The IRS was asking for feedback to proposed changes on how gambling winnings are reported. Right now if you win $1,200 in one game of slots or bingo or $1,500 in a game of Keno you are given a W-2G from the casino. It’s been that way since 1977. The proposed changes don’t include the jackpot amount (yet) just how the session’s wins and losses are treated when there is a jackpot.
The proposed changes are based on the casinos ability to track a customer’s play through the use of a “player’s card.” (Electronically tracked in IRS speak.) Right now, a customer will only receive a W-2G when they win $1,200 on a single game ($1,500 for Keno). They can get smaller jackpots all night and never get a W-2G. This really doesn’t change, yet.
The proposed change concerns customers who use a player’s card (or other way their play can be tracked.) They will receive an aggregated W-2G for all their monitored wins and losses for that session. If…they win one jackpot over $1,200 ($1,500) and the net total for the session is $1,200 ($1,500) or more.
For example, Mort walks in to the casino with $150 to spend for the night on the slots machines. He wins nothing until his last three plays when he hits three jackpots, $500, $700, and $1,000 for a total $2,200. Currently, he will not get a W-2G for his wins because they were all under the threshold of $1,200 (But they are reportable by Mort even without the W-2G). Nor will he get one under the new system since none of the wins were $1,200 or more. But let’s say the last win was for $1,500 not $1,000. Under the current system, he would only receive a W-2G for the $1,500 win. Under the proposed system, he would only get the W-2G for $1,500 if his play wasn’t tracked by casino. Basically, he didn’t use a player’s card. But if he did use a player’s card he would get a W-2G for all three wins less the amount he lost. In Mort’s case the W-2G would be for $2,550 ($500 + $700 + $1,500 - $150 he spent.) The IRS has lots of examples in the proposed regulation.
The basic change is allowing electronically tracked play to combine the session’s wins and losses in one W-2G. I don’t have a problem with that because I know that most casino players aren’t reporting their smaller jackpots just the ones where they get a W-2G. (In line at the store and overheard a lady telling about winning over $1,800 the night before and saying she wasn’t going to have to pay taxes because she didn’t win enough at one time.) The change may drive people away from using player’s club card which is why the casinos don’t like the change. The only problem I will have is clients who keep a log will have to track when they are using a player’s card to make sure I don’t figure losses on sessions where the wins and losses are aggregated.
What I found interesting was a brief mention that the IRS also wants feedback on reducing the filing thresholds down to $600. The rationale is that with new machines and electronic tracking the casinos can easily handle the lower limits. And it will give the IRS information on a lot of the wins not currently being reported.
If you want to comment on the proposed changes, you missed the deadline (like me). According to a recent article on CPApracticeadvisor.com, the IRS has received over 3000 comments. However, there will be a public hearing on June 17th at 10am in the IRS Auditorium, Internal Revenue Building at 1111 Constitution Avenue, N.W., Washington DC if you're in the neighborhood.