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Avoiding Income Tax Problems For Nevada Gamblers in Las Vegas and Reno: Gambling Revenue and IRS Taxes

July 8, 2010 By

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

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 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

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.

Filed Under: Delinquent Tax Debts, Income Tax Problems, Tax Planning, Tax Relief Tagged With: , , , , , , , ,

A Shifting Economy In Las Vegas Results In Payroll Tax Problems For A Growing Business

July 2, 2010 By

As the Las Vegas economy shifted from full-speed ahead to a downturn reflecting the overall economy, numerous business owners found themselves in financial difficulty. A client of the Tax Resolution Institute with a number of small business ventures found himself with serious payroll tax problems. Originally the owner of a small motel on the outskirts of the main strip, the client had expanded his business to include a theme restaurant and a novelty store during the recent boom.

Las-Vegas-And-Payroll-Tax-ProblemsWhen hard times arrived, the client chose to rob Peter to pay Paul by using the Trust Fund from his employee’s Federal Payroll Tax Withholdings to cover business costs. He figured he had plenty of time to make up the difference when the time came to actually deposit the payroll taxes with the Internal Revenue Service. Unfortunately, other financial problems arose, and the business owner found himself unable to cover the funds owed. With the IRS enforcing payroll tax cases with real severity and the Trust Fund Recovery Penalty, known at the 100% penalty, being so extreme, the business owner found himself in dire straits. When he contacted the Tax Resolution Institute, it looked likely that his payroll tax debts would lead to the closing of his business ventures and eventual bankruptcy.

Mind you, even if the business owner had ended up declaring bankruptcy, the trust fund amount he owed in the payroll tax case would not have been dischargeable. Trust Funds Recovery Cases are so severe because bankruptcy does not apply as a protection. Once you have taken money owed by your employees from the Internal Revenue Service and the Federal Government, there is no easy way to avoid paying it back in full. When the Trust Fund Recovery Penalty and the Interest Compounded are added to the total, it often leads to the end of many viable business ventures. Luckily, our client in Las Vegas came to the Tax Resolution Institute before his payroll tax problem turned into a fatal catastrophe for his business ventures. By being able to take action quickly and knowing the ins and outs of the Internal Revenue Service, the tax experts at TRI can provide our clients who have either payroll tax problems or income tax problems with true and effective tax relief.

Payroll-Taxes—Stealing-From-Peter-To-Pay-PaulPeter Stephan effectively negotiated with the Internal Revenue Service to reduce the amount owed to the actual existing Trust Fund. Raising funds from the equity in his business ventures, our Las Vegas client was able to put together the funds to cover everything he owed. Like any collection agency, the focus of the IRS is to close cases and get the base amount owed recovered.

When the Tax Resolution institute offered to have the client pay that amount in full, the rest of the penalty and interest was waived so the case could be closed. Rather than having to close his doors, our client merely chose to sell off the novelty store, keeping his theme restaurant and his motel open and profitable. Without question, his mistaken choice to use his employee’s Trust Fund to cover his bills could have led to disaster. Thank to his decision to reach out for help, a bad decision did not grow into a fatal blow for his company.

Since Nevada has no state tax, many business owners in Las Vegas and Laughlin, Reno and Carson City, make the mistake of taking a casual approach towards their Federal payroll taxes. Such an approach is nothing less than deadly when it comes to the future success of any business venture. If the downturn in the Nevada economy has led to serious payroll tax problems, if you have taken from Peter to pay Paul, then please contact the Tax Resolution Institute, and we can help you to find the tax relief that you need to ensure the future viability of your business.

Filed Under: Tax Relief Tagged With: , , , , , , ,