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[Music]
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foreign
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here from the American Casino guide book
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if you're not familiar with us please be
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sure to visit our website at American
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casino
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guidebook.com and joining me today is my
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son who also works at the American
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Casino guide book website Matt bori
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how's it going everybody and today we
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are interviewing uh Russ Fox he is a
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accountant that specializes in gambling
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taxes how are you doing today Russ I'm
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doing well thanks
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so I guess uh let's just start out with
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the basics in case anybody has never uh
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gambled before how are gambling winnings
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treated for tax purposes
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well all income is taxable unless
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Congress exempts it so you are supposed
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to add up all of your gambling winning
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sessions if you're an amateur Gambler
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put them on your tax return as
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other income on schedule one and your
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gambling losses up to the amount of your
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winnings can be deducted as an itemized
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deduction on schedule a you do have to
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itemize your deductions to get gambling
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losses
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and I uh so then I guess uh that sort of
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answers my next question which was how
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are winnings reported and can you deduct
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your losses so you just so you're saying
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that if you it every Gambler should be
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keeping a uh uh notes and if they go to
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the casino and they win 20 bucks they at
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at the end of the day they've got to
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come home and write that down and submit
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it to the IRS then yeah
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that is what they are supposed to do I'm
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not going to comment on whether people
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are reporting 20 wins but they are
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supposed to also unfortunately there are
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some states that do not allow gambling
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losses
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but people who live in the wrong States
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and some of them have legal casinos like
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West Virginia
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um you're
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just out of luck
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yeah those are real bit and I think one
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state changed it uh last year did it
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says was it Michigan or some correct
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Michigan now allows gambling losses okay
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for those people so if you sign because
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every anytime you get a jackpot of 1200
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or more on electronic gaming machine in
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a casino you would be issued a w-2g
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correct that is correct so at the end of
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the year you have to declare that as
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income
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well you have to declare all income you
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are supposed to declare the non-jackpot
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winnings too if you go in a casino and
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win fifty dollars you are supposed to
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declare that fifty dollars on license
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the only advice I can give is you
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declare all your income okay you declare
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all your income but most people at the
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end of the year they are net losers so
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so how is that treated do you I mean do
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you have to say every time you win so
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okay I won twenty dollars here and then
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I lost uh fifty dollars here so I'm down
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thirty dollars and that's is that how
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you do it believe it or not yes you take
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your gambling winning sessions so the
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days you win presumably against one
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session each day you would declare those
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as other income on schedule one you're
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gambling losing sessions up to the
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amount of winnings you cannot stick
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gambling losses in excess of winnings
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it's specifically prohibited they're an
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itemized deduction on schedule a
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hmm all right now uh as we we have sort
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of beat around a lot of people probably
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don't do that are there is the IRS have
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you heard stories of uh the IRS going
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after uh small-time gamblers for not uh
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doing what they're supposed to with a
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gambling log throughout the whole year
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no I have never I mean it could come up
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in an audit where something else leads
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to it I have seen Big Time gamblers get
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hurt on this
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um there's a case out of Connecticut
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where somebody was gambling at uh I
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can't remember if it was Foxwoods or
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mohegan's son
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but he generated currency transaction
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reports in the millions of dollars
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and declared something like 300 or 3 000
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of gambling winnings and that Beggar's
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belief
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and yes he got caught huh well I mean he
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could he could have lost it all right
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too so yeah but yeah but millions of
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dollars that's uh all right well well
