For a 2022 update, view here: youtu.be/qji3ZSmvIH8
A taxpayer must report their gross amount of gambling winnings on Form 1040 each year. If you have gambling losses, you can record those gambling losses as an itemized tax deduction (Schedule A) to the extent you have gambling winnings.
Need more help? Schedule a Consultation:
✅ FOLLOW JASON HERE:
DISCLAIMER: I am a licensed attorney and certified public accountant (CPA) in the State of Florida. I am not a financial advisor. The information provided in this video is for entertainment purposes only. No such communication is provided in the course of an attorney-client relationship, and no communication is intended to constitute legal advice. You should speak with your own tax and legal professionals to discuss your circumstances before performing any of the tax, legal or accounting strategies demonstrated in this video. This description includes links to affiliates. I may earn a commission or referral bonus if you use these links to purchase products or services from the providers. Thank you.
#IRS #Form1040 #GamblingLosses #GamblingWinnings
Okay, so for this video, I wanted to talk about how to report your gambling, winnings and losses on your form.
1040 tax return, um.
And so what we're going to do here is we're going to we're going to go through a form w.
2G example, I've also got a sample form 1040 where I'll show you how this actually gets reported on the return on the 1040 on schedule, 1 on schedule, a.
And then I got a simple fact pattern in front of us that we're going to use to build out the return.
So just to start with high level, u.s taxpayers are required to report gross income from whatever source derived.
So if you win money, gambling that is gross income that must be reported on your tax return.
You must pay taxes on it, um and so that's.
The kind of the short answer that people don't like you here, but it's the truth.
Now, if you gamble regularly, you report all your gambling winnings, but you can also report, gambling losses to the extent of your winnings.
So what that means is, if you have gambling winnings, you can report the losses to offset those winnings.
You can never report more losses than you have winnings right? So you can't take a net, gambling loss, but at least you're able to offset the two so you're, not paying tax on just the gains you get to offset the losses that you might incur as well.
Now, a little unique, uh nuance to that role, though, however, is for individual taxpayers.
You can only report the losses if you itemize deductions so I'm going to go over those rules we're going to look at.
This example, first I'm going to show you how that kind of works.
So in our example, here we have john doe, he's doing his 1040.
And he he gambles a lot using slots right so he's a slot machine guy.
And during 2021, he had a large payout of fifteen thousand, seven hundred and uh for those of you that go to the casinos you'll, notice that if you win a lot of money, they don't just pay you out right then.
And there they've got to pay you out at the at the window, and they give you, um, a 1099 or a w2g to report, the winnings right, they're obligated to do that under federal tax law.
So john gets his payout.
But he also is going to be issued at w-2-g, which shows the amount of the payout 15 700.
And the casino is taking out withholding taxes of 3768.
so john's going to use this w-2g to prepare his tax return.
So wtg, it might look something like this right? The payer is going to be the casino you're going to have the tax id information, the winner's name.
And then the reportable battle winnings.
He won the type of the wager, the taxes withheld if any um, and then some id information on the winner right? So tax id.
Number driver's license identification, number all that kind of stuff gets collected at the window and it's ultimately reported on your wtg and sent to the irs.
So now go back to the slide here really quickly, um.
So john, um, he.
So he does have these winnings, but he also keeps a ledger showing all of his winnings and losses, and he does have losses of 18 600 for the year.
So overall he's in the hole right? He he had a big payout, but overall he's lost a significant amount of money to exceed the losses.
So what he wants to be able to do here is report, the winnings report, the losses and try to, you know, make this a wash right so he's, not having to pay me taxes.
So u.s, taxpayers report, their gambling winnings.
Those gross winnings are on schedule, one of form 1040.
And then as I noted earlier, if you're a u.s taxpayer, you can deduct the gambling losses as an itemized deduction on schedule, a.
But those losses can never exceed the gross amount of winnings reported.
