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5 Important Tax Filing Tips For The Gambler

5 Important Tax Filing Tips For The Gambler

When most consumers think about gambling they think about sports betting, lotteries, and casino winnings. But the IRS labels gambling income as all of these as well as any additional earnings that you may receive from fantasy sports betting, free trips or vehicles, online casino gambling, and even small poker tournaments. As the winner of any amount of prize money, you need to be aware of what the Internal Revenue Service expects in terms of reported winnings and how it should be claimed on your tax return.

  1. Large payouts should receive a W-2G. The institution distributing your winnings is obligated to supply you with a Form W-2G if you are earnings meet the following IRS specifications for federal tax withholding:
    1. Slot/Bingo Win of $1200+
    2. Keno Winnings of $1500+
    3. Poker Tournament Winnings of $5000+
    4. Any combined winnings of $600 or more, or any time the payout is 300x the wager.
  2. Online gambling earnings also must be claimed. Under the Unlawful Gambling and Enforcement Act of 2006, internationally based on the casinos are able to accept players from within the United States based on their licensing agency. If you choose to play any of these virtual casinos and win, you are required to pay taxes on the profit.
  3. Fantasy league betting is still gambling. In recent years there has been some confusion regarding the legality and tax liability of those who win cash prizes through fantasy league betting. The IRS is very specific that whether you participate in daily fantasy leagues or if you choose season-long leagues, you must claim any winnings as additional income on your tax return.
  4. Use “Other Income” line on Form 1040 for claiming earnings.
  5. Use “Other Miscellaneous Deductions” on Schedule A to list your losses. When filing your taxes, the IRS will take into consideration the losses which you have sustained on the path to your winnings. The other miscellaneous deductions category allows you to individually list all losses which are allowable. Players are able to deduct losses from gambling up to the total amount of their winnings. Remember that it is crucial that you claim 100% of your winnings and your losses when filing.

As much fun as gambling can be, the ramifications for failing to claim additional earnings can be substantial. If you are an avid gambler, be sure to keep detailed records of every deposit, wager, loss, and win. You should be able to log into your gambling account or receive records from a land-based facility to support all of your transactions. Sometimes the gambling waters can get murky. Unsuspecting gamblers may find themselves at odds with the IRS for simply failing to report their earnings properly. Prevent this from happening to you by reaching out to one of our legal tax experts at Attorneys Tax Relief today!

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