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Originally Posted by TEJAS KIDD
For the record, the IRS requires you to report ALL gambling winnings, not just the ones filed on W2G's. Be careful when just reporting W2G winnings as winnings. Someone who bets $2 show and gets back $2.10 is required to claim that .10 cents as winnings. Back in 97, I was audited (this was 2 years after an Audit which there was no change to my taxes, however, I never had filed taxes with total winnings-minus total losses). The auditor basically did not audit my 97 taxes but told me that they pulled me in to educate me about filing gambling winnings. You are required to claim every single wager that you won money and then you can deduct all losses up to the amount of winnings. For example, you have 25k in w2gs, more than likely you would have cashed much more NON signers throughout the year, Lets say you wagered 100k for the year and collected 110k for a 10k profit. The irs requires you to claim 110k as income and 100k as losses. (even though that's not entirely correct, because a 2 show bet profiting .10c would show up as a 2.10 win- minus the 2 wagered). Thats the way I've filed since 1997, only been audited once since then for 2007, of which there was no change.
I'd rather pay a flat rate of 10% on signers over 5k and just ditch all of the paper work required. Gambling winnings should be non taxable income and then be charged an automatic non refundable tax (10% of signers over 5k) to eliminate the millions of man hours and paper work required for all of the bullcrap below 5k signers.
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Folks will also be disappointed to know that you are required to report any rebates as income as well. Another way non-professionals get shafted is when using schedule "A", the amount of your wagers (even if you bet $100,000 per year and lose $100,000 to break even) gets applied as income, which can cause one to exceed allowable limits on donations and perhaps even medical expenses.
Given the explosion of poker tournaments over the past few years, the government has taken a much keener interest these days in returns which include gambling winnings. If you are doing significant activity and you do not enlist the services of a highly skilled Tax Professional versed in the latest gambling laws, it may cost you thousands of dollars.
BTW, I'm not a Tax Professional............I just play one on television!
