Yes, you have to pay taxes. Every year, thousands of casino players win big jackpots in slot machines, and these winnings can amount from millions of dollars each year. Certain big cities are known for their casinos such as Las Vegas and Reno. While most people see gambling as nothing more than a way to earn extra money, winnings that reach a certain amount are unfortunately taxable.
It is a well-known fact amongst casino owners that federal and state governments categorize casino winnings as unique taxes in their own right. All casino gambling winnings, including slot machine winnings, are subject to get taxed by the federal government. It doesn’t matter if it’s a five hundred dollar win from a game of craps or a one million dollar win from a poker tournament, by law, all gambling winnings should be reported on the winners’ federal income tax return.
What happens when you win a jackpot at a casino
When players hit a progressive jackpot on a slot machine, bright lights start flashing, signaling the players win, and the slot machine locks up to be inspected by casino technicians to make sure that the slot machine was adequately working during the event. A casino employee will then verify the jackpot, and assist the player in claiming their pay at the cashier.
Players have the option of taking the winnings in cash or cheques. However, large amounts are usually paid via checks. In cases of multi-million dollar jackpots, players are given a check for the partial sum. The winners are then given 90 days to decide one of two things:
- The lump-sum option: Jackpot winners will immediately receive a percentage of the actual winnings, usually around 60% of the real prize.
- Annual annuity balance: Jackpot winners will receive the full winnings of the multi-million via 25 annual installments
All gambling winnings and gambling losses are subject to tax laws by the federal government. However, the Bureau of Internal Revenue only requires casinos to report jackpot wins of over $1,200 on slot machines.
After a win equal to or greater than $1,200, winners are given form W 2G; this form will ask winners to fill out their name, address, and social security number. Another information to note is that wins above $5,000 are subject to tax withholding, meaning that 24% (the amount is 30% for non-US residents) of the gambling wins will immediately go to the federal government.
Online slot machines like the wild inferno slots abide by different sets of rules that can vary from country to country and state by state when it comes to tax on gambling wins. Online slot machines don’t lock up like traditional land-based casino slot machines, and the wins can be withdrawn within 24 hours even without providing the players the form W 2G for their tax obligations.
Tips for slot machine winners
Bring valid identification
Whenever you are in a casino, it’s always a great idea to bring a valid ID such as a driver’s license, military ID, or any other form of a valid ID. Not doing so can cause players a lot of trouble. Casinos can withhold gambling winnings from the player until they can come back with a valid ID. Additionally, if you don’t provide your social security number, the casino can withhold 28% of the gambling winnings.
It’s a good idea to proactively document your gambling winnings and losses leading up to the jackpot. In doing so, you can use the itemized list later down the line when you have to file for your tax return.
How much money can you win without paying taxes?
As mentioned above, all casino winnings and losses by law must be reported to the government in the income tax return. But gambling wins below $1,200 and below $600 from betting 300 times the player’s wager, can’t be reliably tracked by the Bureau of Internal Revenue. Keep in mind that the amount of tax might not apply to online Bitcoin casinos and Bitcoin slots, depending on which state or which country you are in.
What happens if you don’t claim gambling winnings on taxes?
Failing to report a relatively small amount of gambling winnings and losses on your income tax report to the IRS will most likely not result in any adverse legal actions from the government as they have no practical way of finding out to tax you. But we recommend that you file those reports anyway as gambling losses can be used to reduce the player’s tax.
For tax purposes, casinos are required to provide a form W 2G to players who have won a jackpot of $1,200 before they can claim their gambling winnings.
If a discrepancy is discovered and If the amount of the discrepancy is small and insignificant, the most you will get is a cordial letter from the IRS asking you to make right on your accounts. However, the government will require you to pay for a back tax, a penalty tax, and an interest tax. The amount can vary depending on how big the discrepancy.
The consequences will be more severe if the amount of the discrepancy is enormous. The treasury can accuse you of money laundering, which has significant jail time and forfeiture of income and assets.
Are casino winnings considered earned income?
No, they are not considered earned income. Only professional gamblers with a pre-established contractual relationship between casinos with mutual expectations such as professional poker tournament players can file their gambling winnings as earned income. Regular players must file their winnings and losses through the income tax return.
Are my winnings from online casinos taxable?
Yes, and no. The list of Bitcoin casinos can stretch as far as the eye can see. And these online Bitcoin casinos more often than not operate outside of the USA. And depending on which state or country you’re playing in or which country, taxes from gambling winnings from land-based casinos might not apply to every single player.
How can I avoid paying taxes on casino winnings?
The best way to avoid paying taxes on casino winnings is by having an itemized list of gambling winnings and gambling losses kept in a diary or log-book. It’s a known fact that most gamblers lose more than they win per year (if most players won more than they lose, then the gambling industry would not have a sustainable business model). Since the law allows gamblers to deduct gambling losses to the amount of the winnings, this will negate those winning taxes.
Slot machines have been around for a long time; they are a staple in any casino in Vegas and is beloved by many. Winning jackpots are exciting a flashy. The thrill of having the lights go off left and right as music fills the air is unmatched; this is the reason why players keep coming back.
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