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let me ask this please because we
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mentioned before that on an electronic
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gaming machine whether it's a slot
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machine or roulette machine or a Kino
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machine because I have these electronic
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uh it gets very confusing okay so if
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it's an electronic gaming machine no
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matter what kind
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you get issued at w2g if you win twelve
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hundred dollars or more the jackpot is
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twelve hundred dollars or more correct
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correct okay and they don't make a
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distinction whether it's a table game
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electronic version so if it was
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blackjack or or roulette or craps
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whatever if you're on a machine it's
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1200 where you get the w2g so now how is
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it how are table game players treated do
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they get a w2g also no in general they
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don't there are some exceptions there's
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some like proposition bets you can make
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at um
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various games that have extreme odds
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where w2g might be issued but the
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general rule is you have to win 600 or
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more at odds of 300 to one or more most
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table game bets
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um are one to one or two to one or six
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to one like uh certain things and craps
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or even 30 or 50 to one but 300 to 1
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takes like oh the jackpots the
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progressive jackpots and like the
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ultimate Texas Hold'em or various other
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kind of table games like that yeah I saw
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somebody one time I was playing at Sam's
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Town in Vegas they hit the progressive
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for uh paiga poker and they won like it
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was half a million or a million dollars
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or something while I was at the table
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that was pretty cool so it'd be
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something more like that right that's
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correct
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now uh what about online casinos like if
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you're playing at a table game at an
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online casino is that treated like a
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live table game in a casino or is that
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treated more like a slot machine in a
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casino slot machine in a casino it's an
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electronic game and there are definitely
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the casinos have to issue w2gs and they
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are gotcha so even if it was like one of
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those ones where they have the live
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dealer it's still just considered an
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electronic table game
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they're electronic games I don't as far
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as I know they're electronic games
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now what about sports betting because
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because how is sports betting treated
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and when do they issue a w2g in sports
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betting the same rule of 600 of winnings
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at 301 odds or more which basically
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means it has to be like prop bets on the
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Super Bowl the first play will be a
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safety which probably is two thousand to
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one odds
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um things like that but they're very
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very few w2gs issued for sports betting
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now one person had asked us the question
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he said he was playing I I think
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uh I forget what game it was electronic
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roulette or something and uh or maybe it
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was craps and it's somehow he won
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twelve hundred dollars but he bet six
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hundred dollars so he didn't really win
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twelve hundred dollars he won six
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hundred dollars but he got his big
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attack yeah so you got 600 in his bet
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back 600 but he got issued a w2g for
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twelve hundred dollars so how do you
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treat something like that well there's a
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court case
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um called Park V commissioner it's uh
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from the U.S court of appeals for the
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District of Columbia the second highest
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court in the United States by then uh
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judge Kavanaugh who is now on the
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Supreme Court and it's one of the most
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Gambler friendly decisions ever and it
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allows basically the session method so
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let's assume that you're only gambling
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you get a w2g for 1200 you only won 600
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you're allowed to put down six hundred
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dollars you should attach a note to your
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return the IRS has a form form 8275 it's
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a statement where you explain what
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you're doing you could even just attach
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a
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why you did this just a piece of paper
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or a PDF document if you file
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electronically but it is absolutely
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allowed that you pay tax on your
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winnings not what the paperwork shows
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because
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this the casino did the right thing the
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payout is twelve hundred dollars twelve
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hundred is the amount of the w2g under
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current law
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however the person really won 600.
