When you are filing your taxes, you are likely focused on reporting your income, itemizing your deductions and reporting any other money that comes in or goes out. However, it can be easy to forget some of these transactions, particularly when they were infrequent or seemingly insignificant events over the last year.
For instance, did you bet on The Kentucky Derby? Win big at the slots in Vegas? Lose a couple thousand dollars but then break even at the casinos? If so, these are all things that should be reported to the IRS. Failure to report gambling winnings and/or losses can lead to audits and potentially significant penalties.
Every amount won or lost in gambling is supposed to be reported to the IRS. However, you won’t get a W-2G form every time you place a bet, which is a form that details bets and how much federal tax was withheld from those winnings.
As noted on the IRS website, you should receive a W-2G form if you win:
- At least $1,200 on slot machines or from bingo
- At least $1,500 from keno
- At least $5,000 from poker tournaments
- At least $600 from games like horse races, as long as the winnings are 300 times your bet
You will also report your losses, which can offset the amount of money that is ultimately taxed. It is also important to note that there are tax-exempt organizations and state regulations that can affect what you report and how much of your winnings are taxed.
Whether you are a casual or serious gambler, it can be crucial that you understand the requirements for reporting your winnings to the IRS. Should you neglect to do this, you can face penalties for unpaid taxes, which can prove to be more expensive than you thought.
If you have questions or concerns about gambling and reporting income and losses to the IRS, it can be best to consult an attorney sooner rather than later. If you wait until next April, it could be all but impossible to gather the documentation and receipts you need to have for your records.