Taxes on winnings a ripoff

[cddenver]

Let me get this straight, I need to keep a log containing casino name, address, beginning time, ending time, machine number(s) and net gains or losses? 

 
Some of that info will be on on the W2-G's that you WILL be getting (keep on playing!).  But your message reminded me of some other things.  I keep my W2-G's for a given year together in a folder.  That way I don't have to go hunting for them at tax time.  If I get a standard 3-part W2-G, the first thing I do when I get home after getting one is to staple the 3 copies together, if the casino hasn't done that already.  Those copies come apart pretty easily if not stapled, and it's a pain at tax time to match up the federal/state/me copies if they've become detached from each other and you're working with a bunch of them.
 
Some casinos have computer-generated W2-G's with all the information nicely printed.  At other places the info is handwritten, and sometimes illegible.  That can be a problem when doing taxes.  So another thing I do after getting a W2-G is to type the info I know I'll need at tax time into a year-to-date list I keep on my PC, while my memory's fresh.

[iluvsummer]

I am being audited by the irs for the year 2005 where i got 16,000 in wg2's but had a net loss that year.Im on social security  but my wife works.I never claimed my wg2's because i had a net loss that year.I dont see how the irs can say i had 16000 in gambling income that year.If you go to a casino and lose 5,000 all day and just before you leave you hit a jackpot for 2,000 you did not have gambling income of 2,000 that day you had gambling loses of 3,000 that day.The irs has it ass backwards.

[MikeA]

I am being audited by the irs for the year 2005 where i got 16,000 in wg2's but had a net loss that year.Im on social security  but my wife works.I never claimed my wg2's because i had a net loss that year.I dont see how the irs can say i had 16000 in gambling income that year.If you go to a casino and lose 5,000 all day and just before you leave you hit a jackpot for 2,000 you did not have gambling income of 2,000 that day you had gambling loses of 3,000 that day.The irs has it ass backwards.I'm afraid that's why you need to document those loses.  With the casino's help in notifying the IRS with the W2G's, They know you won but there really is no way to keep up with the loses to offset those W2G wins other than document them yourself.  It's been noted that while you might be able to get some documentation from the casino player's club indicating loses, it is really not dependable.Now, as to how you would "PROVE" that your self-documented loses were not fabricated....that one I don't know!  However, from what I've heard, the IRS seems to accept that documentation.  It's a hell of a lot of trouble to go to.  Almost makes it worthwhile to only play machines that will not hit jackpots over $1,199.00 so that W2G's will not be produced!  "ALMOST" everyone who plays Video Poker either loses more than they win or comes close to breaking even over a period of time.Where the IRS doesn't seem fair to me is when you do have a winning year and report the income like a law-abiding citizen and pay taxes on it.  But, when you lose more than you win and have it meticulously documented, you CANNOT claim more in loses than wins in a year!

[rascal]

If iluvsmmer did not report the income from the W2G's, I suspect that is what triggered the audit, not the manner in which he deducted his losses.
 
My understanding from an IRS staffer is that they do accept losses against wins from non-professionals as long as (a) documentation exists, and (b) as long as the win-loss amounts are in reason. You can't win $10,000 a year for ten years and claim $10,000 per year losses and then all of a sudden the 11th year win $200,000 and by a miracle have $200,000 in losses. They will not accept that without a rigorous audit, and who can blame them?
 
I have been playing VP and reporting losses to equal wins since 1990 and I have never had a single problem from the IRS. I was in an IRS office not long ago concerning another tax issue and they made it clear that my losses against wins were not a problem.
 
People do ignore those W2G's quite often and that is not acceptable. Any source of reportable income that is not filed with your tax return is the basis of evasion, so you want to definitely file all of your W2G's, even if you write them all off as losses.

[cddenver]

If iluvsmmer did not report the income from the W2G's, I suspect that is what triggered the audit, not the manner in which he deducted his losses.

 
That's exactly right.  I know several people who have been audited for the same reason.  The IRS sees your W2-G's, but if you're not reporting them on your taxes they don't know anything about your offsetting losses.  Always put down those W2-G's.