The threshold on reporting and taxing casino wins has not been changed since its inception in 1977. At the time, the IRS decided that any customer winning more than $1 200 in slot machines or bingo, or over $1 500 at keno, had to pay taxes on their win. After so many years, it seems logical for the IRS to revisit that law and adopt it to 21st century standards. However, instead of moving the threshold up to follow inflation and higher jackpots being won, the IRS has decided it wants to lower it, moving it down to $600!
For the government agency, this would help them to better follow their citizens’ wins and consequently diminish fiscal fraud. For us Canadian citizens however, this would represent a 30% deduction on more wins. It would mean, at least at the time they win, leaving more money behind. Considering most Canadian winners don’t file to claim their money back, it would mean a lot more money for the IRS.
The American Gaming Association is not happy about the proposal. “This potential policy change could create additional burdensome and unnecessary reporting requirements for our industry,” Sara Rayme, senior vice president of public affairs for the American Gaming Association, told AGA members Wednesday.
As soon as a jackpot is won, the casino must stop the slot machine, fill the necessary paperwork, and pay the winner before play can resume on the slot machine. This is both time consuming and represents a loss for the casino.
The IRS believes the measure should not hinder the casinos too much, since more and more of the bookkeeping is done electronically.
One thing is certain for Canadian players: it would require more citizens to claim back their money from the IRS during income tax season. A $600 threshold is very low and, while there are some exceptions, there is no doubt that most players having won jackpots that low will have also lost amounts equal or greater than their win in the same year. This will represent a higher burden for the IRS, but it could be well worth their effort. For the players, it will still be possible to recuperate their money but they will have to leave it behind for a while, waiting for the start of the following year to file.
Anyone opposing the IRS view now has 90 days to respond to the proposals. No doubt the AGA will have an answer but the IRS will not necessarily have to consider their answer.
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Gains, losses and expenses
As in anything else, there is no absolute answer. The famous » it depends » rules here also. No two situations are alike. Still, some basic principles never change. The first one: all your losses must be registered and kept in a file. Obviously, telling the IRS that you lost x$ is not enough!
Let’s start by separating the two kinds of players: the regulars and the leisure players. In the leisure group, we will find the winners of jackpots via a unique event. For example anyone winning 100 000$ in a slot machine doesn’t expect to win the same the next day. On the other side, a solid poker player who wins a tournament today still expects to win the next day! He might be a regular.
The regular thus must keep an annual register at all times. This register will include every detail of his whereabouts. Lets follow Paul for instance: in January, Paul decides to take part in a few poker tournaments in Los Angeles. He keeps a record of each of his expenses, even those who probably won’t be accepted by the IRS right now. He keeps track of plane tickets, hotels, meals and transportation( rental cars, taxis, limos, bus).
Not being a pro, Paul will not be able to present these as expenses. On the other hand, if Paul gets very successful, he might eventually decide to turn pro in the USA and will benefit from having kept his receipts.
Paul will also have to keep a detailed account of all of his playing sessions, no matter what game he played. Paul will then write in his log that on January 12th he played a poker tournament at the Commerce Casino, in which the buy in was 1 000$. he finished second in the tournament and won 31 000$. The casino gave him 22 000$, representing 30 000$ net, minus 30% of 30 000$, 9 000$. It is good to understand that the entry fee has already been deducted from the net purse.
The next day, Paul, after having celebrated his second place finish, decides to play some blackjack and goes on to lose 6 000$. His log for these 2 days will read, a win of 30 000$ in tournament X at the Commerce Casino on the 12th and a loss of 6 000$ at the Bicycle casino the next day, playing blackjack from 9 to 11.
When Paul goes to Las Vegas in March, he goes on filling his log. He keeps a record of every session, winning or losing, including where and when he played. Having done this all year, Paul has put himself in the best position (the only one as a matter of fact) to reclaim his dues from the IRS.
The log is the worst part of being a regular player. Nonetheless it remains essential and allows the player to face the IRS holding the right cards. The log also proves the seriousness of a player and usually sets him well when he reclaims the dollars he is eligible to get.
It’s quite the same for an occasional player. Peter for example went to Atlantic City during his vacations. He won 50 000$, winning the jackpot at Caribbean Stud Poker. It is safe to assume he will keep on playing and, knowing the odds of this game, that he will lose part of his winnings. He should consequently use a log also. In his case though, no need to keep a record of lodging, transport and meals, of course! He certainly won’t need them.
As a whole, each case is different and having specialists treating your claim is always the best solution. Knowing that a professional team like Gamblingtaxes.ca is taking care of you and counseling you as well as preparing your documents represents the best bet in a domain that few know and understand well.
