You Must Declare Your Oklahoma Gambling Winnings to the IRS

If you visit Las Vegas frequently—or even if you just go overboard occasionally betting on NCAA basketball or the Super Bowl—you probably know that you have to declare your winnings to the IRS. In certain cases, it also is possible to deduct your gambling losses from your taxes, though not to the extent that most taxpayers like to imagine. In any case, if you wind up thousands of dollars in the black (or red) in any given year, you need to contact an experienced tax attorney for advice.

The IRS Is More Concerned With Your Gambling Winnings Than Your Losses

If you win the jackpot at a Vegas slot machine, or have an unusually lucky day at the blackjack tables and come out $10,000 richer, the IRS will want to know about it. By law, the casino must file a W2-G form if you win a certain amount of money ($5,000 or more in a poker game, $1,200 or more from a slot machine, etc.). The casino may even be entitled to keep a portion of your winnings to forward to the IRS, the same way your employer takes a chunk of your paycheck for taxes before you receive your pay.

Many people mistakenly believe that the IRS is only concerned about legal, government-sanctioned gambling winnings earned in Nevada or on various Indian reservations around the country. But, as a general rule, the IRS doesn't care whether you obtained your winnings legally or illegally. You're still on the hook for taxes, regardless of whether the government may have a harder time establishing a paper trail. A $500 win in your office NCAA pool may not catch the attention of the IRS, but you may be safer if you declare a $5,000 bonanza on your return.

What about gambling losses? In the ideal world of a habitual gambler, the IRS would allow you to deduct an unlimited amount of losses from your yearly taxes to help alleviate the pain of your run of bad luck. But that's not the way it works. If you carefully itemize your gambling losses, you can deduct them from your taxes, but only if they don't exceed your gambling winnings. In other words, you can offset $9,000 of yearly gambling losses against $10,000 in winnings, but you can't claim $10,000 of gambling losses if you have only $9,000 in winnings.

When it Comes to Gambling, It's Best to Be Fair and Square With the IRS

If you're a habitual gambler, you may be inclined to “gamble” with your tax return, wagering that the IRS won't find out about that $10,000 you won in an after-hours Vegas poker game. What you need to understand is that the IRS takes undeclared income very seriously—regardless of the source—and will lay on thick penalties if a revenue officer discovers you have been hiding your winnings.

Questions? Call the law offices of Travis W. Watkins, PC (800-721-7054) for a free consultation today!