Under Notice 2015- 21, a taxpayer determines wagering gain or loss from electronically tracked slot machine play at the end of a single session of play, rather than on a by- bet basis. To this end, the IRS issued Notice 2015- 21, which provides taxpayers a proposed safe harbor to determine gains or losses from electronically tracked slot machine play. This method is also recognized in both Schollenberger and LaPlante, as a by- bet method would be unduly burdensome and unreasonable for taxpayers. In 2008, the IRS Chief Counsel opined that a slot machine player recognizes a wagering gain or loss at the time she redeems her tokens because fluctuating wins and losses left in play are not accessions to wealth until the taxpayer can definitely calculate the amount realized (Advice Memorandum 2008- 011). Tax Court cases have recognized that gross income from slot machine transactions is determined on a session basis (see Shollenberger, T.C. Neither the Code nor the regulations define the term 'transactions' as stated in Sec. 873.Ĭase law and IRS guidance have established that a taxpayer may determine gambling winnings and losses on a session basis. Nonresidents whose gambling winnings are connected to a trade or business may deduct gambling losses to the extent of winnings, however, under Sec. The law is not as kind to nonresidents: While nonresidents must also include U.S.- source gambling winnings as income, they cannot deduct gambling losses against those winnings. For amateur gamblers, gambling losses are reported as an itemized deduction on Schedule A, Itemized Deductions. Whether the gambling winnings are $5 or $500,000, all amounts are taxable.Ī taxpayer may deduct losses from wagering transactions to the extent of gains from those transactions under Sec.

61(a), all income from whatever source derived is includible in a U.S. With proper recordkeeping and guidance, a taxpayer with gambling winnings may significantly reduce audit exposure. There are many nuances and recent developments under federal and state tax laws about gambling and other similar activities. How are these amounts reported and substantiated on a tax return? Does the answer change if the taxpayer seeks to make a living as a poker player? Do states tax gambling differently?

Forms W- 2G, however, do not necessarily capture all of a taxpayer's gambling winnings and losses for the year. Totaling a taxpayer's Forms W- 2G, Certain Gambling Winnings, for the year would seem to be the straightforward way to determine the amount of gambling winnings to report on a tax return.

Gambling winning reported to irs