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Originally Posted by Seattleallstar
I showed all of this to the IRS man, but he said it wouldnt be worth my while to file an amendment because basically dont pay for anything nor do I own anything. WA state doesnt have an income tax as well. Even if I did show him documentation I certainly lost more than I won, that I could only claim up to the winnings, also stating that since gambling isnt my profession that was nothing more he could do for me.
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What's happening is probably this. The agent is saying you are better off taking the standard deduction, which you no doubt did in 2007, than reworking it so that you can itemize and deduct your losses. He's probably right.
Let's say you made $50,000 in non-gambling income in 2007, and you signed for $4000 in gambling wins. Your adjusted gross income on lines 37 and 38 of your 1040 would be $54,000.
If you took the standard deduction on your 2007 return, which if you're single was $5300, your taxable income would be $54,000 - $5,300 = $48,700.
If you try to itemize so that you can offset your losses, then your taxable income is $54,000 - $4,000 = $50,000. You end up with more taxable income by itemizing.
So you're better off just biting the bullet and taking the standard deduction. You end up with lower taxable income that way.
This is why the agent pointed out that you have no other deductions (no state income tax, no mortgage interest, etc). Other deductions would have tipped the balance in favor of itemizing.
If you had signed for something like $20K or more of winnings, then you would definitely be better off by itemizing--but you'd still be effectively paying tax on your first $5K or so of those winnings.
--Dunbar