In Nevada, particularly in the Gambling Meccas of Las Vegas and Reno, gambling revenue often proves to be a land mine when it comes to federal income taxes. High rollers tend to incredible swings when it comes to winnings and losses, resulting in problems when it comes to covering their income tax debts. Although Nevada has no state tax, federal taxes still apply across the board with no exceptions. The IRS treats taxpayers in Nevada in the same fashion that they treat taxpayers across the country.
All Gambling Revenue is Taxable By The IRS
If you are unable to pay your tax debt on major gambling winnings, contact the Tax Resolution Institute, and we can help you find tax relief. Serious income tax debt can be resolved by a capable tax professional through the negotiation of an effective Offer in Compromise or an Installment Agreement. Here are the rules, adapted directly from the Internal Revenue Service website, when it comes to gambling winning and losses.
The following rules apply to casual gamblers as well as professional gamblers. Gambling winnings in Nevada are fully taxable and must be reported on your tax return. All gambling winnings are fully taxable. There is a widespread misconception that only winnings above a certain amount are taxable, and that simply is not true. This incorrect assumption comes from the fact that official tax documents are not issued in every situation of gambling success.
Gambling income includes, but is not limited to, winnings from lotteries, raffles, horse races, and casinos. It includes cash winnings and also the fair market value of prizes such as cars and trips. If there is a question about a claim or prize, please contact the Tax Resolution Institute for clarification of the problem. Too many gamblers end up in hot water with the IRS because they fail to declare all their winnings.
A payer of winnings like a casino or poker house is required to issue a gambler a Form W-2G when any gambling winnings are subject to Federal income tax withholding.
A Form W2-G is issued for winnings of:
$1,200 or more in gambling winnings from bingo or slot machines;
$1,500 or more in proceeds (the amount of winnings minus the amount of the wager) from keno;
More than $5,000 in winnings (reduced by the wager or buy-in) from a poker tournament; or
$600 or more in other gambling winnings where the payout is at least 300 times the amount of the wager.
The Up and Down Gambling Tide on the Las Vegas Strip
The federal income tax withholding from your payout is generally a 25 percent rate, but it could at the backup-withholding rate of 28 percent if a gambler refuses to provide the payer like a Nevada casino with their federal identification number. All gambling winnings must be reported, however, including those that are not subject to withholding. In addition, you may be required to pay an estimated tax on your gambling winnings in Las Vegas and Reno.
Any losing wagers can be used to offset any winning bets. But bad bets cannot be used to produce a loss. They count only up to the amount of your winnings. A gambler may deduct gambling losses only if the deductions are itemized. Gambling losses can be claimed as a miscellaneous deduction that is not subject to the 2% limit on Form 1040, Schedule A.
It is important for a gambler, particularly Nevada professional gamblers in Reno and Las Vegas, to keep an accurate diary or similar record of gambling winnings and losses. To deduct your losses, you must be able to provide receipts, tickets, statements or other records that show the amount of both your winnings and losses. The IRS requires the same thing as it does with any deduction: good records.
Don't Place Your IRS Tax Crisis On The Wheel
On 2007 federal returns, the latest year for which data are complete, the IRS says more than 1.6 million taxpayers reported almost $27 billion in gambling income. This includes winnings from casinos and horse tracks, lottery and raffle jackpots, as well as the fair market value of cars, houses and other non-cash prizes. 987,000 of those taxpayers who reported gambling income also claimed as deductions almost $19 billion in bad bets.
Although such deductions can help soften the sting of a gambling loss by offsetting the federal income taxes owed on winnings, they often are not enough. When a professional gambler in Las Vegas or Reno experiences swings in fortune, they tend to splurge on the upside and end up broke on the downside. As a result, when it comes time to pay their federal income taxes, they find themselves in a tax debt crisis with the IRS. If you owe significant income taxes to the IRS as a result of your gambling winnings and your tax debt is growing, contact the Tax Resolution Institute. Our tax experts can provide with solutions like an Offer in Compromise and an Installment Agreement for real and workable tax relief. If you need tax resolution services, feel free to call the Tax Resolution Institute at 877-829-8370 or fill out our tax resolution form.