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right but but again you can't do that
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unless you itemize your taxes correct no
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you can do that
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oh for you are allowed to let's say
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you're told
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oh twenty thousand dollars your winning
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session total is fifteen thousand you
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can put down fifteen thousand
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Azure winnings you should attach a
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statement to your return explaining the
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difference because the IRS is not IRS
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matches and the w2g total will not match
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you're likely to get an IRS notice but
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you are completely in the right assuming
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you've got records to back that up
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uh I didn't realize that I thought you
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always had an itemize to uh to do that
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so that that's a good ruling that's not
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a gambling loss to get your gambling
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losses to offset that hypothetical
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fifteen thousand of winnings there you
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do have to itemize okay gotcha
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now so let me ask you this do you think
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uh with online online casinos are
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getting much more popular now because
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they're getting legalized in many
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different states now I think it's up to
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like 11 or something now do you think
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it's going to become a bigger issue
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where people if they forget or choose
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not to uh do the smaller wins and and
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record those do you think like that's
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going to become more of a problem or not
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more of a problem but where the IRS is
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going to be going after people for that
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since technically they are owed the
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money
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it's going to be in certain States some
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of the states have reporting
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requirements to the state Departments of
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Taxation or Department of Revenue and so
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let's say John Smith is gambling at some
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online casino I'll use Michigan but I
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don't remember if Michigan has this rule
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or not doesn't report his 5 000 of
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winnings but the Michigan Department of
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Treasury knows about it well he's going
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to get a love letter from Michigan
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saying uh where's our gambling winnings
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on your tax return and have to respond
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and the states do share with the IRS in
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fact all of the 50 states only one does
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not share information with the IRS and
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it's Nevada which we don't have a state
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income tax
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yeah
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so uh there's also there's been Talk of
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the threshold for W-2 going up from 1200
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to 5 000 because to adjust it for
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inflation because I believe it was 1977
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I think it was we looked this up before
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the interview when they set that twelve
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hundred dollar threshold and I know we
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did a video with you a few years ago you
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said there was no chance that it was
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going to go up to the 5 000 uh do you
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still think that do you think there's a
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chance they're going to raise it
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it would have to be Congress that would
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raise it the IRS is not going to the
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last proposal was to drop it lower it to
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600 or Jesus okay the chance of them
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raising it is oh the IRS voluntarily
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same as it's snowing in Las Vegas in
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August
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not likely to happen but one of the
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problems that and I think the most
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common tax situation that people find
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themselves in is and we're going to talk
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about I just want to talk about the
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overall fairness of this tax system
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because I think it's it's very unfair to
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Gamblers it's most people and they don't
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realize until they happen to win a
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jackpot so okay let's say uh they win a
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jackpot for fifteen hundred dollars and
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so and so you know they're real happy
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and everything but by the end of the
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year they've lost the 1500 back plus two
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thousand dollars more
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so when it comes time to do their taxes
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uh uh you know they they follow this w2g
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so they have to declare what this income
