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big frank
05-06-2017, 10:43 PM
A friend had a 2 tri box and won on the derby......he didn't bet 2 one dollar tri rickets..........he bet a 2 dollar tri box on one ticket............it paid 16 thousand...........what kind of taxes will he have to pay ???? i think they might take 25 percent off the top................if anyone knows for sure could you reply............thanks !!!!!!!!!!!1

thespaah
05-06-2017, 10:50 PM
A friend had a 2 tri box and won on the derby......he didn't bet 2 one dollar tri rickets..........he bet a 2 dollar tri box on one ticket............it paid 16 thousand...........what kind of taxes will he have to pay ???? i think they might take 25 percent off the top................if anyone knows for sure could you reply............thanks !!!!!!!!!!!1

Any winning of odds greater than 300-1 are subject to a tax of 25%. I believe the establishment( Race track) takes the 25% off the top and pays the holder of the winning bet(s) the remainder.
In addition, winnings greater than $5,000 in a single year MUST be reported on one's income tax return....
Here is a link that explains in further detail
https://www.efile.com/taxable-gambling-winnings-income-taxes/

SG4
05-08-2017, 10:06 PM
Any winning of odds greater than 300-1 are subject to a tax of 25%. I believe the establishment( Race track) takes the 25% off the top and pays the holder of the winning bet(s) the remainder.
In addition, winnings greater than $5,000 in a single year MUST be reported on one's income tax return....
Here is a link that explains in further detail
https://www.efile.com/taxable-gambling-winnings-income-taxes/

I don't quite understand why people who don't have accurate answers or experience insist on answering questions. The above is not fully correct, here are the rules for taxable tickets:

Any winning ticket at odds of 300-1 or higher & that pay $602+ are subject to IRS reporting & must be included on a tax return, for which a form (W-2G) will be supplied upon cashing the ticket.

If the winning wager totals $5000+ a withholding of 25% (or sometimes 28%) for federal taxes will be enacted & usually 0 for state I believe but this can vary.

I do see that the linked article says gambling winnings are taxed at 25% as a flat rate, but I did not think that was correct, I always thought winnings are added to income & taxed at whatever that rate amounts to when all is said & done between deductions, etc.

Congrats to your friend on their score, when they cash their tri ticket they can expect to receive about $12,445 & depending on their gambling losses to offset this victory they may be able to recoup a part or all of the 25% which was withheld.

dilanesp
05-08-2017, 10:44 PM
I don't quite understand why people who don't have accurate answers or experience insist on answering questions. The above is not fully correct, here are the rules for taxable tickets:

Any winning ticket at odds of 300-1 or higher & that pay $602+ are subject to IRS reporting & must be included on a tax return, for which a form (W-2G) will be supplied upon cashing the ticket.

If the winning wager totals $5000+ a withholding of 25% (or sometimes 28%) for federal taxes will be enacted & usually 0 for state I believe but this can vary.

I do see that the linked article says gambling winnings are taxed at 25% as a flat rate, but I did not think that was correct, I always thought winnings are added to income & taxed at whatever that rate amounts to when all is said & done between deductions, etc.

Congrats to your friend on their score, when they cash their tri ticket they can expect to receive about $12,445 & depending on their gambling losses to offset this victory they may be able to recoup a part or all of the 25% which was withheld.

You are correct about the rate. Gambling income is taxed at the same rate as all your other income, unless it bumps you over the threshold for a higher tax bracket.

That author is confusing the withholding rate, which is 25 percent of certain tickets, with the tax rate. They are two different things (just as your employer does not withhold the exact same amount as you ultimately pay on April 15).

LemonSoupKid
08-28-2017, 03:01 PM
Let's say I hit the pick 6 and it is under 10k but over 5k

I bet multiple tickets, and for the purposes of this, the winning ticket brought to the teller cost me 300.

Do they withhold under these rules still just because of the winnings payout of over 5k? I keep seeing the new proposed rules stated this way:

"Under the proposed rules, the requirements would not be triggered unless the wager paid off at greater than 300-1 to the total amount bet by the player in the pool."

My example has the new ticket base as 300, which is obviously 150 combos of $2. 300 x 300-1 is 90k, so does that mean nothing is triggered under 90k?

Or is it the Homeland Security thing they do also at casinos which is actually 10k reporting, so the best is tracked but nothing is withheld?

No one is very clear on this.

burnsy
08-29-2017, 08:03 AM
I don't know how it works outside of NY (NYRA). But if its over 5000 they take it on the spot when you cash. About 1/4 or 25%.

LemonSoupKid
08-29-2017, 10:19 AM
I don't know how it works outside of NY (NYRA). But if its over 5000 they take it on the spot when you cash. About 1/4 or 25%.

