Have you recently won big at the poker table? Before you go spending your winnings, you should watch this video and determine how much of that money is taxable.
Hello, I'm Jill from TurboTax with some interesting information about reporting gambling winnings on your tax return.
If you enjoy gambling or playing the lottery, there's nothing better than beating the odds and winning some extra money. But did you know that the Internal Revenue Service expects you to report all of those winnings on your tax return? And in some cases, the gaming organization that pays your winnings must report it to the IRS on a W-2G form.
Not all gambling winnings are subject to W-2G reporting. Casinos and other gaming organizations will send you a W-2G when you win $1,200 or more on a slot machine or from bingo, keno jackpots of $1,500 or more, more than $5,000 in a poker tournament and all other games you win $600 or more at, but only if the payout is at least 300 times your wager.
The IRS also requires other gambling winnings to be reported on a W-2G if the prize money is subject to tax withholding. Keep in mind, however, that just because your gambling winnings are reported on a W-2G doesn't automatically require the withholding of income taxes; reporting and withholding are two separate requirements.
Withholding is only necessary on your net winnings, which is the payout minus your initial wager, from a sweepstakes or lottery that is more than $5,000. In addition, payouts of more than $5,000 from any game with odds of at least 300-to-1 are subject to withholding. If the gaming facility does withhold taxes, it normally does so at the rate of 25 percent.
If you don't provide your Social Security number, the withholding will be at 28% and start at lower payment amounts. You should receive all of your W-2Gs by January 31st of each year. The form itself will have a number of boxes, but for purposes of preparing your tax return, boxes 1, 2 and 14 are the most important. Box 1 reports your taxable gambling winnings, box 4 reports the federal income taxes withheld and box 14 reports the amount of state income taxes withheld. You must report the amount in box 1, as well as your other gambling winnings not reported on a W-2G, on the "other income" line of your 1040.
And if your winnings are subject to withholding, don't forget to report it in the "payments" section of your return. Luckily, if you itemize deductions on Schedule A, you can take a deduction for your gambling losses, but it can never be more than your gambling winnings.
Remember, with TurboTax, we'll ask you simple questions about your life and help you fill out all the right tax forms. With TurboTax you can be confident your taxes are done right, from simple to complex tax returns, no matter what your situation.