The Internal Revenue Service (IRS) has historically required that gambling winnings and gambling losses be separately accounted for. The reason for this has to do with the way gambling losses are deducted for tax purposes. Gambling losses are treated as an itemized deduction and reported on Schedule A of the individual income tax return (Form 1040). This creates a problem in the cases in which taxpayers cannot itemize (as is the case when a standard deduction is greater) or in which the taxpayer’s income exceeds a certain threshold (in which case the taxpayer loses part of their itemized deduction via a phaseout). In such cases the taxpayer does not get the full benefit of the gambling losses to offset against the gambling winnings. What the IRS is really after is the reporting and taxation of gross gambling winnings. bandarq
New Tax Rule:
According to a recent tax court case (Shollengerger, TC Memo 2009-36) taxpayers are allowed to net gambling winnings during a given day with gambling losses. This is a significant setback to the IRS. As an example, imagine if you were to win $2,000 in the morning at a casino and lose $900 later that afternoon. Prior to this court case, the IRS would require that you report the $2,000 in gambling winnings and then separately itemize the $900 in gambling losses on your tax return. The court instead ruled that the taxpayer in this case was permitted to net the gambling winnings for the day and report $1,100 as net gambling winnings instead of the $2,000 gross amount, the IRS mandated. The court went on to state that this “netting rule” only applied on a daily basis. It stated that a taxpayer could not net gambling winnings and losses for the entire year.
Irrespective of this change in reporting and taxation of gambling activities, there are specific accounting requirements for gambling activities. The IRS requires taxpayers to keep a diary or ledger of all gambling activities. This tax accounting requires the taxpayer to record the following information concerning various gambling activities:
16. Table credit card data including where credit was issued
All of the above items can be supplemented by receipts, tickets etc.
Tom is a Certified Public Accountant, a Certified Financial Planner, CLTC (Certified Long-Term Care) and President of Cerefice & Company, the largest CPA firm in Rahway, New Jersey. Tom works with clients helping them manage their money, retirement planning, college savings, life insurance needs, IRAs and qualified plan rollovers with an eye towards maximizing tax benefits and minimizing taxes. Tom is founder of the Rich Habits Institute and author of “Rich Habits”.
Internet betting and gambling sites are a multi-billion dollar industry that will not be going away anytime soon. But why all the concern? Well, researchers believe that Internet gambling is even more addictive than traditional casino gambling. An article in the journal Psychology of Addictive Behaviors, stated: “The availability of Internet gambling may draw individuals who seek out isolated and anonymous contexts for their gambling behaviors.” Further, Internet gambling can be associated with a high risk of addiction because of the easy access — even teenagers and children can access online casinos and betting sites. And it is considered fact that people under 25 are more likely to become addicted to gambling.
In general, if you think about it, why should any child oir even teenager, be spending any time at all on gambling websites. So they should really be blocked from accessing them in the first place. But if they do have access, and you believe something may be wrong, in the same way that you would seek treatment for an alcohol or drug problem, you need to seek treatment for a potential gambling problem. Of course the same thing goes for adults as well. There is no lack of stories of people losing their savings, homes, jobs, families over debts accumulated from online gambling.
If you suspect a loved one has a compulsive gambling problem, you should read up on recognizing the signs and symptoms of gambling addiction and ways to handle the problem in your home. Of course, any behavior that is causing problems or disrupting a person’s ability to lead a normal and healthy life, should be attended to, even if there is not an official diagnosis of an addiction.