The new law for things like pick 6 won't be auto withhold at 5k though, right?

The whole purpose of that wager and this type of sane legislation is that you generally are risking hundreds at a minimum to win thousands. It's been 5k since 1970 and homeland security is 10k for other stuff.

I think it should be bare bones 10k and probably 20k.

By the way, if you hit a pick 6 for 30k let's say, do they cut you a check? At what point does the local establishment's cash flow "run out" for the purposes of paying off a wager? Around 10k?

Andy Asaro
08-29-2017, 10:46 AM
Check or cash or both. Before FDIC insurance went up they would cut them in 100K increments in many cases.

AndyC
08-29-2017, 12:02 PM
The new law for things like pick 6 won't be auto withhold at 5k though, right?

The whole purpose of that wager and this type of sane legislation is that you generally are risking hundreds at a minimum to win thousands. It's been 5k since 1970 and homeland security is 10k for other stuff.

I think it should be bare bones 10k and probably 20k.

By the way, if you hit a pick 6 for 30k let's say, do they cut you a check? At what point does the local establishment's cash flow "run out" for the purposes of paying off a wager? Around 10k?

Please do not use the word "sane" when discussing these proposed regulations. The entire purpose of the 1099/W2-G program is to ensure that taxpayers report income. For some unknown reason, the IRS regulations have only targeted exotic bets. Example: BigBettorBob makes a $5000 win bet on a 10-1 horse and wins $50,000. No tax reporting required! Pick6Paul bets a $24 Pick 6
and cashes for $7,500. He is required to sign for his winnings and have taxes withheld.

dilanesp
08-29-2017, 12:13 PM
Please do not use the word "sane" when discussing these proposed regulations. The entire purpose of the 1099/W2-G program is to ensure that taxpayers report income. For some unknown reason, the IRS regulations have only targeted exotic bets. Example: BigBettorBob makes a $5000 win bet on a 10-1 horse and wins $50,000. No tax reporting required! Pick6Paul bets a $24 Pick 6
and cashes for $7,500. He is required to sign for his winnings and have taxes withheld.

I think the reason for this is quite well known, although it isn't a particularly sensible one.

Essentially, the current regulations evolved out of a distinction that tax regulators made between the kind of bets professional gamblers make (which they figured are more likely to be reported and netted out against losses, leaving a modest amount of taxes due) and the kind of bets that are hit by lucky amateurs similar to lottery winnings (which aren't likely to be netted out against reported losses and which they figured required strict reporting and withholding requirements). The 300 to 1 odds requirement is the separator between the two types of bets.

What broke the system down was the advent of numerous exotic wagers that could be played for potential profit by professionals using spread strategies. The IRS took a small step towards fixing this with the one ticket rule, but they obviously aren't near there yet.

AndyC
08-29-2017, 01:28 PM
I think the reason for this is quite well known, although it isn't a particularly sensible one.

Essentially, the current regulations evolved out of a distinction that tax regulators made between the kind of bets professional gamblers make (which they figured are more likely to be reported and netted out against losses, leaving a modest amount of taxes due) and the kind of bets that are hit by lucky amateurs similar to lottery winnings (which aren't likely to be netted out against reported losses and which they figured required strict reporting and withholding requirements). The 300 to 1 odds requirement is the separator between the two types of bets.

What broke the system down was the advent of numerous exotic wagers that could be played for potential profit by professionals using spread strategies. The IRS took a small step towards fixing this with the one ticket rule, but they obviously aren't near there yet.

Nice theory but incorrect. Very few people ever filed taxes as a professional horse bettor before the reporting requirements were enacted. It was only after the reporting requirements were implemented that there was a greater need to file as a professional.

LemonSoupKid
08-29-2017, 01:39 PM
Please do not use the word "sane" when discussing these proposed regulations. The entire purpose of the 1099/W2-G program is to ensure that taxpayers report income. For some unknown reason, the IRS regulations have only targeted exotic bets. Example: BigBettorBob makes a $5000 win bet on a 10-1 horse and wins $50,000. No tax reporting required! Pick6Paul bets a $24 Pick 6
and cashes for $7,500. He is required to sign for his winnings and have taxes withheld.

Andy, we already get taxed by the takeout at the track (supposedly to support the game) and the state in which we are betting. I come from the point of view that that's already enough, so anything beyond that (fairness among different bets) in my mind is just mixing up already unhealthy, or silly tax policy.

Your last post supports my view; why would you file when you're already getting jobbed?

At absolute worst, they should negotiate a cut (at least in horses) with the feds and just forget about reporting all together. It is an unnecessary hassle for the whole system, governments and individuals included. What proves this is that it becomes a game to "cheat" the system, which is just stupid. Why can't you just hammer me on the front end (you already are) and just let me actually keep my winnings on the back, when I finally cash? Not imposed another 20-40% penalty. It's crazy. No wonder people don't take the fed and the 8 foot high IRS book seriously.

