Tax/Withholding question

[roveer]

A long time ago I was sitting in the high limit area at Harrah's AC (Diamond Cove) and I overhead a woman who had just gotten a hand pay. She was telling the attendant how she wanted her payout. If I wasn't mistaken I believe she was telling them to do federal withholding of a certain amount of the jackpot. So this got me thinking. I'd like to do this... But...

I'll find out from Harrah's if they will actually do this, but I have a tax question. If Harrah's would do the withholding and send it to the gov't would it just count against gambling winnings or would it be just like paying quarterly taxes and apply towards income? If it does, it's an appealing way for me to make contributions towards my income tax (self employed). If it just applied to "winnings" than not so much. Not even sure how they could do that as what if you were behind at the end of the year, something I'm all to familiar with.

Thanks and looking forward to the responses.

Roveer

[Minn. Fatz]

Not a tax expert but I'd think any withholding from gambling proceeds would count as such for quarterly estimated tax, etc. The limitation as I understand it is that at the end of the year you may only claim gambling losses as itemized deductions up to the amount of your gambling winnings.

Here's some dope from the IRS.

[Tedlark]

That's an interesting question roveer. With an individual being able to deduct gambling losses up to an amount equal to gambling winnings why would you pay upfront for a tax you may not even owe at the end of the year?

I doubt you would be able to co-mingle your quarterly estimated tax payment with W2-G income but that would be a question for a CPA.

[Gammy]

tax payments are additive whether they are payroll, estimated, w2g or paid by dividend payers before you get the dividend.  Gambling winnings paid in w2g are ordinary income.  Gambling losses up to the amount of the winnings are deductible on schedule A the same as property taxes etc.
My husband wrote this for me. He has always advised me to take the federal taxes out of taxible winnings, so I do not have to write a big check to the Irs in April.  I always request win/loss letters from  casinos Together, with these and W2s showing withholdings, I usually get a refund.
All the casinos I've played in have taken 25%

[Tedlark]

I understand Gammy but I have a question; does your state of residence require you to declare a refund from your federal return from the previous year?

[Gammy]

federal tax refunds are not taxable at the federal level but state tax refunds are included as income.  We live in NH and there is no income tax so the answer to your question is no.  The same is true for Massachusetts.  Other states may have different laws.  For the federal tax refund to be taxable the federal taxes you pay would be deductible at the state level.  No such situation exists that I know about.

[Tedlark]

  Thanks for the quick response, I don't know where my brain was but I had it reversed. Been a long day.

[roveer]

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.

NJ Casinos do not take any withholding. So what i am saying is it's like the casinos that do. They automatically take withholding. If you have a gambling loss that year, you don't get the negate the income, but you will have gambling loss to nullify the W2G income AND you will have made a payment on your taxes in excess of the gambling burden and could get a refund. This is difficult to put into words because it quickly becomes several different discussions.

I'm thinking of having them withhold the excess of any even 1k amount. Examples 1250 have them withhold 250 bucks, 2500, withhold 500 bucks...

This is just another way to force me to leave the casino with more of any given jackpot. On large winnings I usually take a check but when I get smaller 1-2k winnings I usually take it as cash and that's where the problems can start. I can at times pour it all back in. I'm sure I can play without those amounts I'm considering and knowing that it is going to pay my tax bill is an even bigger win in my mind. Get it out of my hands!!!

I hope I'm explaining myself here. Like I said, it's a bunch of different things all rolled into one.

[Tedlark]

  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.

[FloridaPhil]

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.