As per the final paragraph of this post, the best reason NOT to rely on casino win/loss statements is probably that the IRS is going to ignore them in all likelihood. The best you could probably reasonably hope for is that they can be used to corroborate your contemporaneous gaming diary, as previously described. I don't even ask the casino for a win-loss statement anymore.
While it is sometimes challenged, a contemporaneous diary that reports wins and losses independently of W2G winnings, using the session method, seems to be the most reliable method of keeping records that can be used to back you up in case of an audit and is likely to be accepted. It's been a long time since I've been audited (and it was unrelated to gambling), but my experience (and all I had read at the time in tax newsletters, which I used to read regularly back then) was that the first person you meet in the audit will deny your appeal but you can go up a level from there with ease and at no cost except your own time (and still not be in tax court) and get to someone who can negotiate a compromise if they choose to do so -- which is what I went away with, and it was a satisfactory one for me, since it established in writing that the part that I would pay taxes on was only a part I had in the year for which the audit occurred, while the rest of it was not taxable, and that was the part that I would "earn" in the future. Sometimes a good compromise is good enough, and fighting for more, especially considering the downside risk, may not be worthwhile.
Again, this was long ago, and the appeals process and willingness to compromise may have changed. A friend of mine who worked for the IRS, now in the private sector, said that their caseloads are evaluated on monetary return for time spent, so that the more money you're fighting over, the more likely they'll be willing to put in some time on your case. With mine, the amount was relatively small, and therefore there was motivation to wrap it up, since spending a lot of time on a case "goes against the agent" if it doesn't result in proportional taxes paid. They especially don't want to go to tax court (translate: agent time AND money for the IRS) if they don't think they're going to succeed, as that's the worst-case scenario -- lots of time and money invested with nothing to show for it. On the other hand, if someone has decided they're going to make an example of xxx (fill in "gamblers" for our concern) that year, they might take a shot at it.
The "contemporaneous diary" doesn't have to be anything magical. I actually stick a 3x5 card in my pocket and record the key information that has been related here before (so I won't restate it), and just keep the stack of 3x5 cards as my documentation for the year, until I feel safe throwing them away (usually 6 years later). There's nothing magical about having them in a bound diary of any kind, although there are plenty of such small notebooks available for purchase -- I just prefer not to carry all my old records with me, in case I'd lose them -- if I lose my 3x5's for a day or a trip, I can probably reconstruct them pretty quickly.
I use an accountant for my return, and just send them a table (I don't do Excel or I'd send a spreadsheet) with all the totals, and since the accountant doesn't know that much about gambling taxes, they accept and submit that for me, and I've never had a bit of trouble (yet) and I've been reporting all my gambling income and losses for a couple of decades or more.
Of course, the downside is that full reporting, as required by the law, pretty much wipes out any positive after-tax EV unless you're filing as a professional gambler, and maybe even then. But since this is not a major activity for me I trade off the cost of honest reporting in accordance with the law against the cost of being prosecuted for tax fraud, with its certain taxes, interest and penalties if I'm found to owe, not to mention jail time if they can prove I willingly did not report income I knew I had (although when I see my net after-tax non-profit most years, I sometimes wonder why I'm still playing).
Many here clearly do not report non-W2G income on their taxes, and perhaps they consider the risk of interest and penalties and jail to be insignificant or unimportant -- that's their call (I choose to speed sometimes, and sometimes I get a ticket). I would guess, if audited, it's likely that reporting no wins other than those that generate a W2G will seem unlikely to be a "true scenario" in the eyes of the IRS.
And please don't mistake for a minute my opinion of the tax law -- while I comply with it, I think it's unfair, absurd, and sometimes worse than that.
--BG
======================
8. Taxes -- why I know casino statements are wrong....
Date: Mon Feb 10, 2014 9:14 pm ((PST))
I keep a contemporary gaming diary (and u should too if you get w2Gs) and carefully do my taxes each year, matching any w2gs I get with my daily diary, totaling my wins, and losses, etc.
Well a few things turned up this year.
