New Regulations For Tax Withholding Passed

[AlsoEligible]

Originally Posted by VigorsTheGrey

"United Tote, the provider of pari-mutuel tote services to more than 150 racing operations including Churchill Downs Racetrack, has implemented the necessary technological changes to begin processing wagers and payouts that will benefit horseplayers around the world. The positive changes will come into effect Thursday." Source: Churchill Downs.

So does this mean we should check with the track we are betting on to see if they use United Tote...?

So that no matter which OTB you bet from, as long as the home track has UNITED TOTE, it applies..?
Or does the OTB need to be UNITED TOTE as well...?

The facility you're wagering at would need to be using United Tote to benefit from the new rules. If you're at a Maryland OTB (which use AmTote), and are betting on Churchill (a United Tote track), you'll still be stuck with the old rules for right now.

As ADWs go, TwinSpires and XpressBet are both compliant as of today, and TVG is expecting to be ready tomorrow. No word on NYRA Bets yet.

EDIT: Paulick says TVG and NYRA Bets are now compliant.

[AltonKelsey]

Folks with say a net profit of 10k under the new law and none were 300-1 on the TOTAL BET, so no irs forms.

They bet with a single online site. Records are kept

Are they thinking they don't have to report the winnings at all. ?

[showonly]

Originally Posted by AltonKelsey

Folks with say a net profit of 10k under the new law and none were 300-1 on the TOTAL BET, so no irs forms.

They bet with a single online site. Records are kept

Are they thinking they don't have to report the winnings at all. ?

This is not a direct lowering of taxes on gambling winnings. As in any case if you choose not to report taxable income it is tax evasion.

[showonly]

For those of you who did not suffer a loss of your standard deduction by needing to offset gambling losses on your return or had money withheld due to the $5000 threshold. This change will not directly help you. This is not an OK to not pay taxes on net gambling winnings. That is called tax evasion.


There may be an influence on some or all social security recipients who W2-G's negatively effected that I am not aware of.

[olddaddy]

Do the old tax laws stay in effect for everything in 2017 prior to 9/28?

[showonly]

Originally Posted by olddaddy

Do the old tax laws stay in effect for everything in 2017 prior to 9/28?

yes

[showonly]

What has happened is a true cost basis has been applied to the old REPORTING rules and the 5k rule has been eliminated. The direct taxes on net gambling winning have not been lowered. This will very positively impact players with w2-g's over 50 or 60k by retaining their standard deduction.

[thaskalos]

Originally Posted by showonly

What has happened is a true cost basis has been applied to the old REPORTING rules and the 5k rule has been eliminated. The direct taxes on net gambling winning have not been lowered. This will very positively impact players with w2-g's over 50 or 60k by retaining their standard deduction.

Has the $5,000 withholding rule been eliminated? The way I understood the rule-change...the old $5,000 rule is still in affect...if the player receives a 300-1 return on his total investment.

[AndyC]

Originally Posted by showonly

What has happened is a true cost basis has been applied to the old REPORTING rules and the 5k rule has been eliminated. The direct taxes on net gambling winning have not been lowered. This will very positively impact players with w2-g's over 50 or 60k by retaining their standard deduction.

The 5K rule was not eliminated and the "true cost basis" is used to determine the 300-1 barrier and to determine the net win on a bet. It will have minimal effect on retaining a standard deduction.

[ReplayRandall]

Originally Posted by thaskalos

Has the $5,000 withholding rule been eliminated? The way I understood the rule-change...the old $5,000 rule is still in affect...if the player receives a 300-1 return on his total investment.

Originally Posted by AndyC

The 5K rule was not eliminated and the "true cost basis" is used to determine the 300-1 barrier and to determine the net win on a bet. It will have minimal effect on retaining a standard deduction.

Sec. 31.3402(q)-1 Extension of withholding to certain gambling
winnings.

(iii) Any other wagering transaction (as defined in paragraph
(c)(3) of this section) but only if the proceeds from the wager:
(A) Exceed $5,000; and
(B) Are at least 300 times as large as the amount of the wager.

(2) Total proceeds subject to withholding. If proceeds from the
wager qualify as winnings subject to withholding, then the total
proceeds from the wager, and not merely amounts in excess of $5,000,
are subject to withholding.
(c) Definitions; special rules--(1) Rules for determining amount of
proceeds from a wager--(i) In general. The amount of proceeds from a
wager is the amount paid with respect to the wager, less the amount of
the wager.
(ii) Amount of the wager in the case of horse races, dog races, and
jai alai. In the case of a wagering transaction with respect to horse
races, dog races, or jai alai, all wagers placed in a single parimutuel
pool and represented on a single ticket are aggregated and treated as a
single wager for purposes of determining the amount of the wager. A
ticket in the case of horse races, dog races, or jai alai is a written
or electronic record that the payee must present to collect proceeds
from a wager or wagers.
(iii) Amount paid with respect to a wager--(A) Identical wagers.
Amounts paid with respect to identical wagers are treated as paid with
respect to a single wager for purposes of calculating the amount of
proceeds from a wager. Two or more wagers are identical wagers if
winning depends on the occurrence (or non-occurrence) of the same event
or events; the wagers are placed with the same payer; and, in the case
of horse races, dog races, or jai alai, the wagers are placed in the
same parimutuel pool. Wagers may be identical wagers even if the
amounts wagered differ as long as the wagers are otherwise treated as
identical wagers under this paragraph (c)(1)(iii)(A). Tickets purchased
in a lottery generally are not identical wagers, because the
designation of each ticket as a winner generally would not be based on
the occurrence of the same event, for example, the drawing of a
particular number.

