Anyone wonders why we pay taxes on wins of $1200?

[gregorio]

Got a new topic for you all. Can anyone tell me why we have to pay taxes on winnings over $1200 on slots in year 2014???????  I understand when this was enacted decades ago a $1200 amount was quite a bit of money, I figure $5000-7000, so taxing it made sense. Well? What sense does it make now?

[FloridaPhil]

The way I understand it the IRS classifies Video Poker machines as a slot machine, so a win over $1200 is considered a "windfall" and subject to tax.  This number has stayed the same for many years.  Why it hasn't been updated is probably because most recreational gamblers don't pay tax on their winnings as their annual losses are normally  far more than their W2Gs.  I document my visits in a small notebook that I carry with me.   If you keep the right information, you can offset your W2Gs with your losses and not pay tax.  In my crazier days I have had a pile of W2Gs and have never been audited for my gambling, but I am prepared if it happens.  If I hit a huge jackpot, I will be happy to pay the taxes. 

[rascal]

It's not that $1200 is the line for taxation; it's that $1200 is the line for withholding. Technically every penny that you win is subject to taxation. As Phil wrote, unless you gamble professionally you can generally write it all off vs losses. I have written it all off almost every year with no IRS problems. As far as $1200 being the line for withholding, I agree: it is a pain in the a$$. It should be $4000 or even $5000. When you are playing high denoms unless you can get a spotter it really slows you down.

[BillyJoe]

It's not that $1200 is the line for taxation; it's that $1200 is the line for withholding. Technically every penny that you win is subject to taxation. As Phil wrote, unless you gamble professionally you can generally write it all off vs losses. I have written it all off almost every year with no IRS problems. As far as $1200 being the line for withholding, I agree: it is a pain in the a$$. It should be $4000 or even $5000. When you are playing high denoms unless you can get a spotter it really slows you down.
I agree Rascal, with a small correction. $1200 is the clip for the casino to REPORT winnings to the IRS. Whether you have taxes withheld or not at the time that you are paid is up to you, provided that you provide the casino with a valid SSN.

[gregorio]

That really was not my question. I was wondering why $1200 limit enacted years ago and probably equivalent to somewhere between $5000-7000 in todays money has not been inflation adjusted after decades of beiing the same? Everything else went up, why not this?

[Lucky Larry]

Probably for the same reason the taxes on income for Social Security hasn't been raised to extend the life of SS. Open the door and no telling what could happen. Correctly stated most of us don't pay taxes because our losses out weigh our wins.

[BillyJoe]

That really was not my question. I was wondering why $1200 limit enacted years ago and probably equivalent to somewhere between $5000-7000 in todays money has not been inflation adjusted after decades of beiing the same? Everything else went up, why not this?
After I complained to my accountant years ago that the tax code was unfair to recreational gamblers, he told me "The tax code penalizes vices: gambling, drinking and smoking. It is safe ground, and was never intended to be fair".

With the US Government operating at staggering deficits, don't look for them to be 'reasonable' about this, and raise the threshold for reporting. I would be MORE concerned about them going the other way, and looking for reporting on even smaller winnings.

[KingofAmerica]

Just another government money grab. We're lucky they don't LOWER the threshold.

[DaBurglar]

Not to completely derail this thread, but since the topics have been broached, I want to throw in my 7 cents (2 cents with inflation adjustment).....The current situation in the USA, with annual deficits at staggering proportions is unsustainable, but like your average gambling addict, the US government (i.e. the House of representatives mainly, with secondary help from the US senate) is encapsulated with typical cognitive dissonance about the whole topic and refuses to do or even SAY what NEEDS to be done:1)  Taxes MUST be raised especially on the wealthiest strata of Americans who PARK their money in banks offshore or in countries like Switzerland and go to extreme lengths to hide, under report or simply cheat the US government (and if they get caught, they can hire the lawyers needed to negotiate some deal with the US Govt and come out of it smelling ok.)    If the US governement could exercise some initiative and, via DYNAMIC incentives, make it easy for the wealthy to INVEST or otherwise utilize their vast wealth in some way that benefits society instead of hiding it or sitting on it, that would be BEST, but barring that, we need to tax the wealthy at a higher rate for the next 5-7 years.  2) Spending MUST be reduced on things that produce or promote NO return to society......Defense must be streamlined (not cut to the bone mind you), and the horrible waste that takes place must be addressed in a sincere and serious manner.   The whole Farming subsidy/scam must be gutted and foreign aid greatly curtailed.....and our trade policies must be revamped so that, for the next 10 years at least, we no longer run trade deficits that boggle the mind.....The ultimate goal is NOT to eliminate national Debt or all deficits......economics has shown that SOME government debt and a certain amount of deficit spending is actually GOOD overall for the economy.    But right now things are so out of whack it is fatal in the long run (which is rapidly becoming the SHORT RUN!)I am neither Democrat nor Republican.....I belong to the silent majority of the party of common sense and non partisan reality, the world we all live in whether most people want to acknowledge it or not.......The role of Government is to exist to address and solve the problems that Individual citizens are unable to address (i.e.  like if the chinese invade, or if a virus sprouts a epidemic or if a hurricane devastates a area.)  That is when we need Government, and in order for it to work during such times, it MUST have funds and resources and abilities to do some good......its that simple.    It only gets complex when people insist on acting in selfish, anti-social or corrupt ways (or someone incompetent gets elected.)To sum it up,  1200 bucks is kinda silly these days to require all that form signing and documentation (especially when if you win at the tables it is NOT done.)   The figure should be adjusted (or even eliminated altogether) and the burden shiftd to the casinos themselves to keep track of all this and report it to the government and reconcile it somehow WITHOUT bothering the players at all......if a player wins BIG, then the casino should be able to write off that as a loss, leave the player alone, let he or she Spend that money (to the good of society) as she or he sees fit!   If the personal income tax code was not the arcane byzantine mess of madness that it is, we could ignore things like gambling and simply focus on having a simpler more equitable tax code through which the government could fairly take in the revenue it NEEDS to do its job.

[5ofakind4000]

I sort of like it at 1200 because getting handpays is part of the fun...I usually go to the casino with a bankroll of 1000 and play $1 and then a little bit of $5...if the threshold were bumped up to 5k I might have 1-3 hand pays per year as about 90% of mine are $1250 and $2000