Tax/Withholding question

[BillyJoe]

Interesting question. Florida casinos do not withhold tax.   I know Mississippi casinos take out their 3% state tax before they give you the money.  A lawyer once told me you can file to get it back, but it's a hassle. 
Even if you file a non-resident Mississippi State Tax return, and only have gambling winnings as state income, Mississippi still keeps the 3% that they withheld when you got your handpay.

In Louisiana, however, while they withhold state taxes on a handpay, filing a non-resident Louisiana State Tax return will get you that money back.

[BillyJoe]

So is it safe to say that I could as a method to ensure I take more of my winnings to have them withhold a portion of the jackpot as federal withholding? Understand, I'm not trying to mess with the numbers, I'd still have to show the winnings as income (I'd have a W2G), including the amount withheld, but will the amount withheld be considered money paid against my taxes.

Roveer, you can 'donate' as much money to the Federal Gov't in tax withholdings as you like for ANY form of income at any time of the year. When you do your FEDERAL tax return for that year, it doesn't matter where that withheld money came from (W2, W2G, etc), it is all treated the same.

Once to take your allowed gambling losses that year against your declared winnings, if you over-withheld, you get the refund.   

[roveer]

  Roveer you can always tell them to with hold MORE than the roughly 28% that they would take out for the fed. I would rather bank the money and let it earn instead of loaning it to Uncle Sam until I recoup it come tax time. It is my impression that a person should do their best to get their tax liability as close to owing nothing or getting nothing back in the form of a refund on April 15th.

Normally I would look to optimize just as you point out, but money in the bank earns nothing, and physiologically to me at this point it's better spent sending to the govt. Right now it's all about keeping my winnings any way I can. I'm looking at this as protecting myself from myself. Once I get this kink worked out I'll be back to optimizing once again.

Roveer

[rascal]

I agree with those who posted that it makes no difference where the withholding comes from --- it is your total withholding vs your total tax liability that counts. On several occasions I have withheld quite a bit from large jackpots due to anticipated tax liability elsewhere. As Tedlark pointed out, you do in fact lose the potential investment/interest earnings on excess withholding, so it is to your advantage to only have a casino take excess withholding very late in the tax year.

[Tedlark]

roveer I was thinking more like a 6 or 12 month cd or bond. If you are self employed how about socking some of the dough in a Roth or a combination of a Roth and a SIMPLE IRA?

Make a CAPEX purchase for your business (again, if self employed) by loaning yourself the money and then taking the depreciation while paying yourself back?

[olds442jetaway]

Believe it or not, a W-2G is not the determining factor in reportable gambling income. Most people rely on win loss statememtn provided by the casino when doing their taxes. However, all gross gambling winnings are taxable and are offset by gambling losses up to the gross amounts won. This is a very complex area of tax law and court cases over the years are all over the place as are decisions made by various auditors. I am not a tax lawyer or accountant, but have read up on this extensively over the years. Even the definition of what a session is varies from case to case. To be perfectly accurate on reporting gambling income and being able to defend your deductions, you would have to have a diary of all trips, notes made on which machines were played and who was with you, and when your session began and ended as to date and time as well as amounts won or lost for any given session. Even going to another casino in the same day, could be interpreted by the IRS as 2 different sessions by some IRS people. How I wish law was just simple and straightforward. Unfortunately, the curent tax code and laws are so complicated the lawyers and accountants will be in business forever. Just as an aside, the above are just my opinions and observations and everyone should consult their own tax advisors on these matters.

[Minn. Fatz]

So is it safe to say that I could as a method to ensure I take more of my winnings to have them withhold a portion of the jackpot as federal withholding? Understand, I'm not trying to mess with the numbers, I'd still have to show the winnings as income (I'd have a W2G), including the amount withheld, but will the amount withheld be considered money paid against my taxes.

I think I understand now. Again, not a tax expert, but:

Your gross gambling winnings count as income, usually declared on the "other income" line of your form.

As an itemized deduction, you can take your gross gambling losses, up to the amount of your declared gross winnings.

That is, the net effect of your gambling activity on your annual taxable (as opposed to gross) income is the greater of your net results from gambling and zero. If you have a net loss from gambling in a year, you cannot deduct that amount from the rest of your income.

Any monies withheld from your income, including from your gambling winnings, are counted as taxes paid and will offset your tax burden at the end of the year.

So, you count the total amount of your win as income, included in annual gross income; you may take your total losses, up to the amount of your total winnings, as a deduction against annual gross income; and any withholding will count as a payment against your tax.

Hope that's clearer.

P.S. you don't have to have anything withheld from your win as long as you provide the casino with your SSN or tax ID number, which they report to the good ol' IRS along with the amount of the win. If you don't do that your win may be subject to 28% "backup withholding."

[BillyJoe]

Believe it or not, a W-2G is not the determining factor in reportable gambling income. Most people rely on win loss statememtn provided by the casino when doing their taxes. However, all gross gambling winnings are taxable and are offset by gambling losses up to the gross amounts won. This is a very complex area of tax law and court cases over the years are all over the place as are decisions made by various auditors. I am not a tax lawyer or accountant, but have read up on this extensively over the years. Even the definition of what a session is varies from case to case. To be perfectly accurate on reporting gambling income and being able to defend your deductions, you would have to have a diary of all trips, notes made on which machines were played and who was with you, and when your session began and ended as to date and time as well as amounts won or lost for any given session. Even going to another casino in the same day, could be interpreted by the IRS as 2 different sessions by some IRS people. How I wish law was just simple and straightforward. Unfortunately, the current tax code and laws are so complicated the lawyers and accountants will be in business forever. Just as an aside, the above are just my opinions and observations and everyone should consult their own tax advisors on these matters.
Very true, Olds. ALL gambling winnings are required, by law, to be included in your Federal Tax return, not just the winnings that are reported by the casino to the IRS from the W2G's that you received.

But, remember, all those winnings that you report inflate your Adjusted Gross Income. The AGI is used to determine allowable deductions in most areas of your Federal Tax return. So even if you had a net loss for the year in gambling, many other legitimate deductions get whacked just because you had to include the gross winnings in your return.

And, like Olds, I am not a Tax Attorney, nor do I play one on TV (intentional small print disclaimer).

[olds442jetaway]

CT residents get especially screwed because State tax is based for the most part on federal AGI so the itemized gambling losses on Sch A ( misc deductions ) are no help there. That extra 6.7 percent or so the state gets because of this can be huge for some big players. As posted below, pleas consult your own tax advisor on all of this stuff.

[BillyJoe]

CT residents get especially screwed because State tax is based for the most part on federal AGI so the itemized gambling losses on Sch A ( misc deductions ) are no help there. That extra 6.7 percent or so the state gets because of this can be huge for some big players. As posted below, please consult your own tax advisor on all of this stuff.
Well, that settles that. I could NEVER live in CT.

Florida has no state income tax.