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Gambling Winnings and the IRS
In the United States gambling winnings are considered by the IRS to be taxable income and must be reported on your federal tax return. Gambling income includes, casino winnings, winnings from lotteries, and horse races. Cash winnings as well as the fair market value of prizes such as cars and trips etc. are eligible for Gambling taxes. A payer is required to issue you a Form W-2G or Form 1042-s if you receive gambling winnings subject to Federal income tax withholding. All gambling winnings must be reported as income even if no casino tax is deducted. Foreign nationals such as residents of Canada and the United Kingdom may be exempt from paying tax and be subject to a full casino tax refund due to provisions within their tax treaties with the United States. It is advised for Foreign Nationals claiming tax treaty provisions to use the services of an IRS Certifying Acceptance Agent to effect a US tax recovery. You may deduct gambling losses only if you itemize deductions. Claim your gambling losses as a miscellaneous deduction on Schedule A . However, the amount of losses you deduct may not be more than the amount of gambling income you have reported on your return. It is important to keep an accurate diary or similar record of your gambling winnings and losses in order to claim your casino tax refunds. To deduct your losses, you must be able to provide receipts, tickets, statements or other records that show the amount of both your winnings and losses. Refer to IRS Publication 529, Miscellaneous Deductions, for more information.
Diary of winnings and losses. You must keep an accurate diary or similar record of your losses and winnings. Your diary should contain at least the following information. – The date and type of your specific wager or wagering activity. – The name and address or location of the gambling establishment. – The names of other persons present with you at the gambling establishment. – The amount(s) you won or lost. Proof of winnings and losses. In addition to your diary, you should also have other documentation. You can generally prove your losses through , wagering tickets, canceled checks, substitute checks, credit records, bank withdrawals, and statements of actual winnings or payment slips provided to you by the gambling establishment.
For specific wagering transactions, you can use the following items to support your winnings and losses. These recordkeeping suggestions are intended as general guidelines to help you establish your gambling winnings and losses. They are not all-inclusive. Your tax liability depends on your particular facts and circumstances.
Keno. Copies of the keno tickets you purchased that were validated by the gambling establishment, copies of your casino credit records, and copies of your casino check cashing records.
Slot machines. A record of the machine number and all winnings by date and time the machine was played. Table games (twenty-one (blackjack), craps, poker, baccarat, roulette, wheel of fortune, etc.). The number of the table at which you were playing. Casino credit card data indicating whether the credit was issued in the pit or at the cashier’s cage.
Bingo. A record of the number of games played, cost of tickets purchased, and amounts collected on winning tickets. Supplemental records include any receipts from the casino, parlor, etc.
Racing (horse, harness, dog, etc.). A record of the races, amounts of wagers, amounts collected on winning tickets, and amounts lost on losing tickets. Supplemental records include unredeemed tickets and payment records from the racetrack.
Lotteries. A record of ticket purchases, dates, winnings, and losses. Supplemental records include unredeemed tickets, payment slips, and winnings statements.
Divulging Casino Winning Taxes!
Going to casinos is an exciting activity and winnings make it more enjoyable. But your excitement may turn sour when a thing comes to mind that IRS charges 30 percent from part of gambling winning as tax. But do not disappoint because these withheld taxes can be taken back from the IRS in the form if tax refunds.
The U.S.-Canada Income Tax Treaty
Not only locals of United States but also Canadian can also avail the facility of tax refund. Canada and America have an agreement between each other with regard to casino winnings taxes. The treaty between United States and Canada reflects how the taxes of the casino winning should be treated with Canadian citizens. According this treaty thirty percent withheld taxes should be charged from the Canadian citizen, which is based on their gross income from gambling. Adding to this privilege is Article XXII of the same agreement according to which those Canadian locals which are taxed by United States are further entitled to withhold their U.S. source losses against their U.S. source wages. According to this Canadian residents can get Casino tax refunds from the withheld gambling winning tax.
Tax on Gambling
The amount of Casino winning taxes vary depending upon the won amount, it also depends upon the type of casino game and the part of the amount of winnings to the amount of bet. It means that even if you won in a casino game the withheld tax of thirty percent will not be automatically deducted, it is deducted with respect to the ratio between the winnings and losses. Sometimes, your losses exceed from the won amount then there is no winning present to be charged with the tax in the first place. In such situations the IRS requires a report of your earned income to determine how much tax will be charged on the gambling winnings.
The Need to Report
IRS determines whether the winnings need to be charged or not depending upon your losses and winnings. But it is winners responsibility to report his winning details to IRS. It pays to be a careful taxpayer and being liable enough to report even the small amount of winnings. It does not mean you have to pay Casino winning taxes if you reporting about the amount of your winnings. You can reduce your tax amount to be charged on gambling winnings with the help of Form 1040 because this form contains all the information of your gambling winnings and losses. Reporting of gambling losses is as important as the reporting of you winnings because IRS charge taxes on the basic of your winnings and losses.
Get Help
Some persons get confused about how to report gambling winnings and losses to IRS. Sometimes every thing looks to be done perfectly but there are possibilities that you may get into problem with government for not being able to submit the correct information about your amount of casino winning taxes. Get remain safe from such tension you need to have a help from the professional. There are many sites which contains all the information about how to deal with the IRS. To save yourself, from problems and later on litigations it is better to get help of professional before filling up the tax forms.