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and they're going to find out they're
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going to have to pay tax on this and if
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they don't itemize since uh the standard
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deduction is so high relative to the uh
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you know unless you have a lot of
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itemized deductions they wind up just
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having to pay tax on on money that they
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really didn't win because they lost it
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back so what are your thoughts on that
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you're absolutely correct but it's going
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to take Congress to change it
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and and that's not that simple I mean it
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I'm all for like there are two states
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that allow gambling winnings and losses
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to be netted together uh Pennsylvania
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and New Jersey
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so if you are a resident of those States
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for state tax purposes and you have say
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3 000 of gambling winnings and 3 200 of
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losses you don't have to pay a penny in
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tax
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that's good but unfortunately the chance
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of our Congress which is desperately
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looking for more money to change this
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not high right
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now let me ask you if a since we're
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talking about U.S taxes here if a
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foreign citizen somebody that does not
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uh is not a U.S citizen and does not
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live in the U.S say somebody from Europe
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somewhere is is visiting Vegas for a
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vacation and they happen to hit a w2g do
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they have to pay uh taxes on that as
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well
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well here we get a yes and a no
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um it's going to depend specifically
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what countries they're from does that
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country have a tax treaty with the U.S
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that exempts gambling and there are many
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such countries that do for example the
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United Kingdom anybody from England who
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comes to the United States and wins a
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slot jackpot there's nothing withheld no
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tax at all because the U.S UK tax treaty
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specifies that and if they're from the
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UK they're even better off because the
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UK does not tax tax uh gambling winnings
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however let's say they're from
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Liechtenstein which doesn't have a tax
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treaty with the U.S
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now 30 percent would be withheld
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and I don't know anything about
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liechtenstein's tax system I chose that
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country mainly because I didn't have to
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look up that whether they had a tax
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treaty or not mm-hmm
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so some of the countries don't and
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you're just out of luck you lose 30
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percent okay so you can apply to get
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that 30 percent back as as a foreign
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citizen
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only residents of Canada can the U.S
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Canada tax treaty specifies that a
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Canadian can file a form 1040 NR and get
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their uh the amount of their of their
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winnings whatever they have in losses
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back
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um
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okay well well I got one before we move
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on I got a question there I know you
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don't know the exact answer but like
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ballpark number are there a lot of
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countries that have that tax treaty
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where with uh the US where they wouldn't
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have to pay or is it only like like are
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we talking like 10 are we talking like
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50 do you know like just a ballpark
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number it's like 15 to 20 countries that
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have the tax treaty with the U.S
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um there is a list in an IRS publication
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uh I want to say it's publication 515 so
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anybody from a non-u outside the US can
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look this up now
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the US and most foreign countries do
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have sharing information where
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information about income from the US is
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shared with the other countries tax
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agencies
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um and the US also gets that so it's
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getting harder and harder to avoid
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taxation
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all right I I want to ask uh we spoke
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briefly before about uh some states will
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allow you to deduct losses and some
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won't allow you to deduct any losses so
