simpsonmarvin wrote:
>
> I am new to Video Poker but I had a good year in 2010 and received a
> couple of W-2G forms.
> The fellow who does my taxes told me I had to pay tax on the total
> as I have no other records.
>
> I think I am stuck for last year but I have vowed to get religion
> this year and keep some sort of diary.
>
> What is the best way to do it?
My reply echos some of what has already been offered up ...
The average joe in your shoes, in preparing a return, might easily submit a "best guess" of losses as a deduction against the W-2G reported wins (in absence of firm documented losses). Failure to do otherwise would result in a tax liability of $1000+ greater than otherwise due.
But you'll be hard pressed to find a certified tax preparer who will take such a position without appropriate records. In signing your return, they're indicating their willingness to appear to defend the return in the event of an examination.
The IRS has been explicit in requiring a "contemporaneous" gaming record, supported by any other appropriate documents, to backup loss deductions when questioned. End of year casino win/loss statements are rejected as sufficient documentation (as are many "after the fact" reconstructions).
The risk of an audit, triggered merely by moderate reported gaming activity is slim, at most. (I know of audits only in the case of someone filing as a professional gambler, or where the accounting used resulted in reported gross wins less than total reported w-2G's.) But a professional preparer won't take even that risk.
I won't advise you on how to proceed. I'll note that even in the event of an audit, your additional liability would likely be limited to the underpaid tax as a consequence of the denied deduction, appropriate interest (@ something like 7%/yr), and in the worst case, a penalty of up to 50% of the underpaid tax. However, in many cases, if you can demonstrate that you reasonably estimated the undocumented losses, any penalties often are fully forgiven.
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As far as what constitutes an acceptable gaming log, here's the excerpted discussion from IRS Publication 529:
Gambling Losses Up to the Amount of Gambling Winnings
You must report the full amount of your gambling winnings for the year on Form 1040, line 21. You deduct your gambling losses for the year on Schedule A (Form 1040), line 28. You cannot deduct gambling losses that are more than your winnings.
You cannot reduce your gambling winnings by your gambling losses and report the difference. You must report the full amount of your winnings as income and claim your losses (up to the amount of winnings) as an itemized deduction. Therefore, your records should show your winnings separately from your losses.
Diary of winnings and losses. You must keep an accurate diary or similar record of your losses and winnings.
Your diary should contain at least the following information.
* The date and type of your specific wager or wagering activity.
* The name and address or location of the gambling establishment.
* The names of other persons present with you at the gambling establishment.
* The amount(s) you won or lost.
Proof of winnings and losses. In addition to your diary, you should also have other documentation. You can generally prove your winnings and losses through Form W-2G, Certain Gambling Winnings, Form 5754, Statement by Person(s) Receiving Gambling Winnings, wagering tickets, canceled checks, substitute checks, credit records, bank withdrawals, and statements of actual winnings or payment slips provided to you by the gambling establishment.
For specific wagering transactions, you can use the following items to support your winnings and losses.
These recordkeeping suggestions are intended as general guidelines to help you establish your winnings and losses. They are not all-inclusive. Your tax liability depends on your particular facts and circumstances.
Slot machines. A record of the machine number and all winnings by date and time the machine was played.
