I know it is bizarre, but every one of the IRS people I spoke to indicated
that one should total all W2Gs and report them as gambling income. Period.
Even when I questioned them further and said, what if I win $500 and don't get
a W2G, they seemed to indicate that only W2Gs should be listed. I was
specifically told that a Gaming Diary data only supports losses, not wins.
Probably the prudent thing to do is to report W2Gs + all other sessions that
result in a win. But at least the initial IRS auditing procedure seems to
steer the taxpayer to report W2Gs only.
Probably the IRS figures it can't have it both ways. If they don't allow
you to use "sessions" and want you to report all W2Gs as "wins", then it
doesn't make sense to have any other outcomes be wins. If everyone were to report
every $5 or $1 that comes out of the machine as a win - that would be the
same as "coin out" - which would result in all average gamblers getting
hundreds of thousands or millions of dollars in income. Also how do you write down
and record every single pull of the handle? This would be burdensome
paperwork. So the IRS prefers to normally consider W2Gs= wins because they have a
record of that and it is easy to check. This is just my guess.
As for 1099s - I agree with Harry Potter - if you have to gamble to get into
a tournament, or you have to gamble to get entries, or you must have "rated
play" during a tournament to be in a tournament -- to me these are gambling
payouts - no matter what sort of form the casino provides you with. In fact,
some people have reported to me that they got W2Gs for some of these type of
events (especially tournaments where some people paid fees and some didn't) -
even though they had paid no fees to enter. Some casinos don't even issue
1099s at all, especially if you win less than $600. Others total all your
tournament winnings for a year - if you win $100 you get no 1099, if you win
$100 6 times for a total of $600 you get a 1099 for $600. I called several
casinos and asked "upon what basis are you issuing a 1099 versus a W2G when I
had to gamble to get drawing entries" (asking is it an IRS regulation or a
casino decision) - I got a lot of "I don't knows" - and no one has called me back
with any answers. Even the controller's offices couldn't answer this. So I
don't know what or why the casinos do what they do.
On the other hand, the IRS people I spoke with were adamant that if you get
a 1099 Misc, no matter what source (!) - it must be put in as Other Income and
you couldn't call it a Gambling Income or deduct losses against it.
Does that make sense? Nope. I have no idea if you can appeal this
successfully or not. I'm just telling you what they told me.
[Non-text portions of this message have been removed]