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now I I think people aren't aware like
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if if I go to Mississippi
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and and I go to Mississippi and I win a
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jackpot uh
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uh I have to pay the state of
00:16:43
Mississippi even though I'm not a
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resident of the state of Mississippi and
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it depends each state is a little
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different but I think and we put it on
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our website for each individual State
00:16:51
what the tax situation is
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uh I think it's three percent in
00:16:55
Mississippi and that tax is is a
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non-refundable tax uh so even though I'm
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not a resident of Mississippi if I
00:17:03
happen to win a jackpot there 1200 or
00:17:05
more you're going to pay three percent
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to the state now there are other states
00:17:09
where as a resident you have to uh
00:17:12
declare the income and uh you know pay
00:17:15
taxes on and I guess like you say some
00:17:17
will now allow you to uh well Michigan
00:17:19
now allows you to deduct your losses but
00:17:21
some won't but even if you're visiting
00:17:24
that state you're a non-resident of that
00:17:26
state you are subject to that state tax
00:17:28
when you go there are you not
00:17:31
in general uh yes and it goes back to
00:17:34
what is called The Jock tax which
00:17:36
happened after uh Michael Jordan of the
00:17:39
Chicago Bulls played in a basketball
00:17:42
game in Los Angeles and the California's
00:17:46
Franchise Tax Board the state tax agency
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wondered why he didn't pay tax
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that's what led to States taxing
00:17:53
non-residents and so let us assume you
00:17:57
uh Gamble in Iowa
00:18:00
which will do automatically withhold and
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you are a resident of say
00:18:05
Pennsylvania
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okay you're going to have tax withheld
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you're going to need to file an Iowa tax
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return for that gambling activity let's
00:18:13
say you owe money to Iowa you ended up
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ignoring the withholding you might or
00:18:19
might might get a refund you might not
00:18:20
but you had gambling tax you actually
00:18:22
the state of Iowa did not refund all the
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money that was withheld let's just say
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it was fifty dollars
00:18:30
Pennsylvania is required to give you a
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tax credit
00:18:34
for the double taxed income your state
00:18:36
of residence is required to it's not
00:18:39
optional there is a U.S Supreme Court
00:18:41
case mandating this so you end up paying
00:18:44
the higher of the two states marginal
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tax rates
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The Joker is Mississippi
00:18:50
Mississippi's gambling taxes a tax on
00:18:53
gross receipts not income so that
00:18:56
basically you're just out that if you
00:18:59
win money in Mississippi you're going to
00:19:01
only win a portion of that money
00:19:04
um say 97 percent of it is yours and
00:19:06
three percent of it goes right back to
00:19:08
Mississippi
00:19:09
but now also there are some cities that
00:19:13
in addition to the state tax there are
00:19:16
some cities and we mentioned them on our
00:19:18
website American Casino guidebook.com
00:19:21
especially Ohio Ohio has quite a few
00:19:23
cities there that also tax you if you
00:19:27
win a jackpot in that City I think it's
00:19:29
uh Cleveland Columbus and Cincinnati and
00:19:32
and Toledo in certain instances you got
00:19:35
any uh so again if you're if you're a
00:19:37
non-resident of that city or state and
00:19:39
you win you're gonna have to pay city
00:19:41
tax too correct no are those refundable
00:19:45
or no well you again you generally
00:19:49
you're not going to be able to refund
00:19:50
them enough on the city return because
00:19:53
Ohio is one of the states that doesn't
00:19:55
allow gambling losses
00:19:57
so an amateur Gambler who has a say a
00:19:59
one thousand dollar jackpot in Cleveland
00:20:01
is gonna whatever Cleveland's Municipal
00:20:04
tax rate is again though a tax credit
00:20:07
can be taken on your home state if your
00:20:10
home state has a state income tax you
00:20:12
can take it for all taxes based on
00:20:15
income and this comes from a U.S Supreme
00:20:17
Court decision
00:20:19
but you can't apply it against the
00:20:20
federal income tax return uh if you are
00:20:24
deducting taxes it is an itemizable
00:20:26
deduction taxes paid is an itemized
00:20:28
deduction on schedule a and that's based
00:20:31
on taxes paid during the year but again
00:20:33
that's if you itemize your deductions
00:20:35
and don't take the standard deduction
00:20:36
yeah that is correct okay so that does
00:20:39
it for the questions we have and as I
00:20:41
said earlier we had a video from you a
00:20:43
year or two ago and I I went back we
00:20:46
went back through the comments and
00:20:48
pulled in some questions that the
00:20:49
viewers had for you that we want to run
00:20:51
through real quick at the end here one
00:20:53
person said what counts as income I've
00:20:56
won a hundred and twenty four thousand
00:20:58
but I've lost 121
00:21:00
000 so my profit is three thousand does
00:21:04
this make my gross income for the year
00:21:06
124 000 plus my working wages or just 3
00:21:10
000 plus my working wages
00:21:12
if his session results are 124 000 of
00:21:16
winning sessions and 121 000 of losing
00:21:18
sessions is adjusted gross income would
00:21:21
be the 124 000 plus his wages and he'd
00:21:24
be able to take an itemized deduction of
00:21:26
121 000 first gambling losses gotcha
00:21:30
okay
00:21:31
and then uh one more there question
00:21:33
there was I've heard about asking the
00:21:36
casino to withhold money from the
00:21:37
jackpot to more or less prepay your
00:21:40
taxes on a jackpot do all casinos offer
00:21:43
this
00:21:44
uh I've never seen a casino not offer
00:21:46
yes you can have uh taxes absolutely
00:21:51
um you can say I'd like ten thousand
00:21:52
dollars of my 100 000 winnings for
00:21:54
federal income tax gotcha and then they
00:21:57
also said we've heard about casinos
00:21:58
discouraging players from doing this
00:22:00
have you heard of that
00:22:02
I haven't but it wouldn't Shock Me Oh
00:22:06
okay
00:22:07
why would they discourage them just
00:22:10
because it's a pain in the neck more
00:22:11
paperwork for the casino more paperwork
00:22:13
for the casino yes okay understandable
00:22:17
all right Russ if if people want to get
00:22:19
more information about you and your tax
00:22:21
services wherever they go to find that
00:22:23
our website is claytontax.com my email
00:22:26
address is RC Fox claytontax.com
00:22:30
all right great thanks all right Russell
00:22:32
Fox thank you very much for joining us
00:22:34
today
00:22:35
uh if you like the video give it a
00:22:38
thumbs up and don't forget to hit that
00:22:39
subscribe button yeah so you don't miss
00:22:41
out on any of our other great videos
00:22:43
yeah this was a very complicated subject
00:22:46
and you gave us some clarity into it so
00:22:48
we appreciate it and uh thanks everybody
00:22:49
for watching hope you enjoyed it and
00:22:51
best wishes for good luck in the casinos
