Re: "pushback from the IRS" if you use the session method correctly and it results in a tax lower than if you reported a result equal to the W2G amount...
I don't know if the way I do it is any help, but when applicable, my gambling diary will have a session entry of "won / loss $xxx - which includes W2G(s) for $xxxxx" - thus showing that the session did indeed result in a win less than the W2G amount (if that's the case, which it will be unless the rest of your play that day also resulted in a winning outcome), or of course, a loss if you actually lost more than you won even with the W2G "hit" - and unfortunately, I've had days like that, especially when I used to play $5 games and get a lot more W2Gs as the machine overall sucked up my money:)
I have never had any audits based on gambling, but other considerations may include that I file as a nonprofessional, pay taxes when there is a net win (federal), and have proportionally significant income besides gambling activities. On the other hand, since I don't play that much, the frequency of winning years is very low, and you might think that since I usually report net losses (translate: no tax due), that would draw attention.
And as noted in the original post (this portion deleted), living in a state with gross income tax for gambling (i.e., pay state tax on winnings, no off-setting losses allowed), state taxes are the death knell to any reasonable likelihood of winning after taxes in such states - and this would be true in any such state, even if the tax rate is low, since the win margin is so low anyway for most games in most casinos.
--BG
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5a. Re: Advanced Tax question: Not the basics
Date: Thu Feb 13, 2014 3:24 pm ((PST))
...For the nonprofessional, the tax law's approach has always been to require reporting on a session by session basis. The total of winning sessions goes on Form 1040. The total of losing sessions goes on Schedule A. Note that it's entirely possible that you might receive a Form W-2G for $10,000, but in fact have a much smaller win or even a loss for the full session, from the time you start playing until you stop. You should be able to report the total SESSION result, rather than the essentially arbitrary figure shown on Form W-2G. The function of these tax reports is to furnish the IRS INFORMATION through an independent source, rather than to define a person's taxable income. That being said, if the calculation using the correct session approach results in a tax lower than would result from treating the amount reported on the Form W-2G as a session, I think you're very likely to get pushback from the IRS.
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Date: Thu Feb 13, 2014 3:24 pm ((PST))
...For the nonprofessional, the tax law's approach has always been to require reporting on a session by session basis. The total of winning sessions goes on Form 1040. The total of losing sessions goes on Schedule A. Note that it's entirely possible that you might receive a Form W-2G for $10,000, but in fact have a much smaller win or even a loss for the full session, from the time you start playing until you stop. You should be able to report the total SESSION result, rather than the essentially arbitrary figure shown on Form W-2G. The function of these tax reports is to furnish the IRS INFORMATION through an independent source, rather than to define a person's taxable income. That being said, if the calculation using the correct session approach results in a tax lower than would result from treating the amount reported on the Form W-2G as a session, I think you're very likely to get pushback from the IRS.
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