AndyC
08-29-2017, 02:04 PM
Andy, we already get taxed by the takeout at the track (supposedly to support the game) and the state in which we are betting. I come from the point of view that that's already enough, so anything beyond that (fairness among different bets) in my mind is just mixing up already unhealthy, or silly tax policy.


How is the takeout a tax? How would the tracks pay their bills if not for the takeout? Doesn't every business price their goods or services to pay their bills? Aren't there thousands of excise taxes that we pay for products purchased?

I would agree that there should be some sort of upfront fee bettors pay and just eliminate income taxes on gambling.

dilanesp
08-29-2017, 02:14 PM
Nice theory but incorrect. Very few people ever filed taxes as a professional horse bettor before the reporting requirements were enacted. It was only after the reporting requirements were implemented that there was a greater need to file as a professional.

That's orthoganal to my point.

The point is, once you are going to have reporting requirements, how are you going to structure them? And the 300 to 1 cut-off was created (I think it was in the late 1970's or early 1980's) because it drew a distinction between lottery type winnings and ordinary churn of high stakes gamblers.

dilanesp
08-29-2017, 02:16 PM
How is the takeout a tax? How would the tracks pay their bills if not for the takeout? Doesn't every business price their goods or services to pay their bills? Aren't there thousands of excise taxes that we pay for products purchased?

I would agree that there should be some sort of upfront fee bettors pay and just eliminate income taxes on gambling.

In California, the takeout is basically a tax, because the state has a role in setting it and has all sorts of mandates regarding the division of the funds.

In other states where tracks have more control, only a portion of the takeout which goes to the state is a tax.

Andy Asaro
08-29-2017, 02:18 PM
In California, the takeout is basically a tax, because the state has a role in setting it and has all sorts of mandates regarding the division of the funds.

In other states where tracks have more control, only a portion of the takeout which goes to the state is a tax.
If you want to see where takeout goes it's in the Annual Report. State doesn't set takeout. They set the limit at 25%........for now.

http://www.chrb.ca.gov/statistics.html

Annual Reports
*
End Of Meet Reports
*
Occupational License & Fees
*
Pari-Mutuel Pools Reports
*
SLAA Reports
*
Statistical Reports of Operation

dilanesp
08-29-2017, 02:19 PM
Andy, we already get taxed by the takeout at the track (supposedly to support the game) and the state in which we are betting. I come from the point of view that that's already enough, so anything beyond that (fairness among different bets) in my mind is just mixing up already unhealthy, or silly tax policy.

Your last post supports my view; why would you file when you're already getting jobbed?

At absolute worst, they should negotiate a cut (at least in horses) with the feds and just forget about reporting all together. It is an unnecessary hassle for the whole system, governments and individuals included. What proves this is that it becomes a game to "cheat" the system, which is just stupid. Why can't you just hammer me on the front end (you already are) and just let me actually keep my winnings on the back, when I finally cash? Not imposed another 20-40% penalty. It's crazy. No wonder people don't take the fed and the 8 foot high IRS book seriously.

From a tax policy perspective, we should be taxed at a rate similar to what other people pay from their incomes.

There's reasons why the best way to do that is probably just to tax pools at whatever rate would be equivalent to what the income tax would raise if people complied with it. (Essentially, there's a ton of evasion and enforcement costs when you have individuals report their winnings. Takeout taxes avoid that.) But as of now, the federal government, in its wisdom, doesn't tax pools, and the state governments mostly double-tax (both the pools and the income).

AndyC
08-29-2017, 02:56 PM
That's orthoganal to my point.

The point is, once you are going to have reporting requirements, how are you going to structure them? And the 300 to 1 cut-off was created (I think it was in the late 1970's or early 1980's) because it drew a distinction between lottery type winnings and ordinary churn of high stakes gamblers.

Why do you think that the 1099 requirements were implemented? Businesses were not reporting income received and under the table deals were prevalent. It didn't matter if the business was "legitimate". Under or nonreporting in the construction industry was the worst.

So given that 1099s and W2-Gs regulations were issued to encourage compliance do you really believe that win wagers of any denomination were excluded thinking that "legitimate" professional gamblers would surely report their winnings from large win bets? No such assumption was made.

Do you believe that a $602 win is a lottery type win? Do you also believe that the IRS would have little interest in high stakes gamblers?

The regulations were just bad from the get go. There may have been influence from the gambling industry to leave the big players alone. A crackdown on the big players could be bad for business and consequently result in less taxes being paid in the long run.

