8b. Re: Taxes on IL W2Gs
Date: Tue Sep 18, 2007 9:28 pm ((PDT))I don't understand how Illinois could tax our entire income when we
don't live in the state or work in the state; we just won a jackpot
in one of their casinos when visiting the area. We pay our taxes to
the state we live in so how can Illinois tax us as well?
IL can only tax what you "earned" in IL -- including gambling income. But they can base how they calculate what you owe on your full income, either gross or federally taxable -- or any other formula they decide to pass. Every state has this "sovereign right" to tax money made in their state, just as they can tax money spent via sales tax, and so on. Some states have limited their own taxes, or have negotiated agreements with other states regarding how they'll be handled, but (from my own observations, anyway), state income tax is the loss-of-advantage factor in most taxable advantage-gambling ventures, unless the state allows, same as federal, offset of wins with losses (and sometimes even that's not enough to allow a net winner to be a net winner after-taxes).
Which is why, of course, most gamblers try not to report gambling income that's not on W2Gs, in violation of tax law and at considerable risk if audited.
On the flip side is the inappropriate auditing and pursuit of those gamblers who do try to keep good records in compliance with IRS requirements as they understand them, and who do pay their taxes in compliance with the law.
These tax battles are not limited to gambling income; they just seem to be to those of us who constantly discuss it on this list.
--BG
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