March 27, 2020 | 1412 Views
You may be the biggest winner at any online casino, but you can become a loser if you don’t account for your winning taxes. Along with the Tax season going on, it is now the time to look at the tax laws that are applicable to you and determine your best way to file. Some way or the other, you should have your taxes in mind throughout the year, but it’s never too late.
From a bit of advice to warnings, from forms to logs, here are some essential points when doing your taxes while playing at an online casino.
Gambling income is considered as a taxable income. It includes cash and the fair market value of any item you win. According to the law, gambling winners must file or report all their winnings, even your bonus winnings, on their federal income tax returns. Based on your winnings, you may receive one or more Forms W-2G, which list the amount of your winnings, as well as the tax amount that was withheld previously, if any. You will have to prepare and file your tax return. You should know that, even if you do not get a Form W-2G, you must report all gambling winnings on your back.
Gambling winnings include money or prizes earned from:
It is easy to deduct your gambling losses if you categorize your deductions. You can reduce your losses only up to the amount of your total winnings. Initially, you must report your winnings and losses separately, instead of saying a net value.
Gambling losses are deduced or deducted on Schedule A as a miscellaneous deduction, and they are not subject to a 2% limitation. It means that you can deduct all the losses to the amount of your overall winnings, not just the amount above 2% of your modified gross income.
If you want to deduct your losses, the IRS needs you to keep detailed records of your gambling winnings and losses and also any related documents, including tickets, receipts, statements, payment slips, and even forms. You need to prove both your winnings and losses to reduce your losses. IRS says that it is better to keep a gambling log or diary where you can track your wins and losses regularly.
IRS needs you to keep the following data about each gambling win and loss:
Any Nonresidents can usually report income that is “effectively connected” with a developed country’s business form. Any gambling winnings are, however, considered to be “not effectively connected” and, therefore, must generally be reported on the way for the Non-residentials. Such income is taxed at a rate of 30%. In general, nonresidents cannot deduct gambling losses. For the USA, there is a tax treaty between the United States and Canada, which allows citizens of Canada to deduct their gambling losses, up to the amount of their winnings.
The UK does not tax gambling winnings.
Even British gamblers won’t need to worry as the UK has tax treaties with other countries, so UK players don’t need to worry about their winnings. Whether you bet on blackjack, slots, horses, sports, or bingo, you don’t need to worry about paying Tax, no matter how much your winnings are. You need to know that other taxes can come into play. If you win £325.0 or more, you could be charged income tax. This is not a gambling tax, but an estimation that your winnings go beyond typical recreational play and can now become a way you can support yourself. Similarly, there are are other taxes such as inheritance tax in the UK, so if your winnings are transferred to someone else, tax implications may be applied.
If you think that Taxes disappear just because you don’t pay or claim them, then you are wrong. Even the famous Al Capone was imprisoned for money laundering and tax evasion rather than any other criminal activity.
Most of the people do not report their gambling winnings and losses to the IRS. This is mainly the case for the winners who don’t get W-2 forms. Usually, small wins and losses are not even on the IRS radar, and it’s not like you will be imprisoned just because you won $100 at a local casino and did not report your wins or losses to the IRS.
It is just a gamble that people are willing to make. But it may also have some adverse consequences. Depending on how much you keep your taxes based on your gambling, you could end up getting imprisoned, being accused of tax dodging, getting a charge on your property, or other extreme reverberations.
As a result, gamblers are advised to keep gambling records and report everything to the IRS instead of rolling the dice and hoping that no one will notice.
So next time at any top online casino, remember that you can choose to be a winner or a looser, even after hitting the jackpot, and spent your full money instead of just giving it in the hands of the IRS.