vpFREE2 Forums

Can't deduct winnings against losses, IS it true??

#1

Jeep,

I had been itemizing for many years and off-setting casino wins with losses on Schedule A. Now, with the much larger standard deduction, it is now in my best interest not to itemize (even with the same adjusted gross income) - so I didn’t itemize for 2018. Since any W-2Gs that I had received in 2018 were reported by the casinos to IRS , I had to include that total amount as “other income” on form 1040. Otherwise, the IRS computer would have kicked out my return for audit.

So I ended up paying taxes on the sum of the W-2Gs in 2018. Based on my review of the tax law and court precedent, I knew that I could have made the case that the gross W-2G amounts on the “session days” where they did occur could perhaps be offset with other losses on that same session day. But the hassle of trying to explain that to the IRS wasn’t worth it based on my situation. So I just paid it.

The lesson learned is to try and avoid W-2Gs if you plan to take advantage of the new standard deduction. Therefore, for the same denomination bet, game type and pay table, I would move to multi-hand (if available) to avoid most W-2Gs. For example, play 100-play 9/6 JOB .05 ($25 bet) instead of single line 9/6 JOB $5 ($25 bet). Same bet size and EV - but far fewer W-2Gs over the course of a year. I know that you can follow this strategy in Reno, but the options are likely limited in other areas.

In a message dated 4/15/2019 8:37:17 PM Central Standard Time, vpF…@…com writes:

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Hi all

My accountant just told me this. I do long form. I hope accountant wrong. But, having wrong info would

not make me happy either. The old damed if right, damed if wrong.

Cheers…Jeep

#2

Hi Walter,

Sounds exactly like what my accountant said. He handled it same way. “Just pay it, it’s easier.” , accountant said . In my case, last year was an unusually small amount of W2Gs. Played a lot of Joker wild in AC with natural Royal the jack pot. I hit a lot of Wild Royals for $500. Unfortunately no Natural ones. May have saved me $$ on taxes. Also last year in Vegas played lot of quarter and $1 Deuces. about 3 @ $1 Deuces for $1000. Played 50 cents too. Did OK 2018 not many signers.

Played a lot of quarter in Vegas 2019. Played lots of Deuces. Went to M to look see. Never been there before. Caught a $1 Natural Royal causing a signer. Really liked the place for 4 hours I was there. We were in town for 10 days. Came out about even whole trip, including all expenses. I like u’re idea of 100 play @ .05. If you’r trying to avoid W2Gs though, you may get upset if you catch a dealt Royal??

Don’t understand new Standard deduction fully yet. I will ask my tax guy when I see him on out of tax deadline season. It makes sense to explore standard deduction in advance of 2020 tax file time.

Thanks for the info…Cheers Jeep

#3

Walter wrote: " For
example, play 100-play 9/6 JOB .05 ($25 bet) instead of single line 9/6
JOB $5 ($25 bet). Same bet size and EV - but far fewer W-2Gs over the course of a year. I know that you can follow this strategy in Reno, but
the options are likely limited in other areas."

Also, change your strategy to maximize the non-W2G hands, for example if the royal on jacks is W2G, set royal value to zero in strategy generator like wizard’s, resulting strategy is something like:

HP+>4FL>LP>4STo>3FL3H>3SF0>4STi4-3H>3FL2H>3SF1>KQJ>2H>1H>3SF2

You lose a bit not chasing the royal draws (I think about a half percent) but you make it back and then some in less heat from the casino and less W2G’s that you have to wait for and tip and then pay taxes on, so overall it’s the more optimal strategy.

#4

W-2Gs or not, you’re supposed to pay income tax on income. Playing for stakes that does not generate a W-2G is not an excuse to avoid reporting profit.

—In vpF…@…com, <whitejeeps@…> wrote :

Hi Walter,

Sounds exactly like what my accountant said. He handled it same way. “Just pay it, it’s easier.” , accountant said . In my case, last year was an unusually small amount of W2Gs. Played a lot of Joker wild in AC with natural Royal the jack pot. I hit a lot of Wild Royals for $500. Unfortunately no Natural ones. May have saved me $$ on taxes. Also last year in Vegas played lot of quarter and $1 Deuces. about 3 @ $1 Deuces for $1000. Played 50 cents too. Did OK 2018 not many signers.

Played a lot of quarter in Vegas 2019. Played lots of Deuces. Went to M to look see. Never been there before. Caught a $1 Natural Royal causing a signer. Really liked the place for 4 hours I was there. We were in town for 10 days. Came out about even whole trip, including all expenses. I like u’re idea of 100 play @ .05. If you’r trying to avoid W2Gs though, you may get upset if you catch a dealt Royal??

Don’t understand new Standard deduction fully yet. I will ask my tax guy when I see him on out of tax deadline season. It makes sense to explore standard deduction in advance of 2020 tax file time.

Thanks for the info…Cheers Jeep

#5

Do you work for the IRS?

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On Tue, Apr 16, 2019, 7:27 PM bobbar…@…com [vpFREE] <vpF…@…com> wrote:

W-2Gs or not, you’re supposed to pay income tax on income. Playing for stakes that does not generate a W-2G is not an excuse to avoid reporting profit.

—In vpF…@…com, <whitejeeps@…> wrote :

Hi Walter,

Sounds exactly like what my accountant said. He handled it same way. “Just pay it, it’s easier.” , accountant said . In my case, last year was an unusually small amount of W2Gs. Played a lot of Joker wild in AC with natural Royal the jack pot. I hit a lot of Wild Royals for $500. Unfortunately no Natural ones. May have saved me $$ on taxes. Also last year in Vegas played lot of quarter and $1 Deuces. about 3 @ $1 Deuces for $1000. Played 50 cents too. Did OK 2018 not many signers.

