Ask the Slot Expert: Raising the W-2G limit

Question: As you may or may not know, voters in Florida will be asked to approve or disapprove Amendment 3: Voter Control of Gambling in Florida next month. If passed, voters shall have the exclusive right to decide whether or not to authorize casino gambling. If passed, however, it clearly states that it won't conflict with federal law regarding state/tribal contracts.

Being that casino gambling is controlled by the Seminole tribe in Florida, will it really matter which way the vote goes?

Answer: I was not aware of that ballot measure. Here's the analysis I found on VoteSaveAmerica.com:

AMENDMENT 3: Voter Approval of Casino Gambling Initiative

Gambling in Florida: Should voters decide?

DEEP DIVE

Right now in Florida, casino gambling is prohibited at non-tribal facilities in all but two counties (Miami-Dade and Broward).

This measure would give voters, not the Florida legislature, the exclusive right to decide whether casino gambling should be allowed in Florida. This means that the state legislature would not be able to authorize casino gambling though state law or a constitutional amendment. Only citizen-initiated ballot measures could authorize it.

Casino gambling includes card games, casino games and slot machines, but not horse racing bets, dog racing bets, or jai alai exhibitions (which is like horse racing, but with balls and walled-in spaces). ANYWAY, this amendment would not impact casino gambling on Native American tribal lands.

WHO SUPPORTS IT?

Disney, Seminole Tribe of Florida, League of Women Voters of Florida, Florida Chamber of Commerce, Florida Restaurant and Lodging Association, No Casinos, Inc.

WHO OPPOSES IT?

American Legion of Florida, Hialeah Park, West Flagler Associates, LTD, Sen. Bill Galvano (R)

IF YOU VOTE YES

You support giving voters the exclusive right to decide whether Florida should allow casino gambling across the state.

IF YOU VOTE NO

You don’t want voters to have the exclusive right to decide whether Florida should allow casino gambling across the state, and would be fine with it if state lawmakers made that decision.

It sorta matters which way the vote goes, but I think the difference is like Original Recipe or Extra Crispy. The basic product is mostly the same in both cases, just slightly different. Or, as my sixth grade math teach said, "It's exactly the same, only different."

As I understand it, the question is who you think should decide if gambling should be allowed in other non-tribal facilities, the legislature or the voters. The legislature is probably the more flexible choice. It can enact a law at any time. For the voters to decide, you have to get a measure on the ballot and then wait for the election to see if it passes. But at least the decision represents the will of the voters — or, at least, the will of the voters who bothered to vote. Legislators might be voting the will of their donors, not their constituents.

Question: Regarding the tax law changes, it makes no sense at all that the tax laws were FINALLY changed in September 2017 regarding parimutuel wagering and winnings at horse tracks, dog tracks and jai-alai frontons. The new law considers your wagered amount on the winning ticket and the amount you won.

Example: If I spent $40 on a Pick 3 wager (you have to pick the winning horse in three consecutive races), and I hit it and win $4,000, that is now untaxable. The law states it is now 300 times the wagered amount, so 300 x $40 = $12,000. I would have to win 12,000 or more for it to be taxable.

Question is, why won’t the IRS extend this to apply to slot machine winnings? When we are spending $5 a hand on a spin and win $1,350, for example, that is still a hand pay with a tax form, which is ridiculous. At least the 300 x $5 would help in this situation. And for those players who play the high limit machines spending $25 or more a spin, it’s not fair to win $1,200 or more, and have to get a tax form. Seems like the IRS needs to extend this law into casinos regarding slot machines and video poker.

Answer: There are many problems with how the IRS treats slot winnings. Consider this example I found on the Las Vegas Advisor website.

Say you're playing full-coin on a $100 9/6 Jacks or Better machine and hit a three-of-a-kind. You get a W-2G showing $1,500 in winnings.

But how much did you really win? Only $1,000 because $500 of the $1,500 is really a return of your bet. I suppose one could argue that you won $1,500 because slots pay for one and not to one, but your wallet is only $1,000 heavier. (Table games pay to one. When you win, you keep your original bet.

There are some accommodations casinos can make for high-limit players who generate a lot of W-2Gs to minimize their downtime. Instead of going through the ritual of W-2G and hand pay for every jackpot of $1,200 or more, they can keep a tab of taxable jackpots and handle the W-2G when the player is done. Rather than a hand pay, they can do a pay to meter and have the winnings added to the credit meter.

Although I agree that the W-2G threshold should be raised, the threshold doesn't really affect me and others who file as professional gamblers. We report all of our winnings, regardless of whether a W-2G was issued.

The problem pros run into sometimes is when the total of their winnings is less than the total of their W-2Gs. It's never happened to me, but it has to others who play volatile pay tables for high stakes. Playing something like SpinPoker, they end up playing back much of the winnings reported on a W-2G. The difference between the sum of their winning sessions and the sum of their losing sessions still shows a profit, but the winning sessions sum is less than their W-2Gs.

It's the casual gamblers who can really get hurt by a W-2G. Someone finally hits a royal flush on a dollar machine. They're thrilled to watch the floorperson count out 40 hundred-dollar bills, but their problems may only be just beginning. The easiest thing to do is to report the jackpot and pay the taxes. But that extra income increases your Adjusted Gross Income and that may affect your eligibility for certain deductions and credits.

Worse, you may have a net win less than $4,000 and you may even have a net loss. You can't report a true net win number. You have to deduct your losing sessions as an itemized deduction and you may not have enough deductions to warrant itemizing.

There are many ways to make the tax code fairer to gamblers, especially casual gamblers, but I don't expect to see any changes anytime soon.

In fact, maybe it's better to first close some of the loopholes like a certain candidate for President said he would do and didn't.