So let's, look at the 1040 and kind of show how some of these numbers.
Uh, um, you know, end up on there.
So we've got a 1040 here for john doe.
Obviously he's got some other he's, got some other income, his wages, some investment, income capital gains.
But what we're going to focus on here.
The unique piece is how to report these gambling winnings and losses and the federal tax withheld by the casino.
So if I go down to schedule one here, this is where you report, the gross amount of gambling winnings so schedule, one additional income and adjustments.
If we go down to line, eight, b, we have gambling income.
This is where you see us report that fifteen thousand seven hundred the gambling winnings from the w2g.
So you report the gambling winnings here.
Now, if you had any federal income tax withheld on the w2g or on a 1099.
So if I go back to the w2g really quickly, you see that reported winning some fifteen thousand seven.
And then in box four, we've got federal income tax withheld of three thousand seven, six eight.
So where does that number live? If I go back to the tax return page 2 of the form 1040, if we go into lines, 25 federal income tax withheld, you report, the tax withheld from the w2g on line, c.
So 25c other forms there's that number 3768 so that's how john gets credit for the amount of federal income tax withheld from his lottery winnings, right? His slot machine winnings from the casino.
So that's that w2g part.
Now, how do we report the losses to offset those gains well recall that in our fact pattern here, john had 18 600 of losses.
Now when you're a u.s taxpayer, an individual, you report, the gambling losses as an itemized deduction on schedule, a.
But the amount of deduction cannot exceed the losses.
So if we look, uh at schedule, a here let's go to the 1040 scroll past schedule, one go down to schedule, a itemized deduction.
So if you're a taxpayer and you have other itemized deductions, obviously, these will all be completed.
You might have mortgage interest, real estate taxes, maybe some medical expenses.
But in this case, john has no other itemized, deductions, really other than his gambling losses.
And so gambling losses are reported down here in line, 16 other itemized deductions.
So these are other other itemized, deductions, they're, not subject to an agi floor.
So what that means is any amount that you put down there is deductible so long as you can itemize.
So in this case, john reports, gambling losses.
Now notice here we're now reporting that 18 000 number we're, only reporting the amount, um to the extent of gambling winnings.
So the extra gambling losses that he had for the year.
Unfortunately, those are just lost or you can't really do anything with them.
But you can report losses to the extent of the winning.
So we've got gambling losses there of 15 700.
And so that number is included in his total itemized, deduction figure of 16465.
And so ultimately, what we're going to see is that number is flowing through to page one of the form 1040.
And we have here right standard or itemized deduction on line.
We have that 16465 number so that number includes the gambling losses.
So even though we have his gambling winnings here on line, fifteen thousand seven hundred within this.
Twelve a number we have fifteen thousand seven hundred of gambling losses.
So those two more or less offset right, um.
So that is how you report, the gambling winnings and the losses.
Now just to be clear, if we look at schedule, one here for gambling winnings, this does not just include items reported to you on w2g or 1099.
If you have other gambling winnings that are not reported to you on those forms.
You still have to report those totals here right? So you report, the total of your gambling winnings there.
And then you report, the total of your gambling losses on schedule, a to the extent that they match up with gambling income.
If you've got more losses than income, obviously, those are loss.
If you have losses that are lower than your gambling income.
Well, that means you are going to be paying some tax on your net, gambling earnings, because you have some positive profits for the year.
So, uh that covers it for gambling, income and loss, reporting on the 1040.
I hope that was helpful, if you have any questions, leave me a comment below.
And I look forward to seeing you again on the next video.
The full amount of your gambling winnings for the year must be reported on line 21, Form 1040. If you itemize deductions, you can deduct your gambling losses for the year on line 27, Schedule A (Form 1040). Your gambling loss deduction cannot be more than the amount of gambling winnings.Can I deduct my gambling losses from my winnings? ›
You may deduct gambling losses only if you itemize your deductions on Schedule A (Form 1040) and kept a record of your winnings and losses. The amount of losses you deduct can't be more than the amount of gambling income you reported on your return.How much do you get back on taxes for gambling losses? ›
You can deduct your losses only up to the amount of your total gambling winnings. You must generally report your winnings and losses separately, rather than reporting a net amount. Gambling losses are deducted on Schedule A as a miscellaneous deduction and are not subject to a 2% limit.
