Ask the Slot Expert: Including gambling winnings in AGI is unfair

There is one more point about the unfairness of the IRS's method of reporting gambling wins and losses that no one has yet mentioned.

Wins are reported as income. Losses are reported as deductions. With this method, the wins count toward gross income, which determines how much retirees pay per month for Medicare, as well as limiting deductions such as medical expenses.

Each year, my wife or I get at least one W-2G; and almost every year our losses are greater than these wins. Yet, we pay more for Medicare each month because of the way that gambling wins and losses are reported.

There's not much that's fair about taxes and gambling. Anything that gets phased out based on AGI (adjusted gross income) can be affected by your gambling winnings.

The IRS has a Jekyll-and-Hyde relationship with gambling. On the one hand, it's convinced that you can't make a profit gambling, so it makes it difficult to qualify as a professional gambler. On the other hand, it thinks you can win — at least sometimes — and wants to get its cut.

Maybe we can come up with a compromise for taxing gambling winnings. Why not give gambling winnings a special tax rate like that for qualified dividends? Maybe raise the W-2G threshold to $1500, collect a flat 10 percent on W-2G winnings, exclude the winnings from AGI and eliminate the loss deduction.

Anyone else have any other ideas - besides not taxing winnings at all?

I play the Silver Bars slot machines. And someone told me there is a way that I put some kind of program on my phone so that I can increase my chances of winning on the Silver Bars slot machine.

Do you have any knowledge of this?

I'm not familiar with the Silver Bars machine. I Googled it and didn't get any results for that machine. If anyone knows the manufacturer, I can check on its site.

In any case, there's not going to be an app that will increase your chances of winning. The Random Number Generator (see next answer for more info on the RNG) is not affected by any outside force. The results of each spin are determined at random, so there's no way an app can predict whether the next spin will be a winner or a loser and tell you whether to bet the minimum or the maximum - unless the programmer has some inside knowledge of the RNG function, in which case using the app would be illegal. Finally, no gaming jurisdiction would approve a game that could be influenced by some app on a smartphone.

Does it matter how much money I bet on Cave Man Keno for my numbers to hit? Or is it when the machine is ready to hit?

Also, what is RNG in a machine? How does it work? You said in someone's letter to you that the RNG has something to do with the machine hitting your numbers. Is this true?

Should I play the same numbers all the time?

Channeling (and paraphrasing) Roseanne Roseannadanna: You sure do ask a lot questions for a Keno player.

The amount you bet has no effect whatsoever on whether your numbers will hit. The machine needs some method to determine which numbers are drawn in each drawing. Lotteries usually use blower machines filled with numbered balls. Slot machines use a function in their programming called a Random Number Generator (RNG).

The RNG in a Keno machine performs the same function as the blower machine and numbered balls. It randomly selects the numbers for the drawing. Regulators test RNGs to ensure that they satisfy many of the tests for randomness and that they are impervious to outside influences like the amount bet.

Machines are never ready to hit. The RNG doesn't say that it is time to reward the player. All it does is choose numbers at random. If some or all of the numbers drawn happen to match some or all of the player's numbers, the player wins.

I think it's an important distinction to understand. The programming in the machine didn't decide that it is time to hit. The programming just chooses numbers at random and you win if those numbers match the numbers you chose.

It doesn't matter whether you play the same numbers each drawing or change some or all of them from drawing to drawing. Every set of numbers has the same probability of being drawn.