Ask the Slot Expert: More on gambling and taxes

Hi John,

I read your column via my e-mail and look forward to each time you send it. You do a great job of informing the slot gambler.

I just read the article from Mike the Tax Preparer. The casinos would go out of business if we had to file taxes the way Mike thinks they should be. I and many others would just stop playing the slots. Just imagine winning $5,000.00 and having played (lost) $6,000.00 to win the $5,000.00. Good example because I’ve done exactly that a few times. Therefore, I’m down $1,000.00 and on top of that would have to pay taxes on the $5,000.00 win. At 20 percent tax obligation of $1,000.00 now makes me down $2,000.00. Mike’s tax opinion would ruin the casino business.

The change that needs to lobbied by the casinos is the W-2G trigger amount. The current $1,200.00 has been in effect for many years. In today's slot world of much higher wagers per spin and higher denomination machines on the slot floor, it would benefit the player and the casino to adjust the $,1200.00 upward to at least coincide with inflation. I play $5.00 machines and up to $25.00 per spin and W-2Gs at $1,200.00 is out of touch with reality. An inflation adjustment is fair to the slot player and the IRS. Also, the W-2G preparation is an added cost to the casino.

In my opinion, for the 2011 tax year the slot player can expect more IRS audits because the government can’t control their spending and will be “hungry” for every penny they can lay their hands on. Therefore, more than ever a very detailed gambling diary will be needed. Just my opinion but better safe than sorry.

It would be very helpful and appreciated if you could help with an effort to get the W-2G trigger amount increased.

Thanks for the opportunity to voice my thoughts.

Jim

Dear Jim:

Thanks for the kind words.

I don't think Mike meant that we should report gambling winnings the way you described, but I can see how you came to that conclusion. You concluded that Mike said we should have to report our winnings and not be able to offset them with our losses. That would be like taxing a business on its gross revenue and ignoring expenses.

The situation you described is reporting the total of your W-2Gs without being able to deduct any losses. This way is the way many players handle their taxes on gambling winnings. They didn't keep a diary. They didn't use a player's card. They have no way to show how much they lost, so they have no choice but to pay taxes on their entire W-2G total. Even if you have a diary, it has to make sense for you to itemize deductions to be able to declare your losses.

Slot players have been talking about indexing the W-2G minimum for over a decade now. I don't see it happening anytime soon, especially with so many other problems with the tax code that are even more unfair.

I think of the W-2G and the taxes we end up paying on them as a sin tax -- a regressive sin tax.

Best of luck in and out of the casinos,
John

Send your slot and video poker questions to John Robison, Slot Expert, at slotexpert@comcast.net. Because of the volume of mail I receive, I regret that I can't reply to every question.