[Track Collector]

Originally Posted by ReplayRandall

Sec. 31.3402(q)-1 Extension of withholding to certain gambling
winnings.

(iii) Any other wagering transaction (as defined in paragraph
(c)(3) of this section) but only if the proceeds from the wager:
(A) Exceed $5,000; and
(B) Are at least 300 times as large as the amount of the wager.

(2) Total proceeds subject to withholding. If proceeds from the
wager qualify as winnings subject to withholding, then the total
proceeds from the wager, and not merely amounts in excess of $5,000,
are subject to withholding.
(c) Definitions; special rules--(1) Rules for determining amount of
proceeds from a wager--(i) In general. The amount of proceeds from a
wager is the amount paid with respect to the wager, less the amount of
the wager.
(ii) Amount of the wager in the case of horse races, dog races, and
jai alai. In the case of a wagering transaction with respect to horse
races, dog races, or jai alai, all wagers placed in a single parimutuel
pool and represented on a single ticket are aggregated and treated as a
single wager for purposes of determining the amount of the wager. A
ticket in the case of horse races, dog races, or jai alai is a written
or electronic record that the payee must present to collect proceeds
from a wager or wagers.
(iii) Amount paid with respect to a wager--(A) Identical wagers.
Amounts paid with respect to identical wagers are treated as paid with
respect to a single wager for purposes of calculating the amount of
proceeds from a wager. Two or more wagers are identical wagers if
winning depends on the occurrence (or non-occurrence) of the same event
or events; the wagers are placed with the same payer; and, in the case
of horse races, dog races, or jai alai, the wagers are placed in the
same parimutuel pool. Wagers may be identical wagers even if the
amounts wagered differ as long as the wagers are otherwise treated as
identical wagers under this paragraph (c)(1)(iii)(A). Tickets purchased
in a lottery generally are not identical wagers, because the
designation of each ticket as a winner generally would not be based on
the occurrence of the same event, for example, the drawing of a
particular number.

In confirmation of this, I have received messages from two different ADWs (including Xpressbet) who as an example indicated that if one wagered a total of $100 in the exact same betting pool, tax would not be withheld nor would it be even reported unless the return were $30,100 or greater.

[AndyC]

Originally Posted by ReplayRandall

Sec. 31.3402(q)-1 Extension of withholding to certain gambling
winnings.

(iii) Any other wagering transaction (as defined in paragraph
(c)(3) of this section) but only if the proceeds from the wager:
(A) Exceed $5,000; and
(B) Are at least 300 times as large as the amount of the wager.

In short the only change is that the total bet is considered as the amount of the wager and not just the winning bet as was the previous practice.

[Track Collector]

Originally Posted by AndyC

In short the only change is that the total bet is considered as the amount of the wager and not just the winning bet as was the previous practice.

Doesn't the $5000 have "some" significance?

For Example: A person wagers a single combination $1 trifecta that pays $4000.

Under the previous law that person experienced withholding tax upfront.
Under the new law that person does not experience withholding tax upfront.

[AlsoEligible]

Originally Posted by Track Collector

Doesn't the $5000 have "some" significance?

For Example: A person wagers a single combination $1 trifecta that pays $4000.

Under the previous law that person experienced withholding tax upfront.
Under the new law that person does not experience withholding tax upfront.

The only thing that is changing is *how* the 300-1 odds are calculated. It used to be based on only the amount of the winning combination. Now it's based on the total cost of the ticket (or for ADW players, the total amount you wagered into that pool).

So if a $200 Pick 6 with 200 different bets won $5000, the tote would only look at the $1 that won, and apply withholding because 5000-1 is greater than 300-1.

Under the new rules, it looks at the entire $200 ticket. So it would no longer be eligible for withholding, because 5000-200 (or 25-1) is not greater than 300-1. You would have to win $60k on a $200 bet before withholding kicks in...not going to happen very often.

In short, divide the amount you won by the cost of the total ticket. If the answer is 300 or more, you have a signer (only reportable if you won $600 or more, withholdable if $5k or more). If the answer is less than 300, then you have nothing to worry about.

[AndyC]

Originally Posted by Track Collector

Doesn't the $5000 have "some" significance?

For Example: A person wagers a single combination $1 trifecta that pays $4000.

Under the previous law that person experienced withholding tax upfront.
Under the new law that person does not experience withholding tax upfront.

$5000 is the winnings threshold for withholding. If you win $4000 there is no withholding. The secondary part of the equation is that the bet must have paid at least 300-1. So a person betting $1000 on a 6-1 to win would win $6000 but the bet paid under 300-1 so no withholding or reporting. Nothing in the law has changed other than how the 300-1 is computed. Before only your winning bet was considered so that a person betting $1000 into a P-6 and getting back $10,000 would be treated as though he had only made a $2 bet. So $2 to win $10,000 pushes all of the IRS buttons for reporting and withholding. Now the entire bet of $1,000 is considered in computing both the $5,000 threshold and the 300-1 threshold. In my example the $5,000 threshold is met but the 300-1 threshold is not meaning neither reporting nor withholding would be required.