Let’s say that you’re lucky enough to hit it big at the track or the casino. Any winnings you have are taxable, and the IRS is consistently updating and revising its rules on how the successful gambling man can pay his taxes.
Recently, the IRS issued a 31-page document titled “Withholding on Payments of Certain Gambling Winnings.” The document proposes new rules for withholding and reporting on winnings from horseracing, dog racing, and jai alai pari-mutuel betting, and finalizes regulations for reporting on bingo, keno and slot machine winnings. Here at Polston Tax, it’s our job to make sure that your tremendous luck doesn’t become a bad bet. So, here’s a quick overview of the new rules:
Under section 3402(q) of the tax code, both payers and payees are subject to withholding. The IRS withholds funds from three types of wagers, provided that the payout is more than $5,000: General winnings or any proceeds that are at least 300 times greater than the amount wagered, proceeds of state lotteries, and wagers placed in a sweepstakes or a pool in regards to horseracing, dog races, or jai alai.
The newer proposed rules were developed together by the IRS and the National Throughbred Racing Association. They’re designed to clarify the amount of the wager placed in a specific pool by an individual. Today, the IRS only examines the winning base unit, so the proposed regulations should have a positive impact on winning wagers.
Before any rules are enacted, however, they’ll go through a 90-day comment period. Individuals are allowed to leave comments expressing either support or suggestions for the proposed rules.
The IRS has also finalized regulations, effective as of December 2016, regarding the filing system for reporting winnings from bingo, keno, and slot machine play. These new regulations only affect those who pay winnings of $1,200 or more from bingo and slot machine play, $1,500 or more from keno, and those who receive payments. These rules update the already existing requirements in Section 6041 of the Tax Code, which lays out any filing, form, and content of each information return, and allows for an additional form of payee identification.
Payers who make “reportable gambling winnings” (which the new regulations define), must report by filing out Form W-2G, “Certain Gambling Winnings” with the IRS.
Or, you could invest a small portion of your winnings here at Polston Tax! It’s a piece of mind investment, which will ensure you can truly enjoy your good fortune. Be sure to browse our services page and fill out the form for a free consultation. Or give us a call at 844-841-9857. We’re open 8am-5pm Central.