gambling income - probably been discussed 100x before, but...

[schirallicpa]

We have a casino not too far from us. When you cash out the night you are at the casino, you get a little yellow W2G with your ID # on it, their ID on it, and the amount of your gross winnings. It's kinda small, and usually gets tossed out with your atm receipt.

At the end of the year, if you are a registered guest at the casino, you get an annual win/loss statement at the end of the year. "dear valued patron........the following information is for your records only and details the NET RATED amount of your winnings and losses for the 2013 calendar year." And gives you a figure - usually negative (those places aren't built on winnings). Attached is a listing of your jackpot wins, which matches the yellow W2G that you probably tossed in the trash when you came home that night all excited about your big winnings. The attached also details the date and the wager type (example "slots"). But it gives you just the gross for each night, with no detail as to how it came up with your net loss.

My current client has 10 of these W2Gs totaling about $38000. With the statement showing net annual loss of $6000.

Now - Can I or can I not (depending on the info I can obtain from the client) treat each of these 10 items separately. And can I or can I not then show each at the net winnings for that night. So maybe on one night he won $5000 and spent $1000 to get it so I have a net win of $4000. but on the next trip he won $1000 but spent $2000 to win, so that is zero income for the night, and the loss is Schedule A for that one. The third trip he won $3000 and spent $5000 so he has zero income , and the $2000 loss goes to Sch A. Etc. Am I making sense?

The difficult part will be how well he can tell me how much he spent in January of 2013 to win $5000. Or February 2013. Or March 2013. I can't remember how much I spent on lunch.

I just want to make sure my thinking is correct. I have a friend tax preparer who wants to put all $38K on the 1040, and then put $38K on Sch A and be done with it.

I know the chances of the conversation happening before are pretty high, so if there is a link back to something that I didn't find, let me know.

I appreciate any one's help on this.

thanks.

[jasdlm]

I had a client last year with 94 W2Gs. I never line up the days winnings/days losses. Impossible. I include the W2Gs in income as appropriate, and take the total invested (to the extent of winnings) as a deduction on Schedule A. If this isn't correct, I have no idea how else I could do it.

I don't know what you mean by 'show them at net winnings', but if the front of the 1040 doesn't match the gross W2G numbers, I think you'll get a CP2000.

Can't take loss in excess of winnings.

Maybe I'm not reading your question correctly.

[Kea]

The "ideal" way to report is to use the net winnings for each "session" (typically per day), but this assumes that the client kept a diary of their wins / losses per session. So, you are correct to treat the 10 W2Gs separately if they client can substantiate. To avoid the CP 2000 issue, you could report all on Line 21 and make adjustments also on that line. Then report losses on Sch A.

Reporting only the net wins per session lowers AGI and is typically more beneficial -- IF client can document!

[kcjenkins]

It's easy for the gambler to get a print out of the W-2Gs for the year from the casino. Have him get that for you, enter the total on Line 21 then on Sch A take the offset.

[schirallicpa]

Ok Kea:

that's what I am thinking, and thank you for confirming that for me. IF is always the case, and unfortunately it is not likely that I'll get sound records, but it's worth a stab.

thanks again

[Kea]

Good luck. I have had some luck getting one couple to start keeping a log after they saw the consequences. Others, not so much.

[Lion EA]

Ask for a free copy of Lady Luck Gambling Diary designed by a tax attorney/CPA/MBA to help his clients comply with IRS Rev Proc 77-29:

www.LadyLuckDiary.com

[double_odds]

I received a CP2000 notice on 2/27/2012 for the tax year 2010.

It stated I owed additional taxes for under-reporting gambling winnings. I paid the additional tax at the time planning on filing a 1040X at a later date because I had gambling losses that exceeded the additional gambling winnings I had failed to report.

It wasn't until I received a Notice of Additional Tax Due from NY State this week, that I realized I never sent in the 1040X.

I understand there is a 3 year limit on the 1040X but is that from the date the original tax was paid or the date of the CP2000?

Is there any way I can still contest the CP2000 or have I lost the money?

And what about the taxes NY State says I owe them?

 

Thanks in advance for any help!

[jklcpa]

I received a CP2000 notice on 2/27/2012 for the tax year 2010.

It stated I owed additional taxes for under-reporting gambling winnings. I paid the additional tax at the time planning on filing a 1040X at a later date because I had gambling losses that exceeded the additional gambling winnings I had failed to report.

It wasn't until I received a Notice of Additional Tax Due from NY State this week, that I realized I never sent in the 1040X.

I understand there is a 3 year limit on the 1040X but is that from the date the original tax was paid or the date of the CP2000?

Is there any way I can still contest the CP2000 or have I lost the money?

And what about the taxes NY State says I owe them?

 

Thanks in advance for any help!

 

 

From the instructions for 1040X:

 

When To File

File Form 1040X only after you have filed your original return. Generally, for a credit or refund, you must file Form 1040X within 3 years (including extensions) after the date you filed your original return or within 2 years after the date you paid the tax, whichever is later. If you filed your original return early (for example, March 1 for a calendar year return), your return is considered filed on the due date (generally April 15). However, if you had an extension to file (for example, until October 15) but you filed earlier and we received it July 1, your return is considered filed on July 1.

 

This forum is for tax professional only to help each other with technical aspects of using the ATX tax program and in our tax preparation. We do not give out tax advice to the general public here.

[Pacun]

The poster is correct. Each W-2G represents a transaction session. So I would ask the person when he started playing for each session and see how much he invested. Then you enter that net amount on line 21. If there are more losses than winnings on that session, then you take that amount to schedule A (provided you have winning sessions).

 

That's the correct way of doing. Now, you might get a letter from the IRS and you will have to explain it. The IRS already lost in court when a tax payer reported his winnings this way, so you might get the issue resolved with just a letter explaining how you reported the sessions and sending a copy of the reports that the casino provided.

 

Reporting every win on line 21 and then taking out losses on schedule A raises the adjusted gross income.