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Thread: Calculating gambling income and deductions

  1. #1


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    Calculating gambling income and deductions

    When I have gone to my tax preparers, both of them have calculated my gambling income this way: Add up all w2-g’s that were reported. This is the total income. Then put in whatever deductions you need to make the difference equal to your net gambling result for the year.

    Two different accountants that I have had including one in Las Vegas who does this all the time say this is right. Are you likely to get any significant problems by doing it this way?

    I have heard other people say you should add up all your session gains, call that total income, then deduct all session losses. But what is a session anyway? If you stay at a casino for a week while you make $50k and then lose the $50k, do you need to count it as $50k of income and $50k of deductions? What if you make and lose the $50k in two days or one day?

    You would probably pay the exact same tax bill no matter how you do it as long as you are reporting your total results for the year. Can your accountant doing it one way or the other really cause a lot of big problems?

  2. #2


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    Sessions are meaningless. Add up all your 2018 wins and subtract all your 2018 losses. That's your net gambling income. If you're filing as a professional, then there are additional deductions for travel, food, books, clothing, etc.

  3. #3


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    Quote Originally Posted by 21forme View Post
    Sessions are meaningless.
    Where did you get this bullshit from? Provide me a link where it says the IRS doesn't care about sessions. I will admit if you file as a business, sessions don't really matter, but it is a whole different story if you file as a casual gambler and itemize your losses. From everything I read the IRS wants a log of your wins and losses and a session should be no longer than a day.

    And here is a link to back me up.
    https://www.taxsamaritan.com/tax-pre...x-preparation/
    Last edited by Midwest Player; 12-09-2018 at 01:54 PM.

  4. #4


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    Bigplayer made a post on BJ21 green chip back on 3/3/15 concerning session results. Those who have access to BJ21 can look it up. I'm not going to copy the post as it is on a paid page. Anyway, most of bigplayer's post is about the proposed rule in IRS Notice 2015-21. I don't know if its officially adopted. Here is link.
    https://www.irs.gov/pub/irs-drop/n-15-21.pdf

  5. #5


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    Quote Originally Posted by Midwest Player View Post
    Where did you get this bullshit from? Provide me a link where it says the IRS doesn't care about sessions.
    Provide me an IRS link that defines gambling sessions and how it's important to calculating gambling winnings.

    I'll say again all that matters is total wins minus total losses for the calendar year. How you divide it up from day to day is irrelevant.

  6. #6


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    Quote Originally Posted by beta View Post
    When I have gone to my tax preparers, both of them have calculated my gambling income this way: Add up all w2-g’s that were reported. This is the total income. Then put in whatever deductions you need to make the difference equal to your net gambling result for the year.

    Two different accountants that I have had including one in Las Vegas who does this all the time say this is right. Are you likely to get any significant problems by doing it this way?

    I have heard other people say you should add up all your session gains, call that total income, then deduct all session losses. But what is a session anyway? If you stay at a casino for a week while you make $50k and then lose the $50k, do you need to count it as $50k of income and $50k of deductions? What if you make and lose the $50k in two days or one day?

    You would probably pay the exact same tax bill no matter how you do it as long as you are reporting your total results for the year. Can your accountant doing it one way or the other really cause a lot of big problems?
    I would question the competence and integrity of a tax preparer who advises to merely add up your W-2g's and call it your total winnings, essentially inviting you to commit tax fraud. This is a complex topic that requires competent professional advice. The advice you received is absurd and ridiculous on its face. Here's an easy layman's example:


    You "gambled" three days during the year.

    Day One: You played video poker, buying in for $1000. During the day, you received a W-2g for a $1250 straight flush, for which you were paid in cash, and later cashed out a machine ticket for an additional $2000. Result +$2250

    Day Two: You played video poker for thirty minutes, losing your $500 buy-in, cashing out zero. Result -$500

    Day Three: You played blackjack, buying in for $1000 and cashing out $4000. Result +$3000


    You were +$4750 over the three days you "gambled" during the year. Even if this result was all in one day or spread out over 365 days, it is the same. But these tax preparers are telling you to show $1250 as your gambling winnings and make up gambling losses to intentionally misreport your gambling income? Sounds to me like a path to federal prison. There must be something I'm missing.
    Last edited by LVBear584; 12-10-2018 at 10:39 PM.
    Opinions and Commentary on the Gaming Industry: The Bear Growls

  7. #7


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    Quote Originally Posted by 21forme View Post
    I'll say again all that matters is total wins minus total losses for the calendar year. How you divide it up from day to day is irrelevant.
    Yes - this is correct.

