Question: Good evening Ralph. I was wondering about gambling winnings. The other night at the casino I won $1600. When the bells rang and the winnings were paid a casino employee came up and told me that I had to go to the cashiers window to claim my winnings. When I got to the window they asked for my name, address, and social security number. They also asked if I wanted to have any federal taxes withheld from my winnings. I was so shocked by all of this that I told them to just give me the money and don't take out any taxes. I usually never win, so this was quite an experience. What do I do now?
Answer: Congratulations! Lucky at the casino may not mean you are so lucky at tax time. Gambling winnings are reported as ordinary income on your tax return. Since you were compelled to share your information, you can expect to receive a form W-2C from the casino at tax time which will report the winnings. They also will file this form with the IRS, so you MUST report this on your tax return. The good news is that you may be able to partially offset your winnings based on your reportable losses. When we have clients who report to be gamblers the first thing I tell them is to keep track of their losses. The best way to do that normally is to get one of those customer/loyalty cards from the casino. When you use this card, they will track you winnings/losses and they will make available to you at year-end a statement which you can use to determine the gambling losses you can claim on your Schedule A of your tax return. Remember - you can only deduct gambling losses up to the amount of winnings you claim and if you are not able to itemize deductions then the losses will be of no consequence, so you will need the experience of a tax expert. Keep those gambling loss receipts and save them for tax time.
For more specific guidance on reporting gambling winnings and losses contact Ralph V. Estep, Jr., of Saggio Accounting+PLUS at (302) 659-6560 or visit our website at www.saggioaccounting.com. All new client's receive a $35 discount.