Gambling Taxes are indeed a concern for many residents in the United States with the rapid development of this industry. It is self-evident that the government wants to cut off some percentage of your winnings if this is the case for you. Today, we are going to outline the exact things you need to know with regards to your gambling income as well as possible consequences of not reporting your gambling taxes.
1. Reporting All Your Winnings Is A Must
No matter what amount of money you win from gambling, you should report all your winnings as “other income” in Form 104 (on Schedule 1). If you happen to get a yacht or a car as a prize, you should indicate its fair market value and report it as income.
Once again: you should by all means report all your gambling winnings. You may be able to get away with not paying a small tax, yet you still risk getting hunted down by the IRS (Internal Revenue Service).
2. Tax Report Through a Form W-2G
If your gambling winnings reach a minimum of $600 and the payout is at least 300 times the amount you bet, you will have to fill out a Form W-2G as required by the IRS.
When filling out W-2G, the payer will need to meet the requirements of identification: a photo ID and Social Security Number. If the latter is missing, a TIN (taxpayer identification number) is required.
Sometimes, especially when betting with a casino, you will receive the form on the spot. If not, the payer is required to provide you with the form by Jan 31, 2025 for winnings happening in 2024.
3. Do Not Spoil the Records of Your Gambling Winnings and Losses
In order to keep track of the amount of money you have gained or lost, the IRS recommends recording your gambling activities in the form of a diary or something similar. Having at least the dates and types of exact wagers along with gambling activities, name and address of each gambling establishment as well as names of the people also engaging in the activity with you, including your precise winnings and losses.
W-2G forms, wagering tickets, credit records, canceled checks, bank withdrawals and statements of actual winnings or payment slips provided by gambling establishments should all be documented through these documents.
4. State And Local Taxes May Also Count
In Form W-2G, there are boxes to report state and local winnings as well as withholding. The reason behind this is that your state requires you to pay their taxes, too. Your state of permanent residence should tax all your income, whatever it is. If you get to gamble in another state, you will discover that the state where the gambling activity is done also taxes your winnings. A tax credit is usually given to those gambling in a state different from their state of residence.
Important Notes
In this article, we have highlighted the legal basics of gambling, so if you feel like the information provided here is not exhaustive, do not hesitate to consult a licensed layer or respective organization to assist you. And no matter how much you win with gambling, do not forget to comply with the government regulations.