Can a win loss statement be used for tax purposes. Yes, you can use it for your tax year if you have won and lost money through gambling venues such as lotteries, raffles, horse races, and casinos.What to do if you lose all your money gambling? ›
- Accept that the money is gone. In order to get over a gambling loss, you must come to a place of acceptance, where you realize that that money is gone, and no amount of groveling will get the money back. ...
- Acknowledge that the odds are against you. ...
- Cut off your gambling fund.
While you are permitted to deduct gambling losses up to the amount of your winnings, doing so could lead to an audit. If you find yourself facing this type of audit, a seasoned IRS audit lawyer can defend you and protect your rights.How do I prove my gambling losses to the IRS? ›
Your records should also show your winnings separately from your losses. 5. Keep accurate records. If you are going to deduct gambling losses, you must have receipts, tickets, statements and documentation, such as a diary or similar record of your losses and winnings.Can I claim gambling losses if I don't itemize? ›
Even if you lost more than you won, you may only deduct as much as you won during the year. However, you get no deduction for your losses at all if you don't itemize your deductions—just one of the ways gamblers are badly treated by the tax laws.Will the IRS know if I don't report gambling winnings? ›
If you don't report all of your gambling winnings, you're violating the law. The IRS can discover this by comparing your income with the W-2 forms they receive or by examining your bank deposit activity.What proof do you need for gambling losses? ›
Since you will need to know how to prove gambling losses, you will need the proper paperwork. The payer must issue a Form W-2G, Certain Gambling Winnings, that is if you receive, as the IRS explains, “certain gambling winnings or have any gambling winnings subject to federal income tax withholding.”
Form W-2G is an Internal Revenue Service document that a casino or other gambling establishment sends to customers who had winnings during the prior year that must be reported as income to the Internal Revenue Service (IRS). Its full title is Form W-2G, Certain Gambling Winnings.Do casinos send w2g to IRS? ›
Casinos and other gaming organizations will send you a W-2G when you win $1,200 or more on a slot machine or from bingo, keno jackpots of $1,500 or more, more than $5,000 in a poker tournament and all other games you win $600 or more at, but only if the payout is at least 300 times your wager.How much losses can you write off? ›
Tax Loss Carryovers
If your net losses in your taxable investment accounts exceed your net gains for the year, you will have no reportable income from your security sales. You may then write off up to $3,000 worth of net losses against other forms of income such as wages or taxable dividends and interest for the year.
But at the same time, gambling losses can be harder to prove than you think; not only do they require documentation, but the IRS demands receipts and bank statements for an itemized deduction.Why do people keep gambling after losing? ›
Gamblers often engage in “post-loss speeding” by placing another bet quicker following a loss because frustration from the defeat prompts them to try and win back their money. As a result, gamblers become more impulsive - instead of becoming more cautious about spending money, they become more reckless.How do I get my gambling loss back? ›
Steps to Obtaining a Refund for Online Gambling Losses
The first step is to contact the online gambling site where you lost the money. Explain the situation and request a refund. Be polite but firm in your request, and provide any evidence you have to support your claim.
- Set some goals. ...
- Avoid high-risk situations. ...
- Face the feelings. ...
- Talk about it. ...
- Coming clean - Talk about the lying. ...
- Ask for help. ...
- Try to find an alternative to gambling. ...
- Prepare for a lapse.
