Photo: Anna Shvets

Will gambling losses trigger an audit?

Gambling losses are often a trigger for IRS audits because most people don't keep careful records of how much they lost while at the casino, racetrack, or another gambling establishment. While you are permitted to deduct gambling losses up to the amount of your winnings, doing so could lead to an audit.

paladinilaw.com - IRS Gambling Losses Audit | Paladini Law

How do you find the spread of a game?

A point spread is dictated by a sportsbook that determines by how many points the favorite is expected to win the game. Bettors can then wager on...

Last updated Apr 1, 2022

What Position tackles the most in rugby?

flankers The mysterious Number Eight and his role One of the players who sees the most tackling, the number eight is also the only player without a...

Last updated Mar 5, 2018

Make Your Bookie Cry And Pull The Hair By Generating $23,187

Promotion

If you’re like many Americans, you enjoy gambling. Perhaps you hit Atlantic City or even Vegas a few times a year, having fun while winning a few bucks. But how does your gambling affect your taxes?

Gambling winnings are considered taxable income, which means that you must report them as such for purposes of both federal and state income taxes. To offset these winnings, you can list your annual gambling losses on Schedule A of your tax return. However, if you don’t keep good records, you could find yourself facing an IRS gambling losses audit. Gambling losses are often a trigger for IRS audits because most people don’t keep careful records of how much they lost while at the casino, racetrack, or another gambling establishment. While you are permitted to deduct gambling losses up to the amount of your winnings, doing so could lead to an audit. If you find yourself facing this type of audit, a seasoned IRS audit lawyer can defend you and protect your rights.

Reporting Gambling Winnings and Losses

In 2016 alone, nearly $120 billion was lost in American casinos. Gambling can be a lot of fun, but the saying “the house always wins” exists for a reason. If you’re a gambler, it is far more likely that you will lose money than it is that you will strike it big. Under U.S. tax law, people who gamble recreationally (i.e., not as professionals) are permitted to deduct their losses. This amount can be used to offset gambling income, which must be reported to the IRS as taxable income. Gambling losses cannot be deducted from your non-gambling income. When you win money through gambling, you may receive a Form W2-G to report that certain winnings to the IRS. Other gambling winnings can be reported directly on your Form 1040 as “other income.” Typically, you will receive a Form W2-G from established gambling businesses, like a casino or race track, and not from things like a local bingo hall or an informal poker tournament. You can then itemize your losses on Schedule A as other itemized deductions. These losses are then deducted from your gambling winnings to reduce your taxable income, up to the amount of your winnings. For example, if you won $5,000 through gambling in 2020, you would report that as taxable income. If you lost $7,500 through gambling that same year, then you would list those losses on Schedule A. This would effectively cancel out your winnings so that you wouldn’t be required to pay taxes on the $5,000. Losses that exceed your winnings ($2,500 in this example) cannot be carried over to the next year or used to offset other sources of non-gambling income.

How to Avoid an IRS Gambling Losses Audit

Can you withdraw 10k from ATM?

A frequently cited limit on the most cash you can withdraw at any one time is $10,000. However, the reality is that withdrawals of $10,000 or...

Last updated Mar 16, 2021

What does it mean when a cop says I got your six?

I got your back WWI pilots were the first to say, "I got your six," meaning they've got you covered so the enemy can't come up behind your back and...

Last updated May 3, 2020

Promotion

The ability to deduct gambling losses is important — but you will need to be able to prove that you actually suffered those losses. When most of us gamble, we aren’t taking careful notes of what we spent or even what day we spent it. This is particularly true if we are having a few drinks while hitting the blackjack tables. Unfortunately, the IRS requires you to keep a record of your gambling winnings or losses. This record can then be used to prove that you incurred certain losses or won money through gambling. At a minimum, these records should contain:

The date you gambled

The type of gambling involved

The people you gambled with

The name and address of where you gambled

The amount you won and lost

Taking the time to record these things can protect you from an audit. These records should include any gambling that you participate in, such as lotteries, slot machines, keno, casino games, poker, sports betting, horse and dog races, sweepstakes, and off-track betting. They should also include the fair market value of prizes, like cars and trips. Because most people don’t keep careful records of their gambling losses, itemizing these losses is often a red flag for the IRS — particularly if the losses are significant and/or completely offset gambling winnings. This can lead to an IRS audit. If you do receive an audit letter from the IRS, you should contact a skilled IRS audit lawyer as soon as possible. Your attorney will help you put together the necessary documentation and develop a legal strategy to achieve a successful outcome.

Facing an IRS Audit? We’re Here to Help.

Receiving an IRS audit letter can be incredibly scary. Depending on how the audit goes, you could be facing a massive tax bill. A seasoned IRS tax audit attorney can advocate for you and help you get the best possible result: a “no change” letter. At Paladini Law, we represent individuals and businesses in a range of tax matters. We use our extensive knowledge of both federal and state tax law to help you handle even the most complicated tax issues. To learn more or to schedule a consultation with a member of our team, contact us today at 201-381-4472 or fill out our online contact form.

paladinilaw.com - IRS Gambling Losses Audit | Paladini Law

What does +800 mean on a bet?

A plus-sign means that you win that amount if you bet $100. For Mayweather at -800, you have to wager $800 for every $100 you have to win. For...

Last updated Feb 16, 2019

Why is sport not all about winning?

This is because sport is not just about winning or losing. It is about a shared experience, a shared contest, and it represents values that bring...

Last updated Feb 26, 2020

Promotion

How do I control myself when gambling?

When you feel like you might gamble again, or if you do gamble again, helpful strategies include: Talk to your support person. Write your feelings...

Last updated Dec 28, 2020

Promotion

What state has most gambling?

Nevada. Nevada is home to most of the casinos in America, and this alone has made Nevada undoubtedly one of the most interesting and fun-filled...

Last updated Feb 3, 2022