    As a tax professional, my advice is always - you need to be prepared to support the amounts claimed in your tax return.

    I've never had a client that was a professional gambler, but for the pro that conscientiously keeps personal logs, that should be sufficient to support the win/loss amount (as long as it can be reasonably reconciled with bank account activity for the year).

    For the vast majority of (non-pro) gamblers, here's how it works at tax time:

    Client: "I got a 1099-G from a casino - I hit a Royal Flush at video poker."

    Tax preparer: "Do you have any gambling losses for the year that can be claimed? If you regularly gamble at the casino, they might be able to give you a record of your play. If it's a loss, then we can use it to offset the income."

    Client: "Let me check and I'll get back to you."

    Three weeks later.... Client: I couldn't get any information from the casino, but I know I lost at least that much in other games for the year. I'm down overall for the year."

    Tax preparer: "We'll need some documentation from you regarding the details of your gambling losses in order to list it in your tax return.

    Client: I don't have the details, but just go ahead and list losses for the same amount as the win. I guarantee that I lost at least that amount.

    Tax preparer - This is where the tax preparer's response becomes unpredictable. Here's how I handle it:


    • If the amounts are not significant in relation to the tax return, then I go with his representation.
    • If the amounts are significant to the tax return and the client is not a significant (well-paying) client of our firm, then I hold my ground and insist on documentation.
    • If the amounts are significant to the tax return and the client is a significant client of the firm, then I go with his representation.


    Welcome to the real world of taxes.

  8. #8


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    Quote Originally Posted by Bigdaddy View Post
    Welcome to the real world of taxes.
    Thanks, good to know we have a tax professional on this site.

    The fact that this thread has shown very little interest by the folks here suggests to me that most casual gamblers don't give a damn about taxes. My gut feeling is most casual gamblers don't report any gambling winnings unless they have to by getting a W-2G. I may be wrong, but that is my gut feeling.

  9. #9


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    Bigdaddy, sounds like you favor white collar crime.

  10. #10
    Random number herder Norm's Avatar
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    At race tracks, you see people picking up losing tickets off the floor to use against trifecta wins. You also see older folk on social security cashing in big winning tickets from friends that have won as they pay lower or no taxes. All illegal of course. Plan ahead. Keep a ledger.
    "I don't think outside the box; I think of what I can do with the box." - Henri Matisse

  11. #11


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    Quote Originally Posted by BoSox View Post
    Bigdaddy, sounds like you favor white collar crime.
    No not at all -

    My above example is a bit tongue-in-cheek, but not far from the realities that tax preparers deal with.

    I always make it clear to clients that they need to be able to support their deductions if they were to be audited. Tax preparers can use their professional judgment concerning what types of documentation they require from their clients in order to prepare their returns. If the preparer has no reason to believe that a client's representation concerning an amount might be dishonest, then he can prepare the return on that basis.

  12. #12


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    Quote Originally Posted by Bigdaddy View Post
    No not at all -

    My above example is a bit tongue-in-cheek, but not far from the realities that tax preparers deal with.

    I always make it clear to clients that they need to be able to support their deductions if they were to be audited. Tax preparers can use their professional judgment concerning what types of documentation they require from their clients in order to prepare their returns. If the preparer has no reason to believe that a client's representation concerning an amount might be dishonest, then he can prepare the return on that basis.
    A client's representation that the only "winnings" he had were exactly the W-2g amount seems unreasonable. Of course most people can offset their winnings with legitimate losses, but isn't it a red flag to claim only the W-2g amount, thereby asserting that he had no other winnings in the entire year?

    Even if it nets to zero, it seems like such likely underreporting of winnings is an obvious misstatement that should require further investigation by the IRS. If the taxpayer fails to maintain adequate records of winnings, how can the claimed losses be trusted? Or are most people's amounts too small for the iRS to bother with, especially since it likely truly nets to zero, with no additional revenue to be gained?
    Last edited by LVBear584; 12-14-2018 at 11:33 AM.
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  13. #13
    Random number herder Norm's Avatar
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    The IRS budget has been cut to the point they're happy if they catch waiters and taxi drivers not reporting tips. Having said that, you're better off following the law.
    "I don't think outside the box; I think of what I can do with the box." - Henri Matisse

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