Most people don't win enough to have to pay. But if you're winning a lot, not a bad "problem" to have. Technically you are required to pay taxes on winnings. This is one of the grey areas regarding this industry. The government considers this activity illegal, but don't expect them to send your check back!
There are many politicians that realize the potential winfall from legalized gambling, but fear the political backlash from the moral majority.
My advice is to pay if you are winning a significant amount. If you don't, you run the risk of being charged with money laundering.
The Patriot Act gives the government broad powers and they can violate civil rights at will. If you are labeled a "suspected terrorist," you will have to prove you are not!
GP
There are many politicians that realize the potential winfall from legalized gambling, but fear the political backlash from the moral majority.
My advice is to pay if you are winning a significant amount. If you don't, you run the risk of being charged with money laundering.
The Patriot Act gives the government broad powers and they can violate civil rights at will. If you are labeled a "suspected terrorist," you will have to prove you are not!
GP
As far as taxes go at the racetrack-if a single ticket pays more than $1,200; or if the ticket is more than 300 times the ticket value you have to fill out the tax forms and pay taxes to the IRS later.
I'm not sure about a sports wager in Vegas, I want to say $1,200 requires one to fill out tax forms. Anybody out there know?
I'm not sure about a sports wager in Vegas, I want to say $1,200 requires one to fill out tax forms. Anybody out there know?
I know the race track part is correct; when me and a friend were in Maine a guy with 2 winning tickets worth $1,500 EACH asked us if we could cash his tickets and fill out some tax forms. He paid us $100 each; I didn't pay tax since I was a CA resident. The guy said that Maine would soak him for taxes if he cashed the tickets!
Just so its clear, here are the rules (but I'm not your tax accoutnant!). If your bet pays out at least 300:1 and the amount won on the bet (not including the amount bet) is $600 or more, they make you fill out an IRS Form, which gives your name and social security number to the IRS. It is merely a tax reporting and no monies are withheld. But the IRS knows you have the income (which can be set off by losses, so it helps to keep records).
Regular withholding, where they withhold and send to the IRS 27% of your winnings, and you have to file IRS Form W-2G, is when you win more than $5,000 and at a payoff ratio of at least 300:1.
Backup withholding, where they withhold and send to the IRS 30% of your winnings, applies when you don’t supply a social security number and the winnings would have been subject to regular withholding.
Regular withholding, where they withhold and send to the IRS 27% of your winnings, and you have to file IRS Form W-2G, is when you win more than $5,000 and at a payoff ratio of at least 300:1.
Backup withholding, where they withhold and send to the IRS 30% of your winnings, applies when you don’t supply a social security number and the winnings would have been subject to regular withholding.
IF YOU EARN 1 DOLLAR AND DON'T CLAIM IT, YOU ARE SCREWED.
AND IF YOU RUN A BUSINESS, DON'T EVEN THINK ABOUT NOT PAYING TAXES.
JUST CLAIM AND KEEP TRACK OF LOSES AS WELL. LOTTERY TICKETS, ECT.
CLAIM IT AS A SMALL BUSINESS, WRITE OFF BOOKS, PAPER, MILEAGE, PROBABLY EVEN CABLE IF YOU GET A CREATIVE ACCOUNTANT.
AND IF YOU RUN A BUSINESS, DON'T EVEN THINK ABOUT NOT PAYING TAXES.
JUST CLAIM AND KEEP TRACK OF LOSES AS WELL. LOTTERY TICKETS, ECT.
CLAIM IT AS A SMALL BUSINESS, WRITE OFF BOOKS, PAPER, MILEAGE, PROBABLY EVEN CABLE IF YOU GET A CREATIVE ACCOUNTANT.
Truelyhandicapping is correct, you may indeed call it a small business and be able to deduct your EXPENSES that help you make money gambling.
You may also just report your gambling WINS on line 21 as other income........GAMBLING. If going this route, then you may deduct your losses UP TO the extent of your winnings listed on line 21.
I prefer to do the latter, as you much more apt to be red flagged for an audit claiming to be a professional gambler and running it as a business.
But either way listed is the correct way to handle the situation.
You may also just report your gambling WINS on line 21 as other income........GAMBLING. If going this route, then you may deduct your losses UP TO the extent of your winnings listed on line 21.
I prefer to do the latter, as you much more apt to be red flagged for an audit claiming to be a professional gambler and running it as a business.
