Anyone who has been gambling for a while knows that there are tax implications involved. There are greater chances of winning due to sports betting, lotteries, online casinos and the old way of costing offline casinos. Whatever the case may be, the enthusiasm to make some extra bucks through gambling has never been higher.
But while the chances of winning increase, the tax obligations do too. The Internal Revenue Service keeps track of your wins and losses more than you anticipate. In this article, we will let you in on some of the major tax guidelines related to winnings and losses related to online casinos.
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It is Mandatory to Report Your Winnings
Yes, you read that right. You cannot just walk away with your winnings and spend it all extravagantly. The government wants a cut out for all you are making. Whether it is an online gamble or a win at the office pool, it is mandatory to report all of it in the tax filing.
Ensure that even if a win is not of actual money but an asset, its fair value is to be reported for tax filing. Both small and big winnings need to be reported likewise so that there are no complications later on.
Withholding May Be Required
In some special cases, withholding is required. This means that if a player wins more than $5000 and the payout money is more than 3000 times the amount they bet, withholding is mandatory by law.
Specifically, if the conditions just mentioned are fulfilled, the online casino or the player is liable to withhold 24% of the total amount to pay taxes on your behalf. There is a form W-2G that one will have to fill with all the correct information so that there is no chance of penalty from the individual’s behalf.
The amount withheld from your earnings should be mentioned at the time of your next filing. Make sure to mention it so that it is not deducted twice. It will automatically be subtracted from the tax you owe. This practice should really happen at a reputable gambling platform, whether it is online or offline. Whatever the case may be, make sure to report it.
Losses can be Seen as Tax Deductibles
There is a benefit to reporting your losses as they can be seen as tax deductibles. It is an important thing to report them separately from the winnings but we will get to that later. The gambling losses you have to report include the cost of wager and other expenses. Other expenses usually include the travel cost from your place to the casino; this does not apply to any online establishment. Since there are no additional expenses, one can play from any place through reliable gambling websites like https://www.australianonlinecasinosites.com/real-money-casinos/.
While reporting everything has to be mentioned in an item is listed so that each entry can be deducted separately. Do not think of going with the standard deduction as it may lead to more inconvenience. If your gambling losses were more than the womens they cannot be deducted the way you think. If you one $50 but lost $150, only the first of the losses can be deducted. This may be unfair but if you have absolutely no winnings and long streak of losses then there is no chance of getting any deductibles.
Only professional gamblers who play for a living can list their losses as business expenses. Not everyone can become a professional gambler because it requires continual involvement with the soul aim of making a profit. Anyone who does it as a hobby just sometimes cannot hope to report it in a similar way.
Keep the Items Separate
We have already stated that everything needs to be itemised rather than a total report. The taxable income needs to be reported separately from the deductibles as it is required by law. If you want four bets, then all four of them should be mentioned separately as income on which income tax can be applied.
If you want a total of $200 on 4 bets for $50 each, you cannot subtract $100 as losses and only report the remaining as income. It is important to list all of them separately so that the IRS can directly subtract and return that deductibles as a valid claim. They need to be kept separate for complete transparency of your earnings and loss.
Maintain a Thorough Record
Being organised is highly recommended for anyone who wants to engage in any kind of gambling. If you are playing through a website or application, it is very easy to be carried away with the wagers. Keeping track of how much you’re spending and how much you are potentially earning back is an important way to stay on top of your finances.
Maintaining the detailed record of every thing you played and how much you back will be a good way to minimise your effort while filing your taxes for the year. It is important to be specific about the dates, the amount you bet, the activities participated in, and the online address of the casino.
While keeping a record, one should also have screenshots or online receipts which clarify how much you have spent. It is also important to know how much you want for each bet. You can collect screenshots, emails, SMS transcripts, and other details for proof.
Do not hesitate to read up on the official rules of your country while playing online. Each country has different guidelines that a citizen needs to follow. Reporting the earnings is essential for any individual especially if they are playing regularly and within an intent to make a profit. All the earnings, whether small or big, should be reported along with the money that was lost in the wager. It is also important to report the details in an item’s list and not as a total income or loss.