You do not want to spoil the fun you might have had gambling by forgetting some important information concerning how the IRS treats gambling winnings. All your winnings are taxable whether you play cards, the slot machines, roll the dice or bet on the ponies. Gambling winnings also include any gains from lotteries and raffles; the cash as well as any prizes you receive. The fair market value of a prize such as a car or trip is taxable. To be prepared at tax time, even the most casual gambler needs to keep accurate records of all gambling activity whether the end result was a win or a loss.
If you win while at a casino or at a race track, you should receive a Form W-2G entitled Certain Gambling Winnings. This form is used to report winnings to you and the IRS. This type of form is issued to report the type of gambling, the amount of your winnings, and other factors required to properly report your winnings. Even if you do not receive a W-2G, you need to report your winnings on your tax return as the payer is required to report all winnings paid to the IRS.
Your gambling winnings are reported on the “Other Income” line on the Form 1040. If you have any gambling losses they may be deducted if you file using a Schedule A, Itemized Deductions. Unfortunately if you do not itemize your deductions, you may not deduct any of your gambling losses. Also, the amount you may deduct on your Schedule A is limited to the amount of your winnings. In other words, you may not deduct more in losses than you report in winnings and you may not reduce your winnings by your losses and only report the difference. The IRS will compare what you report as winnings against the W-2Gs they receive pertaining to your winnings and they definitely need to match.
Maintaining accurate records of your gambling activity will certainly assist you when gathering your income tax information to prepare your tax return. You should keep all your receipts, tickets or other documentation. Also, a diary, calendar, or similar record will be very helpful to record your activities and remember to record your winnings as well as your losses.
Have fun gambling and hopefully winning but remember to keep records of all activity so you are prepared when income tax time rolls around!
Submitted by Kathy Shrader
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