It’s that time of the year, CP2000 time. The CP2000 is an IRS notice to a taxpayer when there is a discrepancy between what income was reported on their return and what was submitted to the IRS in W-2s, 1099s and W-2Gs. Because I’m so close to so many casinos, I see a lot of CP2000s that deal with missing gambling winnings.
When a taxpayer wins a jackpot, the casino gives them the W-2G for the win at that time. It’s up to the taxpayer to keep the W-2G safe and bring it into me, or their preparer, when their taxes are done. What happens to the W-2G? It gets shoved into a purse or pocket, thrown in the glove compartment or on the desk at home or thrown in the trash by accident. It’s no wonder that gambling income is so easy to get wrong.
It’s up to the taxpayer to create a system to keep track of their W-2Gs. The best solution is the log book for gambling wins and losses that they should already be keeping. That will give them a list of what they actually won during the year. Even if they are missing a W-2G, they will be able to report the income. If the taxpayer doesn’t want to keep a log, they need to have a safe place to put the W-2G the minute they get home.
I’d also like to see the casino be able to give taxpayers a list of the W-2Gs they’ve issued to them for that year. Like a pharmacy gives a taxpayer a list of the prescriptions they bought, a casino should be able to give them a list of their jackpots. That way the taxpayer has a list to check against the W-2Gs they’ve saved. It would not only help insure that all the winnings are on the return but give the taxpayer another source to check a CP2000 against.
The IRS isn’t off the hook though. They need to add the date of the win to the information they provide on the CP2000. The date is on the W-2G so it should be an easy task. Without a date, it is very hard to be sure which W-2G(s) was not on the return. I have a CP2000 listing 25 W-2Gs the taxpayer received and 10 of them were for the same amount. Without a date, I can’t be sure which W-2G wasn’t included on the return.
There are to tax prep issues here. First I want to make sure that I have all the income on the return and if a CP2000 is issued I want to make sure the IRS is correct. The taxpayer needs to keep good records of their winnings and a log would help. But casinos make mistakes and it would be helpful to know what they are showing on their records. A winnings printout could easily catch a mistake or missing jackpot. The IRS just adding the date from the W-2G to the CP2000 would make it easier to check what was still missing and if it was really won by my client.
Working with W-2Gs has gotten easier in the last few years. I see very few handwritten forms and it looks like the casinos are better training their people how to fill out the form. But everyone involved could do a better job of tracking and reporting jackpots. Not just to get all the income on the return in the first place, but to give us a way to verify the IRS’s information is correct.