Comparing tax situations at tables and slots

Three Card Poker is not one of my wheelhouse games. I prefer the games with larger skill elements, and tend to look first at blackjack and video poker.

Still, Three Card Poker is a nice change of pace, an easy game that's kind of fun, and its biggest-paying hands — straight flushes and threes-of-a-kind — come up frequently enough that anyone who plays often is going to have a nice payday every now and again.

So one recent casino afternoon, I found myself settled in at a $5 Three Card Poker table, betting the minimum both on the ante-bet portion, where the player's hand must beat the dealer's, and on Pair Plus, where any pair or better wins, regardless of the dealer's hand.

The big hands didn't come my way. I lost a little money, headed to the buffet for a bite to eat, then headed for home.

While I was at the table, another player was more fortunate. He was dealt a straight flush while he had a $10 bet on the table. That was worth a $400 payoff on the Pair Plus section of the game, which pays 40-1 on straight flushes.

As the dealer was counting out chips, a woman to my right asked, "No tax form with that? I saw someone get a straight flush once, and they had to sign a tax form."

I asked if that happened at Three Card Poker.

"I don't think so," she said. "I think it was that Caribbean Game."

That could have been either Caribbean Stud or Caribbean Draw Poker. The side bet on a progressive jackpot is the same on either game. At some casinos straight flushes pay 10% of a progressive jackpot. A royal flush would win tens or hundreds of thousands of dollars, and a mere straight flush would win 10% of that.

At other casinos, straight flushes win a flat $5,000. Either way, it's a nice win for a $1 side bet.

That meets standards for requiring an IRS Form W-2G before the player can be paid. On a table game, if the jackpot is $600 or more AND the payoff is 300-1 or greater, you are required to sign a tax form before you're paid.

It's a standard that makes sense. A high-roller betting $1,000 a hand at blackjack doesn't need a W-2G for each hand he wins. He's likely to lose more hands than he wins, anyway. Win 45 hands in an hour and lose 55 for a $10,000 loss, the last thing you need is a tax bill on $45,000 in "winnings" to go with it.

Even the biggest hands at Three Card Poker fall well short of that 300-1 requirement. There are versions of the pay table where straight flushes pay 50-1 instead of the usual 40-1, and there are versions that add a three-card royal paying as much as 200-1 to the top. None of them reach the 300-1 IRS standard that requires immediate paperwork.

That's roughly analogous to what we see on a slot machine of a video poker game. A top jackpot of $1,200 or more is going to bring a tax form, no matter what your bet size. But four 2s in Deuces Wild, paying 200-1, isn't going to kick in the requirement on quarter machines, or even dollars.

The analogy breaks down at higher-denomination electronic games. If you're playing a $5 machine, payoffs at much lower odds can trigger the W-2G requirement. In Double Bonus Poker, where four fives through four kings pay 250 credits for a five-credit bet, that payoff translates to $1,250 on a $5 game. Even that 50-1 payoff will bring a casino employee around with a form to sign.

So there are tradeoffs in comparing tax situations at tables and slots. The $600 threshold for triggering a form is lower than the $1,200 at the slots, but the 300-1 provision keeps away the W-2Gs for moderate table wins while there is no equivalent provision at electronic games.

With or without an on-the-spot tax form, the IRS does hold gamblers responsible for all winnings, even those of the lower-limit variety. Professionals — blackjack card counters, live poker sharps, video poker pros who are skilled enough to gain an edge on the house — must keep careful records and balance all session wins versus session losses.

For the vast majority who are not advantage players, careful records can help if you hit a large jackpot, then try to deduct losses up to the amount of winnings from your federal taxes. Just tracking the losses isn't good enough. The feds want to see the wins too, date by date and session by session.

Back at the tables, a jackpot at 300-1 odds is a bonanza you're not likely to give back just in a normal session. That's income, and the IRS wants its cut. Your signature here, please.