TaxAlerts Tax Article
September 2016 | Written by: Charla Woods
Gambling – it can be as simple as picking up a single lottery ticket, playing the penny slots in Vegas, or taking numbers during a horse race. Many of us have participated in some type of gambling and there are those who even consider it to be a favorite pastime!
However, whether you’re a seasoned gambler or are fairly new to this type of activity, there are a few things you should know about gambling and how it can affect you when tax time rolls around:
- No matter how much you consider gambling to be a fun activity, you still have to report any and all winnings on your tax return. Some people make the mistake of thinking that, if they do not receive a Form W-2G, they do not have to report their winnings to the IRS. Unfortunately, this could not be further from the truth! While it is the payer’s responsibility to issue this form, there is always a chance something could fall through the cracks. At the end of the day, the IRS will hold you responsible for any unreported income not documented on your return.
- While gambling “income” sounds like it pertains strictly to cash winnings, it also applies to non-cash profits – such as cars and trips – and the cash value of those items need to be reported as income on your tax return as well.
- Typically, gambling winnings should be listed on the “Other Income” on line 21 of your Form 1040.
- Gains and losses must be tallied separately by “session” within a taxable year; they cannot be netted all together.
- Receipts are your best friend. I know – they don’t SOUND as exciting as your best friend. But come tax time, you’re going to be thankful for documentation that will clearly chronicle all your gambling losses and winnings. That way, if Uncle Sam ever does come knocking at your door, you’ll have solid proof to back up all the numbers listed on your tax return.
For more tips about reporting gambling winnings and losses to the IRS, please visit IRS.gov.