissa said we’d have to count the fair market value of the cruise in our gambling income on our tax return.
e subject of comps is a huge gray area and there’s no uniformity of casino policy when it comes to issuing 1099s. Also, there’s no standardized interpretation of this issue by
various tax preparers or even by IRS employees.
Cashback and Free Play
Jean: Related to comps, in that the casino often uses it to reward their players club members, cashback is a popular gambler bene t about which the IRS has yet to make a ruling, and again there’s no consensus on how to treat it, even among tax experts. Casinos usually don’t issue 1099s for cashback, even if you collect a large amount at one time, though a very few casinos do issue a 1099 if it’s more than $600, treating it as a prize, or they’ll give a W-2G if more than $1,200, treating it as a machine jackpot.
And to confuse matters, some casinos give you a choice of cash or comps for the points you earn in their players club.
us, many players believe that cashback falls under the same category as comps, a reward from the casino that’s not gambling income. Others feel it’s more like a rebate of some of your losses and should reduce the total losses that you report. is is another gray area and you need to discuss your particular situation with your tax preparer.
Marissa: I tell my clients that cashback is gambling income, whereas free bu ets aren’t. e standard I apply is that cashback is statutory, while a comp from the slot club
(players club) booth or your host, such as the free bu et, is discretionary. Since the comp is entirely up to the host’s discretion—i.e., he or she could refuse to issue it for any reason—to me that doesn’t fall under the de nitions of income under the tax code. Cashback is earned pursuant to a particular formula, and you’re entitled to that cashback if you meet the statutory requirements of earning it.
e biggest argument as to why cashback is income is that if you’re 86’ed (barred) from a Nevada casino, Nevada Gaming Control has ruled time and time again that you’re entitled to the cashback
earned, whereas comps in your comp account are forfeited, since they’re discretionary.
Jean: ese days casinos often give you free play instead of cash rewards. Free play is machine credits that must be played through a video poker or slot machine at least once before you can cash it out for money that you can put in your pocket. Here, again, we have a gray area that is not speci cally addressed by the IRS or any court cases. Some people don’t include free play in their gambling win since they say it’s just like comps, a non-cash gift from the casino. Some only count as a win what they actually have left to cash out after they play it through the machine once, as is required by the casino. Others keep churning it through the machine until they have nothing left (in which case they feel they have no “win”) or until they hit a big jackpot (which they do count as a win).
Marissa: I recommend that free play be incorporated into one’s log of session results. If someone receives $2,500 in free play, they should report the actual proceeds after playing it through the machine as a win. A big di erence between free play and cashback is the fact that free play always has an expiration date and is usually valid for only a short period of time. Cashback can expire as well (for example, if for a lack of play during a set period your players account is closed), but it’s usually available to collect for a much longer period of time.
Tax Help for Gamblers—Poker & Other Casino Games is 167 pages, paperbound, and is published by Huntington Press, Las Vegas, December, 2007. You can order copies ($24.95) from www.QueenofComps.com or by calling 1-877-798-7RGE. It is also available as an e-book, immediately downloadable, at www.lasvegasadvisor.com.
Casino Comps and Gifts
Jean: Not all activity in a casino results in a clear-cut win or loss dollar gure. What about the T-shirt you get as a free gift when joining a casino players club? What about comps—meals, hotel rooms, show tickets—that the casinos give players to reward them for, and to try to keep, their loyalty? ese areas
aren’t directly addressed
in IRS publications, but
most tax experts have
concluded, from past IRS
cases, that these kinds
of comps do not need to
be declared as gambling
income and the casinos
have not been instructed
to issue 1099s for them.
However, often a
casino does give 1099s
for more major gifts to
customers—e.g., cars
to the highest rolling
whales—and the IRS has
ruled that the fair-market value of these have to be included in gambling income, but can be o set by gambling losses. Brad and I were awarded a free cruise by one casino in a
February 2009
SOUTHERN CALIFORNIA GAMING GUIDE
Page 33
“The subject of comps is a
huge gray area and there’s no uniformity of casino policy when it comes to issuing 1099s. Also, there’s no standardized interpretation of this issue by various tax preparers or even by
IRS employees.”