But either way listed is the correct way to handle the situation.
Everything you want to know about taxes and offshore wagering:
1) No offshore book does reporting to Uncle Sam, therefore, you are on the honor system wrt offshore winnings. However, making a lot of big withdrawals which are cycled through your bank account could throw up a red flag.
2) 99% of the guys on these forums or elsewhere who gamble offshore, regardless of what they brag about or claim, are net losers over the long haul. And you are likely to fall within that category. What that means is, if you are concerned about taxes, don't be. The IRS only taxes winnings. If you are a strictly-by the book type who would like to report that 10 dollar bet he earned on the Super Bowl last year, just try to remember how many losing bets you had. Better yet, if you're that sort of stickler, keep a log of every wager you make. When the year is done, net it up and see if you won or lost. I'll bet you lost. Then if you wish to report winnings, go ahead and take the time and effort to do all the paperwork, I'm sure it will make for a fun afternoon. Then deduct your losses and owe nothing. Now, aren't you glad you did all that work?
3) Let's say you are among the 1% who actually wins long haul. You then can be subcategorized again: 1) a guy who follows the law wrt taxes and pays what he owes. 2) the 9,999th guy who comes to this forum and wants to know how to evade his taxes. While I'm all for "sticking one to the man", in the case of the IRS I'm firmly against it. This is a bureacracy that knows no limits when it comes to screwing you over if they set you in their sights. It is better to err on the side of caution than to play silly games with these guys. It's a choice between being worried all the time that your shenanigans will be exposed some day, versus simply paying what you owe (better yet hiring a good tax guy to handle it for you) and having peace of mind and enjoying those offshore winnings. Gamblers are under scrutiny in the first place, so don't multiply your worries by pretending you're Al Capone; you're not. Taxes suck but being audited and fined (or worse, federal prison) suck more, and that's the bottom line, imho.
1) No offshore book does reporting to Uncle Sam, therefore, you are on the honor system wrt offshore winnings. However, making a lot of big withdrawals which are cycled through your bank account could throw up a red flag.
2) 99% of the guys on these forums or elsewhere who gamble offshore, regardless of what they brag about or claim, are net losers over the long haul. And you are likely to fall within that category. What that means is, if you are concerned about taxes, don't be. The IRS only taxes winnings. If you are a strictly-by the book type who would like to report that 10 dollar bet he earned on the Super Bowl last year, just try to remember how many losing bets you had. Better yet, if you're that sort of stickler, keep a log of every wager you make. When the year is done, net it up and see if you won or lost. I'll bet you lost. Then if you wish to report winnings, go ahead and take the time and effort to do all the paperwork, I'm sure it will make for a fun afternoon. Then deduct your losses and owe nothing. Now, aren't you glad you did all that work?
3) Let's say you are among the 1% who actually wins long haul. You then can be subcategorized again: 1) a guy who follows the law wrt taxes and pays what he owes. 2) the 9,999th guy who comes to this forum and wants to know how to evade his taxes. While I'm all for "sticking one to the man", in the case of the IRS I'm firmly against it. This is a bureacracy that knows no limits when it comes to screwing you over if they set you in their sights. It is better to err on the side of caution than to play silly games with these guys. It's a choice between being worried all the time that your shenanigans will be exposed some day, versus simply paying what you owe (better yet hiring a good tax guy to handle it for you) and having peace of mind and enjoying those offshore winnings. Gamblers are under scrutiny in the first place, so don't multiply your worries by pretending you're Al Capone; you're not. Taxes suck but being audited and fined (or worse, federal prison) suck more, and that's the bottom line, imho.
You can offset your winnings with gambling losses up to the amount that you have won if you can prove it. One way to do this is to go to a horse track (if you live near one) and collect losing track wagers that are all over the floor. Tracks don't really want you to do this, but it works. You can pick up thosands of dollars in losing tickets in just a few minutes.
For offshore Books, you are on the "honor system", but if you have bank wires coming into your bank accounts, they can be traced if the IRS audits you...
On the IRS website, somewhere it says you must keep a log of all your bets so you can show a record of all your winning and losing bets...
Get that Excel spreadsheet ready...You'll need it IF YOU WIN, that is...
Good luck...
On the IRS website, somewhere it says you must keep a log of all your bets so you can show a record of all your winning and losing bets...
Get that Excel spreadsheet ready...You'll need it IF YOU WIN, that is...
Good luck...
