As the tax deadline nears, you’re probably worried about making sure that your paperwork is in order. The best way to prevent an audit is by making sure your documents match up with what the IRS has on file. If you won money from gambling last year, then you may be wondering about the taxes on gambling. Here’s what you need to know about gambling winnings and losses for your income tax return.
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Records The IRS Needs For Gambling
If you need to report gambling winnings and losses this year, you should have certain records readily available for the IRS. Use the following list to make sure your paperwork is as accurate as possible when you file.
Types of Games
You will need to have a log of the different types of games you played, including:
- Sports betting
- Lotteries and raffles
- Horse and dog races
- Casino poker and slot games
Info The Records Need to Include
Keeping correct records will help protect you in the event of an IRS audit. Your gambling records should include information such as:
- The date that you gambled
- The type of game you played
- The actual amount of your winnings and losses
- The names of the people who you went gambling with
- The name and physical location of the gaming establishment
Official Documentation to Prove Income And Losses
To claim any gambling winnings and losses on your taxes, you will need formal documentation like:
- Form W-2G and/or Form 5754
- Receipts from the gaming establishment
- Copies of your wagering tickets, credit records, or canceled checks
5 Tips You Need to Know About Gambling Income And Losses
It’s important that you understand precisely how to handle gambling income and losses before you go to file your return. After all, if you don’t report correctly, you could end up with a huge tax bill as well as penalties from the IRS. Here are five tips to help you be prepared for whatever the tax season may bring.
Losing Money While Gambling Doesn’t Reduce Your Tax Bill
A common misconception is that you can claim gambling losses and deduct all of the money from your overall tax bill. However, it actually only reduces the taxes that you would otherwise have to pay on the winnings that you report. You should also keep in mind that you won’t be able to deduct any losses at all if you don’t report your winnings to the IRS.
There Is a Limit on Loss Deductions
You can only deduct losses equal to or less than your gambling winnings. These are logged separately on your tax return, and they should also be tracked separately in your personal records. If your losses do exceed your winnings, you won’t be able to deduct the remainder amount. For example, if your winnings are $10,000, but you actually lost $15,000, you wouldn’t be able to deduct the remaining $5,000 on your taxes.
You May Need to Use The W-2G Form
The gaming establishment is required to issue you a W-2G form whenever you win above certain amounts. This form is used to report the winnings as taxable income. The IRS requires the payer to give you a W-2G if you win:
- $1,200 or more on bingo or slots
- $1,500 or more from keno after your wager
- $5,000 or more from a poker tournament, minus your buy-in amount
- $600 or more in other types of gambling winnings if your payout exceeds 300 times your bet
You Have to Itemize Deductions to Report Losses
You may not know exactly how to report gambling losses. First, you can only write off your losses if you itemize all of your tax deductions on the IRS Schedule A form under “Other Miscellaneous Deductions.” However, it only makes sense to itemize your deductions if all of your eligible expenses for the year actually exceed your standard deduction amount. For example, the standard deduction this year is $12,950 for single filers and $25,900 for married people who file jointly. For many people, the standard deduction will provide the most benefit.
However, if your overall tax deductions are more than your standard deduction, then you should proceed with itemizing them. If you do claim the standard deduction, you won’t be able to deduct your gambling losses, but you will still have to pay taxes on your winnings. Gambling winnings are typically listed as “Other Income” on IRS form 1040.
Always Keep Records And Documents
Remember that accurate records are key should you ever experience an audit by the IRS. If you do deduct your losses, you should maintain documentation such as receipts or statements as well as a personal log of all your winnings and losses. IRS Publication 529, Miscellaneous Deductions can give you more information on what kinds of information you should write in your log.
Let Us Help You File Your Taxes In Las Vegas
Filing an accurate tax return is imperative to minimize your tax burden each year. Gambling winnings and losses can make your return more challenging to complete, especially if you’re uncertain whether you should itemize your tax deductions or take the standard deduction. Working with a professional Las Vegas tax accountant can help you ensure that everything is in order and get you the maximum return for your situation. Our team is ready to help. Contact Larry L Bertsch, CPA & Associates today for a free quote.