August 31, 2016

Gambler? Keep accurate records for taxes.

Enjoy gambling?  Make sure to maintain accurate records for taxes.

Gambling income is taxable, including the fair market value of non-cash items you win or receive as a prize, such as cars.

Taxability of non-cash items often hits new tax clients by surprise.  Remember the huge Oprah Winfrey flap in 2004 when 276 members of the audience received "free" new cars from her?  Only they weren't truly "free", given an estimated federal income tax of up to $7000 owed by each recipient, based on the fair market value of the cars.  And that doesn't include any additional state and local income taxes.

Taxpayers can deduct gambling losses to the extent of gambling income earned.  However, additional losses cannot be carried over to future tax years.

For more information, here is the IRS Newsletter Five Tax Tips for Gambling.

Questions about Tax Matters?

I am an Enrolled Agent licensed by the Department of the Treasury which allows me to provide tax services to taxpayers in all 50 states and US territories.  I provide tax services to individual income, business, estate, and trust clients.  Please contact me if you have questions about tax preparation, tax planning, or taxpayer representation (audit and collection) matters.

For information about my nationwide fee-only Consulting, Expert Witness, and Tax Services visit Fouts Financial Group.

Mary Rae Fouts

6 comments:

  1. How likely are significant gambling winnings and losses to trigger an IRA audit?

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    1. More likely to trigger an audit than similar regular earned income. The IRS will also sometimes do focus audit campaigns related to certain financial events, including gambling income. Be sure to record all gambling income on your tax returns, keep accurate records, and retain them for the audit statute of limitations. (Generally 3 years, but can go longer if substantial tax return errors are found.)

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  2. What about my airfare and lodging and meals in Las Vegas? Can I write those off against my gambling winnings?

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    1. Great question! You can if - IF - you are a "professional" gambler. I'll address this issue in a column post in the near future, so check back!

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  3. What about rooms and meals that are comped?

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    1. Great question! I'll address that issue in a future post, so check back. Unfortunately, the IRS has been inconsistent in its treatment of "comped" items. I'll go into details in the future post.

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Thanks for sharing your comments here! Mary Rae Fouts