Gambling is quite fun. It attracts people like moth to fire. An ordinary individual couldn’t resist a simple hand at gaming to earn up few quick bucks. But, most of the individuals who indulge in this highly addictive game do so without being fully aware of the prevalent tax laws. This could put them in a dangerous position with the authorities if their winnings are detected.
Here are some quick tips on your gambling spoils and losses so that the next time you feel an urge to indulge in it, you do so with your eyes open on the tax laws. This way you can enjoy the tax benefits even when you lose in the game. At the same time you also contribute towards the development of the state with the help of a small share from your winnings. Hence, you should be aware about the various rules regarding the reporting of a gambling loss or win.
To help you out we have listed seven things about the IRS rules on reporting. Thus, the next time you come face to face with your lady luck, you would know the right way of reporting it and be on the better side of the law.
1. You are obliged to pay tax on all your gambling winnings.
2. Most people are aware of the fact that lottery winnings, horse races, raffles, casinos and poker tournaments come under the gambling tax. But, you would be surprised to know that even fair values on prizes like trips and cars and other cash winnings are also taxable amounts.
3. If lady luck smiles on you and you win in a gambling game, or if you have in your possession certain gambling winnings that are subject to the federal IT withholding then the payer is obliged to present you with the Form W-2G.
4. In case you are not issued the Form W-2G then you are required to take the initiative and report the gambling winning as a taxable income. Thus, you prove yourself to be a good citizen and pay up an estimated tax amount on your gambling winnings. You can get additional information regarding the payment on estimated taxes through the IRS Publication No. 505, Tax Withholding and Estimated Tax.
5. The line no. 21 of Form 1040 is the place allotted for the reporting of gambling winnings.
6. There is also provision for tax savings on your gambling losses. These losses are limited to the total gambling winnings and you cannot take their benefit under the 2% AGI Limitation. Hence, make a clear book of all your gambling winnings and losses all the year round. This way you do not pay more that you have to. You can itemize the deductions on the Schedule A of Form 1040.
7. The Tax law requires that you provide them all the tickets, receipts, statements and any other record that can show them a clear picture of all your losses and winnings. So, please, keep all the documents related to gambling safely with you.
