The Mailbag is Overflowing

It's time once again to open the mailbag, as it has become very full recently.

Question: I am a poker dealer in a casino in Lake Tahoe. As part of my job, I direct multiple weekly poker tournaments. The audit department requires that we issue a W-2G on any tournament payout of $600 or more. I have heard that other poker rooms in Nevada do not require that a W2-G be issued for tournament winnings, and one regular player mentioned that it became illegal a while back. Now, while I doubt it's illegal, I would like to know if there were any changes made recently that make it unnecessary to issue a W2-G.

Answer: IRS Revenue Procedure 77-29 was written by the IRS to define the situations that require casinos, cardrooms, and other gambling establishments to issue a W-2G to report winnings of a certain amount, depending upon the game, and to withhold 30 percent of the winnings, also dependent on the game. Poker was not mentioned in this procedure. So, now we have different rules for different places for poker tournaments. Many Nevada casinos are required to report winnings of more than $600 in a poker tournament, and some are required to withhold, as well. And, some are not required to do anything. This is due to numerous Private Letter Rulings made between the IRS and the various establishments and associations, usually as the outcome of negotiations during an audit. So, we have a situation in which there is no uniform law.

Q: I've talked to two tax advisors about this issue already, but I'm still not comfortable that I know the answer. I did some online gambling last year. I have a list of all of my transaction dates and amounts. I did not receive a W-2G for any of these winnings. I assume this is because I never received a single payout of more than a few hundred dollars, even though the total amount of my winnings was several thousand dollars. I understand how to report my gambling losses, but I'm not sure about the winnings, since I don't have a W-2G and was not required to pay any taxes on those winnings. All payouts (winnings) are documented in writing, as are my deposits (losses). Can I simply add up the total of the winnings that are documented and put that down as the total gambling winnings on my tax return?

A: Yes, that is exactly right.

Q: Do you offer a tax guide for Canadians?

A: That subject is covered in our book, and we have Canadian clients.

Q: I have a question about gambling winnings from most sources in the casino when it is less than the amount requiring any forms to be filled out. I was told a few years ago by the IRS in Nevada that whatever you walk out with that is more than what you walked in with is your gambling winnings, and you need to report it.

A: That is right. All games are required to have winnings reported as well as losses, but as separate figures and not one net figure together.

Q: If I play poker online, do I have to pay any taxes at the end of the year?

A: Only if you were a winner for the year.

Q: Thanks for your articles in Card Player; I always find them informative. Here's a topic I'm interested in. It appears that the risks associated with tax evasion are more serious than the risks associated with small-time gambling – online and home games – in states where the legality of these activities is, at best, questionable. So, if an individual is making substantial income from online gambling or home games, either by playing in them or running them, and wants to pay taxes on it, how should it be reported? Should it be reported as gambling winnings, even though there's no 1099G, simply as "other income," or in some other way?

A: We who are not professional gamblers are required to report it as "gambling winnings" on the Other Income line (line 21) on Page 1 of the Form 1040.

If you have any questions regarding tax regulations as they apply to gaming that you would like to see answered in Card Player, please e-mail them to us ([email protected]). We will keep your identity confidential. If you would like to utilize our professional services or order our book, The Tax Guide for Gamblers, please call (800) 829-7271. R.B.S. will prepare your tax return without your having to leave the comfort of your home, no matter where you live.