A lot of people mix up W2G figures with the actual win/loss figures from a gaming "diary." Actually W2Gs have NOTHING to do with your win/loss figures that you put on a tax return - and as an aside, the win/loss statements from the casino don't either. More on that later.
Simply put - you add up all your winning sessions you had all year long (now what a session is - that's NOT simple - but a daily figure is a "logical" one that many people use) and that is the gambling WIN figure you put under Miscellaneous Income. Then you add up all your losing sessions of the year and IF you itemize you can put it on Schedule A (but only up to the amount of the win figure). If you do not itemize, you are screwed royally, paying federal tax on your GROSS win and state tax too in many states, plus losing deductions and all sorts of bad things happen if you have a large income. And, of course, that isn't fair - but that's the IRS regulations. There is much that is not clear in IRS regulations about gambling - but one thing is spelled out clearly: you must keep your winning and losing session totals SEPARATELY all year long and report them separately at the end of the year. YOU CAN NOT USE ONE NET WIN OR LOSS AT THE END OF THE YEAR!!!
If your winning sessions figure is more than your W2Gs, you don't have to do anything with that W2G total. IF your winning sessions figure is LESS than the W2G total, then you MUST add a note that this figure has been accounted for in your win/loss figure. The best way to do this is to attach a list of the W2Gs to your return. That is what we do. If you don't, you will get a letter audit - like we did once when we forgot to add the W2G list - but if you then explain that these are in your win/loss figures, that is the end of the situation and you don't go to jail!
As far as your win/loss statements from casino, I've NEVER had one that was exactly like my win/loss figures from my diary. And most are so far from reality that I wonder if the casino just makes up some figures. The IRS does know this - and that is why they say specifically that these are "supporting" documents only and do not take the place of your "diary." All they do is show you did play at that casino and if it is detailed enough might show on what days you played there - but even that is not always very accurate.
Now all the above is the way the IRS wants things done and if you do it this way you will not go to jail. But you will not likely go to jail if you do it some other way - and you probably won't get audited and you might even pass an audit although you will have some nervous moments.
Here are some "alternative" ways to do this and I know plenty of people who do this and "get by with it." But be wary - the IRS is becoming more pro-active in investigating the area of gambling figures!!!!
1. Never count any gambling figures if they never get a W2G.
2. If they get just a few W2Gs, just count that total figure as their gambling "income."
3. Even some with lots of W2Gs go the same route as #2 although in many cases, they are overpaying their taxes by doing it that way instead of using the diary amount, if their gross win figure is less than the W2G amount.
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Jean $�ott - Go to http://www.FrugalGambler.biz
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