Busted by IRS now i owe back taxes on winnings

Originally Posted by westcoastinvader

I've had many four digit wins in a single day at blackjack in Nevada, but never a five digit.

I may be mistaken, but somehow I thought that if cashing in a large enough amount of chips at the window at one time there was some tax transaction of note that would take place.

Not a "holier than thou" thing, but I always declare my annual gambling winnings......and the offsetting losses. Candidly, most of the time I declare "a wash" for year end by my estimates and keep enough supporting detail around to have a reasonable defense if audited.

If playing at a casino on a regular basis with monitored play for comps, I'd highly recommend making an effort to acknowledge in some way on tax filings.

Exactly, I declare the winnings and itemize the losses, but the winnings effect your adjusted gross income before you can itemize the losses. So basically gamblers are screwed (with W2-G's) unless you can claim professional gambler status. A lot of deductions are reduced or phased out based on AGI, and the signers effect your AGI before you can deduct/itemize your losses.

[Seattleallstar]

So I finally went down to the IRS to get to the bottom of this, guy at his computer recrunched the numbers told him I certainly lost more than i wont but that you can only deduct the losses up to the amount won. So final verdict after 10 minutes of inputing things into his IRS computer, is that since I dont own any property, pay any other taxes, no state income tax, and basically nothing else. It wasnt enough to offset the taxes from the reported gambling income's taxes. He was like all ready for my check, and im like I didnt come here with the intention of paying, he had a good laugh and was like I understand and I am sorry. I should pretty much trust the IRS?

[Port Conway Lane]

Originally Posted by Seattleallstar

So I finally went down to the IRS to get to the bottom of this, guy at his computer recrunched the numbers told him I certainly lost more than i wont but that you can only deduct the losses up to the amount won. So final verdict after 10 minutes of inputing things into his IRS computer, is that since I dont own any property, pay any other taxes, no state income tax, and basically nothing else. It wasnt enough to offset the taxes from the reported gambling income's taxes. He was like all ready for my check, and im like I didnt come here with the intention of paying, he had a good laugh and was like I understand and I am sorry. I should pretty much trust the IRS?

I had a situation where I won a contest and because it was free to enter I had no outs.I spoke with an irs guy and he let me know I could have offset the winnings had they been achieved from gambling if I could prove I had losses up to the winnings.

I had a similar situation to yours only in that I didn't own property but did pay state taxes.

It wouldn't hurt to try a different representative.

[NoLuvForPletch]

Originally Posted by Seattleallstar

So I finally went down to the IRS to get to the bottom of this, guy at his computer recrunched the numbers told him I certainly lost more than i wont but that you can only deduct the losses up to the amount won. So final verdict after 10 minutes of inputing things into his IRS computer, is that since I dont own any property, pay any other taxes, no state income tax, and basically nothing else. It wasnt enough to offset the taxes from the reported gambling income's taxes. He was like all ready for my check, and im like I didnt come here with the intention of paying, he had a good laugh and was like I understand and I am sorry. I should pretty much trust the IRS?

Honestly, I have no idea what you just said. So, are they making you pay more or not? Are they taking your word for it that your losses equalled your winnings or do you have to show proof? Are they going to audit you now, or basically are they asking you to fork over a few hundred bucks?

[Seattleallstar]

Originally Posted by NoLuvForPletch

Honestly, I have no idea what you just said. So, are they making you pay more or not? Are they taking your word for it that your losses equalled your winnings or do you have to show proof? Are they going to audit you now, or basically are they asking you to fork over a few hundred bucks?

I had a notice that some gambling income was not reported, and that i owe taxes for those winnings. They are asking me to fork over a few thousand

[NoLuvForPletch]

Originally Posted by Seattleallstar

I had a notice that some gambling income was not reported, and that i owe taxes for those winnings. They are asking me to fork over a few thousand

I knew the backround of the story, it was your explaination of what happened when you went down there that I didn't understand.

First, any ADW should be able to provide you with a statement. Second, don't you keep losing tickets from the track, and on days when you hit for a signer, collect more from what is laying around?

[rpncaine]

Originally Posted by NoLuvForPletch

I knew the backround of the story, it was your explaination of what happened when you went down there that I didn't understand.

First, any ADW should be able to provide you with a statement. Second, don't you keep losing tickets from the track, and on days when you hit for a signer, collect more from what is laying around?

This is the reason I use a "Player's Card" that is tied to a number specificaly assigned to you. The IRS could say that you picked up tickets that were not yours and can't prove they aren't. But if you have tickets with a number then it is proof that YOU made the bets. Also, pick up any lottery scratch-offs you see laying around and save them for the same purpose and keep non-winning lottery tickets if you have them or can find them.

[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.

[Dunbar]

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.

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