4a. IRS mistaken W2 problem
Date: Wed May 30, 2007 12:41 pm ((PDT))A friend of mind was playing in Atlantic City for several hours. He
left his slot card in the machine and someone else sat down and hit a
taxable jackpot. This happened in 2005. He just received a bill from
the IRS saying he owes $4000 for a 20K jackpot on taxes that were not
paid. He never signed for the jackpot and wasn't even in the casino
when it was hit. I know the IRS doesn't receive the actual W2. If the
casino is uncooperative and won't give him a letter saying the jackpot
wasn't his what should he do. He did collect the cashback that he
earned when he was playing and that also included any money that was
earned on the card while it was in the machine. I don't see how the
IRS can bother him when he never signed for any jackpot or even inside
the casino when the jackpot was it. This is clearly a negligent casino
which just used the information from the slot card and not putting the
jackpot in the name of the person who submitted the ID. I wonder if
this has happened to anyone else.
Your friend is certainly not automatically off the hook; he will need to do some work to fix this problem. He should contact the IRS or a tax accountant or tax attorney to get advice on how to challenge an erroneous income form - I KNOW this can be done for a 1099, and see no reason why it shouldn't be able to be done for a W2G he never signed.
The casino is, I believe, required to get tax ID from anyone receiving a jackpot (social security card, for example), and if that's not available, then some other ID -- and somehow, to get a social security number to put on the form.
In fact, he might want to start with the casino -- if they failed to do what they are supposed to do, they might be facing "trouble" themselves, and might be willing to notify the IRS of the "error" to get themselves from being scrutinized.
I don't know if he'll be successful, and I don't know how the burden of proof could possibly be on him (how do you prove you're NOT somewhere, and DIDN'T receive income, unless you have proof you were somewhere else, not likely). I would think the IRS would be required to prove that he DID receive the income, and if they are relying on a report from the casino, if he challenges that report and asks for the W2G that the casino provided for that payout, that should be a starting place to get this fixed.
I'm sure it won't be easy -- I've made the simplest honest mistakes with the IRS (paid withholding tax deposit for one quarter in the next quarter by mistake) and it took a couple years to get straightened out.
--BG
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