Players dream of hitting a big jackpot when they play the slots. When that day comes for you, you'll have questions about the taxes you must pay on the winnings.

• Do You Have To Report Online Gambling Winnings Slot Machines
• Do You Have To Report Online Gambling Winnings Taxable

Hand Pay Jackpots

Don’t be caught unaware. No matter the amount, gambling winnings are taxable. Those winning a substantial amount are likely to receive a tax form, and the IRS will also receive that form. Those winnings will usually be reported via form W-2G or 1099-Misc. The IRS will then compare the information to the taxpayer’s return. That’s because you’re required to report each stroke of luck as taxable income — big or small, buddy or casino. If you itemize your deductions, you can offset your winnings by writing off your gambling losses. It may sound complicated, but TaxAct will walk you through the entire process, start to finish. Unfortunately, there are some other scenarios in which the casino might have to report your win to the IRS before handing you the proceeds from your hard-fought victory. A casino must report a win to the IRS with Form W-2G if any of the following events occurs: The total winnings, or combined bet and profit, on a slot machine exceed $1,200.

When you hit the winning combination of symbols for a large jackpot, your slot machine locks up. Depending on the machine, the lights on top of the machine may come on and start flashing, music may play or bells ring. A slot attendant arrives promptly to see what you have won.

On jackpots smaller than $5,000, an attendant verifies that you hit the jackpot and then assists you in claiming your money at the cashier's cage. In the case of a large or progressive jackpot, the casino may have technicians come and check the machine to certify that it was functioning properly when the jackpot hit. If you hit one of the wide-area progressive machines such as MegaBucks, the slot company that operates the game comes out and verifies that machine before giving you a check.

When you hit a jackpot, you have the option of taking your winnings in cash or check. Usually, large amounts are paid by check. In the case of the MegaBucks or similar multi-million dollar jackpots, you receive a check for the partial amount, and then you have 90 days to decide if you want to be paid a lump sum or an annual annuity on the balance. If you select the lump sum option, you receive only a percentage of your actual winnings. For example, the full winnings of one multi-million slot jackpot is paid in 25 annual installments, or you can take a lump sum of 60 percent of the winnings.

IRS Withholding

All casino winnings are subject to federal taxes. However, the IRS only requires the casinos to report wins over $1,200 on slots and ​video poker machines or other games such as keno, lottery or horse racing. When you have a win equal to or greater than $1200, you are issued a W-2G form. This form lists your name, address and Social Security number. The casinos are not required to take out withholding tax on jackpots under $5,000 as long you supply your Social Security number. If you don’t provide your Social Security number, the casinos withhold 28 percent on small jackpots.

You can request a specific amount of withholding tax to be taken out of any jackpot you win. Some players like to do this to avoid a big tax payment in April when they file their income tax returns. The additional withholding may not be necessary if you keep a log book. The law allows you to deduct gambling losses up to the amount of your winnings. You can only do this if you have documentation of your losses. Keeping a diary or log book is the way to do this.

Proper Identification

Casinos can refuse to pay you until you produce proper identification—a photo ID such as a driver’s license, military ID or passport.

If you don’t produce an ID, you are photographed and the casino holds your winnings until you come back with proper ID. For this reason, you should always carry a valid form of identification with you when you visit the casino.

When the casino checks your identification, it also checks your age to make sure you are legally old enough to play. The minimum age for gambling varies from state to state, but under-age gamblers are not be paid if they hit a jackpot. This is the law in all jurisdictions, and it has been upheld in court.

Plan Ahead

Before you start playing your favorite slot machine you should have a plan for the day you hit a jackpot. Players become excited when they hit the big one, and this may affect the decisions you make about your winnings. It is helpful if you know ahead of time how much withholding you want taken out or whether you want a check for all or some of the amount.

Thread Rating:

hi. i live in a state where online gambling is illegal and i like playing at brovada. Is it not silly to report winnings and losses as far as taxes go seeing as how that would let everyone know that you are participating in something that is 'illegal'? I don't want to stop playing at brovada but don't want to get arrested either. Any advice is greatly appreciated, thanks

If you are in Washington, I would be careful, I think its a felony. I don't know that you have to tell the IRS exactly where you are gambling. As long as you pay your taxes I doubt they will care. Just file gambling winnings. If you are winning a fair amount and depositing checks in your bank account, I don't know how you will explain that if you are ever questioned. Find a way to Pay the taxes period.I think the tax advice here on the forum tends to be overly cautious. I recall helping a friend with some online gambling. Her net winnings for the year were about 10k, plus she had regular earned income. We consulted her tax CPA, and I insisted that she should report winnings, but the CPA thought I was insane. Ordinary people do not report winnings unless W-2Gs are involved, and even then they only report the total of the W-2Gs.
If you don't report, the question is what happens if you get caught. As long as you can plausibly claim ignorance, then the risk should be minimal (i.e., interest and penalties only, no criminal charges). Especially if the winnings blend with other sources of income.
The legality of playing online should be a non-issue. It's hollow government intimidation. You're not doing anything wrong, and no one has been prosecuted.
If you do choose to report the income, the challenge is to interpret the vague tax code. In theory, your gambling income is the total of all winning sessions, but the definition of a session is unclear, so you'll need to use your own judgment. Of course you can deduct losing sessions against the declared winnings, but only as an itemized deduction.

1.) With respect to Federal taxes, gambling losses can only be used to offset gambling winnings, thus, if you have lost money overall, then you have nothing to report in the first place.

Sorry Mission, this is not true. If you win $100 in January but lose $500 in March, officially you are still required to report that $100 as gambling income, and then deduct $100 (out of your $500 loss, since you can only offset wins) as an itemized deduction. Your net tax liability on gambling is $0, but your AGI will blow up if you gamble a lot as an amateur. It sucks.
Now if you your numbers are actually $100 and $500, then don't bother. But if they were $30,000 and $40,000, I would probably bother. But that's me.

3.) Technically, an individual is legally bound to report ALL winnings to the IRS and then offset their winnings with losses as appropriate. I'm not saying not to report all of your winnings to the IRS, but in reality, most people don't. They only report the winnings that the casinos themselves are required to report, anyway, and then offset those with losses, as appropriate.

I report all of my winnings and losses from table games. I've never had a W-2G. I mostly do this because I generate several CTRs each year (generally 2 per Vegas trip) and I fear the audit. Keep good records, etc.

Do You Have To Report Online Gambling Winnings Slot Machines

I just read the thread from post #1.

Do You Have To Report Online Gambling Winnings Taxable

Mostly accurate advice, as amended.
State where you live is first consideration.
Making sense of the Federal regulations is next ( they are vague, either stupid or intentionally vague ).
For a couple K, don't sweat it. Keep good records, keep immaculate records, then try to follow the Regs as best you can and be prepared to explain your logic. There is nothing illegal, as far as I know, about keeping multiple sets of records which don't necessarily drill down to the truth. What is the truth? For tax audit purposes the truth is what you turn over and they accept ;-)
Get into tens of thousands, hire a professional who specializes in this area of tax law ( most don't have a clue ).
Press your bets, buy an island, declare a new republic, and ask the USA for assistance as you become an Ally.