IRS memo implications

[shadowman]

A new memo has been created by the IRS.
 
http://www.irs.gov/pub/irs-utl/am2008011.pdf
 
This memo has some rather disturbing parts. I thought I'd open this thread to discuss the implications. The good news is this is only a memo and is not a new law and it still leaves many unanswered questions.
 
The bad news is this could lead to taxing recreational gamblers much more heavily. More later. 

[royal flush]

 being a tax attorney this is a guideline now a "reg" the win loss statements could be attached to a tax return of someone whom is writing off losses against gambling income on w2g forms

[Eduardo]

It seems pretty straight forward. Essentially, you can only deduct losses to offset your wins and not have to claim income if you lost just as much. But you can't take the losses against anything other than gambling income, and only if you itemize. What am I missing?

[royal flush]

you are correct this this just a statment of current code nothing new

[Eduardo]

Well shadowman is disturbed so I await that tantalizing details that I must be overlooking.

[shadowman]

The question has always been what exactly is a session win vs. what is a session loss. Most people just look at their overall results and if they have lost they never put anything on their tax return. Because the definition of session was never made clear that COULD have been acceptable. This memo now clears up that ambiguity.


 
A session is any visit to a casino (or even possibly whenever you cash out a ticket). So, it's still a little ambiguous but it certainly is NOT a full year. Hence, anyone who gambles on a regular basis and does not put winnings on their tax form are clearly in violation of this interpretation.
 
This would allow the IRS to collect information from casinos on any player and follow up with an audit. I don't think this is going to happen (soon) but it is now clear that anyone who wins just one day a year and does not put that win on their tax form is in violation of the law. Without this clarification it was previously unclear whether other losses made placing this information on the tax form unnecessary.
 
Think about all the senior citizens that go to a casino once every week or two and gamble. They may play VP or slots and win maybe 20% of the time. They are required to track these wins and should place all these wins on their 1040x (x is what form base 1040 form you use) along with losses on Schedule A. But wait, I suspect most of these people DO NOT file Schedule A. Therefore, they are required to pay taxes on these phantom wins (both state and federal). In some states you are not allowed to deduct losses and in those states you are required to pay even when you file schedule A on your federal returns.
 
There's another aspect of this interpretation that impacts regular players that receive many W2Gs. I believe most of these people simply put the sum of the W2Gs on form 1040x and losses on Schedule A. This memo now informs us that that is not correct. Instead a person should add together ALL of their wins during a year and place that form 1040x and add together all their losses and place that on Schedule A. For anyone who gambles regularly this will result in a significantly higher number on form 1040x. And, the same problem is increased for anyone who doesn't file Schedule A or those states that don't allow that deducation.
 
Since the form 1040x total is used in AGI that also imposes other tax burdens on those who NEVER made a penny gambling. It can impact social security taxes and deductions that are limited based on AGI.    
 
This is essentially a "sin" tax on gamblers. I would think the casinos and their lobbyists would object since this could drive people away from casinos (and now is not a good time for that to happen).
 
OTOH, the vast majority of people may never see this memo and will continue to ignore their gambling activities. I certainly hope this interpretation does not come back to bite them. 

[faygo]

It would not suprise me to see the IRS go to the Casinos for win/loss statements. A number of years back the IRS tried to pressure Casino Windsor to provide exactly that.  At that time the Casino told them that they were not bound by the U.S. tax code and refused to provide that information. Now I  wonder what all is in the fair trade agreements.
The real impact is with the State Taxes and as SM said the AGI. In effect the States tax you on money you don't have.  If you don't itemize the IRS does the same. Ugly business.

[vidopoker]

if they (in the future) need to keep information on all players and since many players don't use players club cards, could it become a requirement for all players to use a card whether it be at tables, slots or vp so they can be tracked?

[pokeherguy]

The best payback on DDB around here I can find is 98.98% and Shadowman nailed it when he said my few years of positive returns would probably even out after a while. I don't play perfect vp and thats just adds fuel to the fire when you hit a bad run. I keep a log of each trip I make to the casino but the last couple of years its been hard to look at. I doubt I'll play near as much this year, if it was to become a hassle it would be easy for me to quit playing at all. I've heard it said a million times "they don't build those fancy casinos on winners.