AndyC
08-29-2017, 03:03 PM
In California, the takeout is basically a tax, because the state has a role in setting it and has all sorts of mandates regarding the division of the funds.

In other states where tracks have more control, only a portion of the takeout which goes to the state is a tax.

What product doesn't include some sort of fee or excise tax? What the takeout isn't is an income tax.

AndyC
08-29-2017, 03:07 PM
From a tax policy perspective, we should be taxed at a rate similar to what other people pay from their incomes....

Seeing how race betting is a negative sum game how would an income be determined?

dilanesp
08-29-2017, 03:41 PM
Why do you think that the 1099 requirements were implemented? Businesses were not reporting income received and under the table deals were prevalent. It didn't matter if the business was "legitimate". Under or nonreporting in the construction industry was the worst.

So given that 1099s and W2-Gs regulations were issued to encourage compliance do you really believe that win wagers of any denomination were excluded thinking that "legitimate" professional gamblers would surely report their winnings from large win bets? No such assumption was made.

Do you believe that a $602 win is a lottery type win? Do you also believe that the IRS would have little interest in high stakes gamblers?

The regulations were just bad from the get go. There may have been influence from the gambling industry to leave the big players alone. A crackdown on the big players could be bad for business and consequently result in less taxes being paid in the long run.

I believe that it was somewhat rational, though not really sophisticated, for the IRS to assume that 300 to 1 was a reasonable cut-off in 1980 for lotteries versus day to day gambling. At that point, the only exotic that any track even contemplated that routinely paid that much was the pick six. It isn't anymore.

I also think it's misleading to talk of a $602 win. That's just the cut-off point, and all regulatory cut-off points are arbitrary. The point was they thought a $7,500 3750 to 1 pick six win was more lottery-like whereas a $7500 win produced by putting $2500 to win on a 3 to 1 shot was not.

dilanesp
08-29-2017, 03:44 PM
Seeing how race betting is a negative sum game how would an income be determined?

Some people make an income playing the races. The current system attempts to tax that income directly (however imperfectly). The purpose of the tax is that professional gambler is a profession like any other, and people who succeed at it should pay their fair share in taxes.

The problem is that there are gigantic practical problems in collection. So a tax on pools that raises the same amount of money as a perfectly enforced income tax would is a reasonable alternative to ensure the horse race betting community pays its fair share in taxes.

LemonSoupKid
08-30-2017, 12:56 PM
What product doesn't include some sort of fee or excise tax? What the takeout isn't is an income tax.

Our point, among other things, is that takeout is way too high and doesn't approach other sports that have max 10% vig.

Still, all this would be that much more understandable or far more accepted if they didn't double tax your wins and not allow credit for losers, which most people are.

LemonSoupKid
08-30-2017, 01:00 PM
Some people make an income playing the races. The current system attempts to tax that income directly (however imperfectly). The purpose of the tax is that professional gambler is a profession like any other, and people who succeed at it should pay their fair share in taxes.

The problem is that there are gigantic practical problems in collection. So a tax on pools that raises the same amount of money as a perfectly enforced income tax would is a reasonable alternative to ensure the horse race betting community pays its fair share in taxes.

I believe also that the UK or british descendant countries (but not US) that have sports gambling do not touch winnings. You walk out with what you walk out with, no questions asked. Are their front end taxes, surcharges, etc? I'm sure, since they are highly centralized social welfare governments, that tend to do this. But the reason why the late take or requirement to file and account for it all is so bad is that you don't know when you're going to win and it becomes impossible to truly know what you're getting into. If you did, you could make a more rational decision.

My thought is that in the later (better, smarter) scenario, you'd get a lot of players dropping out if they set it (the fees, charges, vig, etc) too high --- there would be a market of types to actually make the game better for everyone --- except the bureaucratic blood sucking, faceless central governments.

AndyC
08-30-2017, 01:27 PM
I believe also that the UK or british descendant countries (but not US) that have sports gambling do not touch winnings. You walk out with what you walk out with, no questions asked. Are their front end taxes, surcharges, etc? I'm sure, since they are highly centralized social welfare governments, that tend to do this. But the reason why the late take or requirement to file and account for it all is so bad is that you don't know when you're going to win and it becomes impossible to truly know what you're getting into. If you did, you could make a more rational decision.

My thought is that in the later (better, smarter) scenario, you'd get a lot of players dropping out if they set it (the fees, charges, vig, etc) too high --- there would be a market of types to actually make the game better for everyone --- except the bureaucratic blood sucking, faceless central governments.

The UK abolished taxes on gambling winnings in 2002. They correctly reasoned that gambling being a zero sum game did not yield net profits. Taxing only the net winnings but not allowing a deduction for net losses would be unfair. Bookies are required to pay a 15% tax on gross profits.