Played a lot of quarter in Vegas 2019. Played lots of Deuces. Went to M to look see. Never been there before. Caught a $1 Natural Royal causing a signer. Really liked the place for 4 hours I was there. We were in town for 10 days. Came out about even whole trip, including all expenses. I like u’re idea of 100 play @ .05. If you’r trying to avoid W2Gs though, you may get upset if you catch a dealt Royal??

Don’t understand new Standard deduction fully yet. I will ask my tax guy when I see him on out of tax deadline season. It makes sense to explore standard deduction in advance of 2020 tax file time.

Thanks for the info…Cheers Jeep

#6

—In vpF…@…com, <bobbartop@…> wrote :

W-2Gs or not, you’re supposed to pay income tax on income. Playing for stakes that does not generate a W-2G is not an excuse to avoid reporting profit.

True, but recall that what’s at issue is the requirement to report W-2G’s as gross winnings, even in absence of a net casino win, for those without sufficient deductions to warrant filing a Sch-A (not avoiding income tax on actual net winnings).

#7

Ok. I didn’t say I like how it’s reported, or how the adjusted gross income is used, but even if I don’t get W-2Gs I’m still going to keep records and report what they consider winning sessions. The whole system seems convoluted to me but I want to do what the IRS wants. And then I’m going to itemize, the standard deduction doesn’t help me. And I probably would not play video poker in one of the several states that doesn’t allow losses deducted against wins. That’s crazy. Thankfully I don’t live in one of those.

—In vpF…@…com, <harry.porter@…> wrote :

—In vpF…@…com, <bobbartop@…> wrote :

W-2Gs or not, you’re supposed to pay income tax on income. Playing for stakes that does not generate a W-2G is not an excuse to avoid reporting profit.

True, but recall that what’s at issue is the requirement to report W-2G’s as gross winnings, even in absence of a net casino win, for those without sufficient deductions to warrant filing a Sch-A (not avoiding income tax on actual net winnings).

#8

At considerable risk of beating a dead horse, what I wanted to clarify was that the point of the thread wasn’t to avoid reporting gambling activity in the stipulated manner. I don’t think anyone was suggesting that they were seeking “to avoid reporting profit” (or for that matter, reportable winnings even in absence of a net win).

So, your original post, while accurate, wasn’t exactly to point re the thread subject. (That’s not to say that it wasn’t an appropriate observation, generally speaking).

To capsulize, the thread noted that with fewer people finding it beneficial to itemize deductions, being issued a w-2g will likely result in a tax liability that would not have been incurred were they otherwise filing a Sch A (to the extent that deductions, including offsetting gaming losses, are less than the standard deduction). For this reason consideration might be given, where feasible, to play at lower multi-line denominations, where w2-g incidence can be expected to be smaller (just to emphasize, no consideration of “avoiding reporting a profit”).

It’s respeciable advice and doesn’t represent tax evasion any more than year-end “tax harvesting” of investments does. It’s merely a strategy that legitimately reduces tax liability.

btw, not to minimize your point about the benefit of session reporting, I’ll note that my interpretation of the session rules are such that any transaction that results in the redemption of credits for cash constitutes a session break. As such, being issued a w2-g with cash payment will require accounting for a session at that point, reducing the opportunity for offsetting “session” losses later in the day. (I haven’t seen this “take” validated elsewhere, but I find it consistent with the logic of session reporting. You’re welcome to take it with less than a grain of salt :wink:

—In vpF…@…com, <bobbartop@…> wrote :

Ok. I didn’t say I like how it’s reported, or how the adjusted gross income is used, but even if I don’t get W-2Gs I’m still going to keep records and report what they consider winning sessions. The whole system seems convoluted to me but I want to do what the IRS wants. And then I’m going to itemize, the standard deduction doesn’t help me. And I probably would not play video poker in one of the several states that doesn’t allow losses deducted against wins. That’s crazy. Thankfully I don’t live in one of those.

—In vpF…@…com, <harry.porter@…> wrote :

—In vpF…@…com, <bobbartop@…> wrote :

W-2Gs or not, you’re supposed to pay income tax on income. Playing for stakes that does not generate a W-2G is not an excuse to avoid reporting profit.

True, but recall that what’s at issue is the requirement to report W-2G’s as gross winnings, even in absence of a net casino win, for those without sufficient deductions to warrant filing a Sch-A (not avoiding income tax on actual net winnings).

#9

Also, I highly recommend reading the following court case which is quite relevant to this discussion.

Schollenberger v. Commissioner

https://www.morrellawpllc.com/court-cases/schollenberger-v-commissioner-us-tax-court/

The judge in this case now sits on the Supreme Court.

In a message dated 4/17/2019 10:54:17 AM Central Standard Time, vpF…@…com writes:

···

btw, not to minimize your point about the benefit of session reporting, I’ll note that my interpretation of the session rules are such that any transaction that results in the redemption of credits for cash constitutes a session break. As such, being issued a w2-g with cash payment will require accounting for a session at that point, reducing the opportunity for offsetting “session” losses later in the day. (I haven’t seen this “take” validated elsewhere, but I find it consistent with the logic of session reporting. You’re welcome to take it with less than a grain of salt :wink: