Gambling is a big business in America and the Federal Government knows it. When someone wins a big jackpot, Uncle Sam wants some of the winnings. The government has passed laws that require casinos to enforce current laws on individuals or face severe penalties themselves.
One law that is easily enforced by the casinos is awarding winners who hit it big time with a notice of tax obligation. When a player receives $600 or more (and that amount is 300 times your bet) at a horse track, wins $1,200 at a slot machine or bingo game, or takes $1,500-plus in keno winnings, the payer must give their Social Security number and let the IRS know that they came into the extra income. Recently, the IRS also enacted the requirement that all poker tournament sponsors are required to report competitors' winnings of more than $5,000.
What a player signs for when getting the payout is the promise to pay the taxes when filing their annual return. The casino will then issue a W-2G form and send a copy to the IRS so the government will know when a big win has been awarded. In addition, the tax law also says all winnings at gambling are reportable. The casino, track or lottery agent might not have reported the $50 that you won, but it's still taxable income. It's ultimately the taxpayer's responsibility to tell Uncle Sam about his or her good fortune.
Bet You Didn't Know
The ten casinos in Tunica Mississippi pay a 12 per cent gaming tax, with 8 per cent going to the state, and 4 per cent to the local economy.
When Charles Fey built his first slot machines in 1887, he pasted a tax stamp on each machine. At the time there was a 2-cent federal revenue tax on each deck of playing cards. Fey though it was wise to buy the stamps since his slot machines had card symbols on its reels.
Taxes on casinos in Chile are 70 percent of gross gaming wins. Seven percent goes to the national government; 30 percent to regional development; the remainder goes to city government to develop tourism facilities.
From 1849 to 1855 the California legislature made gambling a legal profession that allowed the government to tax the gamblers earnings.
Taxes on European casinos can be extremely high, 50 to 90 percent, while US taxation on casinos runs between 6 to 8 percent.
In 1950 Congress authorized the expenditure of US taxpayer funds to open a casino in Travemunde, Germany under the provisions of the Marshall Plan for business recovery in Western Europe after WWII. The casino is still operating successfully today.
