Won big? Don’t ignore the tax implications! Few things match the utter joy of drawing a winning hand or picking the fastest horse in a race, especially with money on the line. But if you win big, don’t forget you’ll need to give Uncle Sam his cut of your good luck before planning that long overdue getaway trip. A lot races through your mind after hitting a jackpot, however, the IRS is likely not on the list. Gambling winnings are taxable income, though, and that means you will owe taxes on gambling winnings.
Mismanaging your gambling winnings can wreak havoc upon your annual tax bill. Here is some advice from our tax resolution firm on how to manage your winnings.
Report Gambling Income with a W2-G
Following payment, casinos promptly report your winnings to the IRS. Any discrepancies between a casino’s and your account of a winning sum will likely be noted by the IRS. Therefore, fudging numbers or failing to report your winnings and pay your taxes on gambling winnings is never a good idea.
For large winnings, a W2-G form must be completed and filed. Casinos will typically provide these forms, however small winnings that do not warrant W2-G filing must be personally declared.
Withhold the Owed Amount
Casinos are familiar with gambling income tax regulations and aware of the all-too-common fallout of unpaid tax bills. So, many casinos will automatically withhold the taxed amount of your winnings, saving you the time and energy of personally managing your taxed funds.
If such services are not provided by the casino, you should withhold the amount of the tax immediately upon receiving payment. Put that aside and do not spend it, so you can use it to pay the tax.
Count Your Losses
Losing isn’t much fun, but if you do have gambling losses, you should make sure to document them well. A well-documented account of your gambling losses can significantly reduce the amount of tax you will owe if you do have a luck win.
Some casinos offer loyalty cards that track your gambling endeavors, providing detailed accounts of every win and loss. An activity report sourced directly from a casino is your best option when declaring your losses to the IRS.
Good luck multiplies itself with good strategy. When you win big, you will not regret having logged your losses.
Tax Relief Assistance
Need case-specific counseling from experienced professionals? Contact Tax Resolution Group for a free, extensive consultation on how to manage your taxes on gambling winnings.
We have the expertise to help you out of tax trouble. If you made a mistake on your tax return and end up on the receiving end of an IRS notice, or if you have years of unfiled tax returns, contact Tax Resolution Group today.
Tax Resolution Group specializes in fixing tax problems. We offer proactive tax services including tax resolution, tax planning, tax preparation and audit support. We offer in person, virtual service or socially distanced service, and we are ready to help you. Call us for tax help today at 941-413-2799 or Request a Free Consultation.