Gambling can be a fun way to waste some time and spend a few dollars, but what happens if you win? Like all other income, gambling winnings taxes must be filed, and the process can be somewhat complicated. This guide will help you determine what steps you need to take to report your winnings properly and avoid unnecessary fines or legal actions.
What Happens When You Win?
Whether you are scratching off a lotto ticket, pulling the arm of a slot machine, or sitting down at a game of poker in a casino, winning a jackpot can be exhilarating. Once you have collected yourself and alerted the casino owner or the store clerk of your win, they will verify your prize and discuss the payout process, which will vary by the business. For prizes over certain amounts, they will request your social security number for tax reporting purposes and issue an IRS form W-2G. Sometimes called a tax slip, this form indicates how much was won and the amount withheld for tax purposes, if any. An ID, such as a driver’s license, will also be necessary.
What Winnings Are Reportable?
Gambling winnings for lotteries, sweepstakes, and wagers are reportable if:
- They are over $600
- They are over 300 times the initial wager
Winnings for bingo, slot machines, and keno have different thresholds, with a prize of over $1,200 being reportable on bingo or slot machines and $1,500 on keno. Poker tournaments are reportable if the winnings exceed $5,000. For table games like poker, blackjack, craps, or roulette, winnings are not required to be reported, because the casino and the IRS have no way of knowing the amount of money you started with or your total gains. It is best, however, to report those gains to the IRS, as well.
Withholding Requirements
If you win a jackpot over the reporting thresholds and you do not provide a social security number, the IRS requires that the casino or business withhold a percentage of the winnings to cover the taxes. The withholding amount is typically 24% for US winners. For foreign jackpot winners, 30% may be withheld.
Filing Your Taxes
When it is time to file your taxes for the year in which you won the jackpot, you will need to locate your form W-2G, along with the W-2s or 1099s for all other income sources. If you have not received a W-2G from the casino or business where you won the jackpot, you should contact them as soon as possible to request a copy.
Record the amount of your winnings on the appropriate income field on your 1040 or 1040EZ, and follow the institutions to calculate the taxes for your gambling winnings and other income. If the amount withheld exceeds the amount of taxes due after deductions are considered, you will receive a refund. Otherwise, you may have to pay the IRS.
Accounting & Tax Prep Services in Dallas
Need help making sense of your taxes after you have won a jackpot? Let our team at Gurian CPA Firm help you file your taxes while accounting for your gambling winnings properly. Our expert CPAs have plenty of accounting and tax experience, and we can make sure that you do not overpay while minimizing your tax liabilities.
Get started filing your taxes. Call Gurian CPA at (469) 306-9866 or contact us online to talk to our Dallas tax experts today about your gambling winnings.
