Gambling Wins/Losses

[dhoyt]

Hey all. Looking for some feedback on a particular situation and how to handle it.

I have a new client who likes to play the slots. But she keeps no records of her daily net wins and losses. She has 5 W-2Gs totalling about $10k. Then she has a printout from the casino showing about $300k  in "Slot Wager" and -$40k in "Slot Loss." Basicaly the Casino gave her the total amount she wagered and then her net loss for the year. She has nothing reporting the amount she won.

My assumption is I should take the total slot wagers, subtract the amount of loss, and that would be the total wins (300k-40k= 260k) and then back out the 10k reported on the W-2Gs (added back in by the system after entering them spartately). Then report the 260k as a loss on Schedule A. Does that sound logical or am I missing something? 

The previous guy for 2023 did something weird. He reported 300k on Schedule 1, Subtracted it on Schedule A, and then on the 1040, took the standard deduction and ignored the schedule 1. He only added in to income the few thousand that had been on the W-2Gs. He printed off the Sch 1 and the Sch A showing the large wins and losses, attached them to the tax return copies he gave her, but they were not actually used on the 1040.

[Terry53029]

Don't know if its changed, but this is part of  a letter I gave to my clients who gambled.

Rule 1: Your winnings are taxable. Your gambling income is taxable. And—just as important—it’s reportable.

For example, when you win $1,200 or more from a slot machine, the casino must report your winnings on Form W-2G and send a copy to you and the government. With this tool, the government knows when you don’t report enough gambling income on your tax return.

Rule 2: Keep records of your losses. You can offset your gambling winnings with your gambling losses—but you have to keep good proof of those losses. The IRS and courts expect you to maintain a “contemporaneous gambling diary.”

You face specific rules for a gambling diary depending on the type of gambling. For example, with slot machines, the IRS advises that you record the machine number, date, and time played to support your winnings. Often, you can find the machine number clearly displayed on the machine. If not, simply ask the casino operator for the machine number. (A good player card will automatically do this for you.)

[dhoyt]

Thanks for the response, Terry. That is good information for clients. I can't say I have many clients I know who gamble, or at least not ones who tell me about it, but a letter to that effect sounds like a good idea.

As your info says, gambling winnings are all taxable. The only recourse is to deduct the losses, which of course only happens if she itemizes, and the winnings inflate her AGI so much that it eliminates any deductions for her medical expenses, and makes her lose out on what would otherwise be a standard deduction which would be better to take. It seems to me her last guy was just ignoring the wager/loss report because it was more beneficial for her to just pay the tax on the amount reported on the W-2Gs and take the standard deduction. But that is not correct, since she can't just net out her winnings for the year and not report them. Unless someone is aware of a provision I'm not that allows that.

So I'll tell her to either go back to her last guy, or we report it the proper way with the winnigs and losses as best I can calculate and she is going to pay a bit more in taxes.