Some red flags for an audit are round numbers, missing income, excessive deductions or credits, unreported income and refundable tax credits. The best defense is proper documentation and receipts, tax experts say.Does gambling winnings affect Social Security? ›
The only way that gambling winnings could affect your eligibility for Social Security disability (SSDI) benefits is if you're considered to be a professional gambler who's required to pay self-employment taxes on your winnings.How do I avoid paying taxes on prize winnings? ›
- Consider lump-sum vs. annuity payments. ...
- Charitable donations. Donating some of the lottery money to charity will reduce your tax bill when you're a big winner. ...
- Gambling losses. ...
- Other deductions. ...
- Hire a tax professional.
Example: A casual gambler who enters a casino with $100 and loses the entire amount after playing the slot machines has a wagering loss of $100, even though he may have had winning spins of $1,000 and losing spins of $1,100 during the course of play.Does IRS audit casino winnings? ›
Recreational gamblers must report winnings as other income on the front page of the 1040 form. Professional gamblers show their winnings on Schedule C. Failure to report gambling winnings can draw IRS attention, especially if the casino or other venue reported the amounts on Form W-2G.How likely will you be audited by IRS? ›
Odds of being audited by the IRS
Last year, 3.8 out of every 1,000 returns, or 0.38%, were audited by the IRS, according to a recent report using IRS data from Syracuse University's Transactional Records Access Clearinghouse.
Income affects your Social Security retirement benefits in the form of taxes. For example: Do gambling or lottery winnings affect Social Security retirement benefits? Yes. The SSA considers gambling and lottery winnings unearned income and, therefore, it must be reported to the IRS.Where does w2g go on 1040? ›
You must report the amount in box 1, as well as your other gambling winnings not reported on a W-2G, on the "other income" line of your 1040. And if your winnings are subject to withholding, don't forget to report it in the "payments" section of your return.Do you receive a 1099 for gambling winnings? ›
The W-2G form is the equivalent of a 1099 for gambling winnings.What do I do if I didn't get a w2g? ›
If you haven't received your W-2 G or you lost it, contact the gambling institution to get it reissued or contact the IRS directly since they will already have a copy.How do I get my w2g online? ›
- You can get a wage and income transcript, containing the Federal tax information your employer reported to the Social Security Administration (SSA), by visiting our Get Your Tax Record page. ...
- You can also use Form 4506-T, Request for Transcript of Tax Return.
n Attach a copy of Forms W-2, W-2G and 2439 to the front of Form 1040. Also attach Forms 1099-R if tax was withheld. n Use the coded envelope included with your tax package to mail your return.Do you have to attach W2G to tax return? ›
If you receive multiple W-2G forms, you'll need to enter the winnings for each of them when preparing your tax return. You are required to also report winnings even if the payer doesn't send you a Form W-2G.
CITIZENSHIP FOR TAX PURPOSES
U.S. Citizens: No tax withholding on prize winners in US. When the individual files personal income taxes, the prize money will show up on a 1099-Misc if over $600.00, and will be filed with the return. Prize money of $50.00 or more is self-reported on 1040 line 21.
If you receive a W-2G form along with your gambling winnings, don't forget that the IRS is getting a copy of the form, too. So, the IRS is expecting you to claim those winnings on your tax return. If you don't, the tax man isn't going to be happy about it.How do you document gambling losses? ›
- Form W-2G (issued by the payer)
- Form 5754.
- Betting tickets.
- Canceled payments or bets.
- Credit records and bank withdrawals.
- Receipts from gambling facilities.
To report your gambling losses, you must itemize your income tax deductions on Schedule A. If you claim the Standard Deduction, then you can't reduce your tax by your gambling losses. The IRS doesn't permit you to subtract your losses from your winnings and report the difference on your tax return.Are gambling winnings considered earned income? ›
Taxes for Professional Gamblers
If gambling is a person's actual profession, gambling proceeds are usually considered regular earned income and are taxed at a taxpayer's normal effective income tax rate. A professional gambler can deduct gambling losses as job expenses using Schedule C (not Schedule A).