Jean Scott correctly pointed out that W2-Gs aren't the determining factor in reporting gambling income. You are supposed to report all winnings as income and take a deduction for losses. That's for the federal taxes and you can report on a session basis. A session is less than the entire year but more than a single play.
On state taxes, it's an entirely different story. In Michigan, every W2-G is a taxable event, even if you lose money in the session.
Example. I play one day for the entire year. On my first hand, I hit a progressive , quarter royal flush for $1250. I then lose my next 1000 hands in a row and break even for my one day session. Frustrated with gambling, I quit forever. On my federal tax , I will declare $1250 as income and offset it with $1250 as an itemized deduction. However, on the Michigan State Tax form, I will only list $1250 as gambling income and pay the 4% tax on it. At the state level, W2s are very important in determining tax liability. They are also very important at the federal level if you don't itemize. If I don't itemize, I have $1250 in gambling income and no way to offset it.
This is part of the reason that avoiding W2s is important to a lot of people. Jean, I think you file as a professional gambler so your tax consequences are much different than most of us. I don't think most people want to avoid paying their fair share of taxes. They do want to avoid paying income tax when there is no income, only gambling action.
John Zaroff
Delphi Electronics and Safety
313-996-3682 (w)
888-683-3345 (p)
313-443-2887 (c)
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