If you win money by gambling, playing the the lottery, raffles, betting on horses, and the like you must report that to the IRS. This also means you must pay taxes using the market value of car, boat, or some asset you won. If you don’t report it to the IRS, they could send you a bill for what they estimate you won. Typically winnings have to be significant or usually over $600 dollars for Casinos to report your income to the IRS although all taxpayers are required to report all winnings. One good thing is that most casinos will not allow the IRS to monitor individuals or their tables.
In reporting your winnings or withholding, you will need to follow a few steps:
1) A payer must provide you with form W-2G
2) You need to put your winnings on Form 1040, line 21.
3) If you are itemizing deductions you can use the Schedule A, Form 1040 to report losses only up to the amount you won
4) To be eligible to deduct loses you need to show a receipt, or documentation of some kind to show both winnings and losses
If you have made a mistake and forgot to report your winnings or losses you can correct this situation by fling an amended tax return. You may owe some additional taxes with interest and penalties but if you wait until the IRS finds you the penalties will likely be significantly more.
This post was published on August 7, 2009