In a message dated 10/10/02 6:04:12 PM Eastern Daylight Time,
harry.porter@verizon.net writes:
Note, I have avoided the frequent misnomer of "taxable jackpot". All
winnings are taxable, no matter what the filing method of the
taxpayer. As to what a particular taxpayer chooses to report is
matter that rests between their conscience and the IRS. (And let's
not extend any discussion into that topic, ok? It's an exercize that
doesn't enlighten or educate.)
Harry, your info was accurate but not quite complete.
But first, I would like to briefly discuss this subject of accurate reporting
(which you suggested not discussing). I agree that the "morality" of this
topic is no more appropriate to discuss here than religion, politics etc. But
I have a more practical viewpoint.
And from that viewpoint, I say that for those of us who have mortgages, pay
significant taxes and give to charities (ie we itemize deductions) most all
gambling winnings are reported on the "honor" system. Unless you are a
megabucks or lottery winner (or playing a special VP System as is often
discussed on another VP site and never here) your "documentation" of your
winning records consists of that small spiral notebook in your fanny pack and
the casino's year end statements of your winnings. I've been gathering that
information for a decade and my experience is that out of over one hundred
year end statements from casinos, less than 25% were consistant with my own
annual records. And mine are accurate. So that's where the honor system comes
in. You know that $800 that you won last Thursday at Bally's? If you inserted
a minus sign instead of a plus, that would be a $1600 swing in your yearly
totals. You do that just a few times and, viola, you have a losing year.
Cheating? Yes. Fraud? Yes. Likely to get caught? No, not really.
Obviously, I am neither endorsing nor recommending that anyone do this. My
only point is that this behavior is no different from not reporting your
winnings when no W2G's have been generated. No judgment implied on my part. I
prepare many many tax returns each year. Some clients will report the value
of the turkey they won at a VFW meeting. Some are, let's say, a little less
fastidious about their reporting. It's my responsibility to remind them, as
necessary, that the IRS has the right to examine their records to determine
the validity of what they report.
As to the tax implications you listed, there was one potentially significant
omission: adjusted gross income (AGI). When you DO report gross gambling
wins, as a non professional gambler, they go on line 21, other income. Even
though you deduct your losses on Schedule A, you will have increased your AGI
and without getting too technical, that can have negative impact on other
areas of the tax forms for those with higher incomes or more complex tax
items like tax credits, losses from rentals, and a variety other issues.
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