1. Got a statement for MIsc 1099 for drawings from one casino, and noticed it was several thousand dollars less than my total. I called them and got a list to see what was going on. First, they only include winnings over $750. Even so, they missed two different $750 winnings (so the 1099-Misc is off by at least $1500).
2. Then as I put my w2s in order, I noticed one dated 4/18/2014 -- very odd, because that date hasn't even happened yet!! I thought maybe it was for 4/18/2013, but when I checked my gaming diary, I hadn't gotten any w2Gs that date, and also, I was gone from the casino by the time listed. Using the transaction number, I figured out that it was issued much later than April, and eventually I found it -- 12/18/2013! Really odd.
Also, I noticed my Harrahs Win/loss statement for Chester/Philadelphia, easy to see because I'd only played one day there, so easy to check. They had the right amount of W2Gs for the day, but.....Looking at my losses/wins, they have my husband and I winning about $6000 more than we really did. I think this may be because we were playing together with his card in, but a W2 was in my name because I was seated, so this money may have been counted twice, once for a coin out win for him and once as a W2 win for me. I don't know, but the difference between Harrahs win/loss statement and the actual win for the day was considerable.
Another thing, when we were audited a few years ago, the iRS sent me a list of all the w2Gs they had supposedly/apparently received, and it was missing a lot of them. Most of the missing ones seemed to be where I had won two in the same day with the same denomination -- for example $1250 plus $1250 plus $2000 -- they listed only $1250&2000. I don't know if this was an IRS error or a casino error. You would think everything would be computerized, but maybe not. The missing items were not just one or two, but (if I remember rightly) over a dozen. Odd. (by the way I included the correct amount in my IRS filings)
So this may be one reason the IRS doesn't just use win/loss statements. They just aren't accurate. Also they know that sometimes people play and forget to put cards in, blackjack and craps and other table games aren't accurately tracked, and sometimes couples play together or on each others cards.
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Date: Mon Feb 10, 2014 9:14 pm ((PST))
I keep a contemporary gaming diary (and u should too if you get w2Gs) and carefully do my taxes each year, matching any w2gs I get with my daily diary, totaling my wins, and losses, etc.
Well a few things turned up this year.
1. Got a statement for MIsc 1099 for drawings from one casino, and noticed it was several thousand dollars less than my total. I called them and got a list to see what was going on. First, they only include winnings over $750. Even so, they missed two different $750 winnings (so the 1099-Misc is off by at least $1500).
2. Then as I put my w2s in order, I noticed one dated 4/18/2014 -- very odd, because that date hasn't even happened yet!! I thought maybe it was for 4/18/2013, but when I checked my gaming diary, I hadn't gotten any w2Gs that date, and also, I was gone from the casino by the time listed. Using the transaction number, I figured out that it was issued much later than April, and eventually I found it -- 12/18/2013! Really odd.
Also, I noticed my Harrahs Win/loss statement for Chester/Philadelphia, easy to see because I'd only played one day there, so easy to check. They had the right amount of W2Gs for the day, but.....Looking at my losses/wins, they have my husband and I winning about $6000 more than we really did. I think this may be because we were playing together with his card in, but a W2 was in my name because I was seated, so this money may have been counted twice, once for a coin out win for him and once as a W2 win for me. I don't know, but the difference between Harrahs win/loss statement and the actual win for the day was considerable.
Another thing, when we were audited a few years ago, the iRS sent me a list of all the w2Gs they had supposedly/apparently received, and it was missing a lot of them. Most of the missing ones seemed to be where I had won two in the same day with the same denomination -- for example $1250 plus $1250 plus $2000 -- they listed only $1250&2000. I don't know if this was an IRS error or a casino error. You would think everything would be computerized, but maybe not. The missing items were not just one or two, but (if I remember rightly) over a dozen. Odd. (by the way I included the correct amount in my IRS filings)
So this may be one reason the IRS doesn't just use win/loss statements. They just aren't accurate. Also they know that sometimes people play and forget to put cards in, blackjack and craps and other table games aren't accurately tracked, and sometimes couples play together or on each others cards.
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