Bad Gambling Tax Advice on Marketplace Money

[TrvChBoy]

I couldn't believe it when I heard it on the podcast, but it is still up on their website, so I'll quote this bad advice here:

Well here's one thing you don't want to forget if you're lucky enough to win on a game show, or the lottery or any other random windfall -- Uncle Sam WILL take his pound of flesh. Game show prizes in any form are taxable. But the specifics can get a little complicated. So we asked tax specialist Louis Barajas to break down tax law behind income from winnings.

Did you know that the amount of money you can win without having to report it on your taxes is different for horse race betting, slots and poker? If you win big, an accountant needs to be in your future.

From
http://www.marketplace.org/topics/li...-your-winnings

I would suggest getting a different "tax specialist". All gambling income is taxable whether it is on a 1099 or not.

[Thousand Tigers]

Yeah, her ditzy intro makes no sense. Also the CPA interviewed is incorrect about timing on when you "receive" a prize. I will be a CPA in a few months, and I know this stuff HARDCORE.

[AngusThermopyle]

Originally Posted by TrvChBoy

All gambling income is taxable whether it is on a 1099 or not.

Why don't you quote the entire segment then? ie, "technically, you are supposed to report it". I think his point is that the casino/racetrack, etc, will report it if it if it is over $X. If it is under $X, you are supposed to be a good citizen.

[Jigsaw]

Originally Posted by Thousand Tigers

Yeah, her ditzy intro makes no sense. Also the CPA interviewed is incorrect about timing on when you "receive" a prize. I will be a CPA in a few months, and I know this stuff HARDCORE.

Great! Here is a question that I have been wondering about:

If I win big at the WSOP for $millions, can I then establish a residence in Las Vegas by the end of the calendar year to avoid state taxes on the winnings, or is it necessary to have already had established the Las Vegas residence before I win big?

Thanks.

[Pokeraddict]

if you're lucky enough to win on a game show, or the lottery or any other random windfall -- Uncle Sam WILL take his pound of flesh. Game show prizes in any form are taxable. But the specifics can get a little complicated. So we asked tax specialist Louis Barajas to break down tax law behind income from winnings.

I am confused here. A game show win is not the same as a gambling win. A game show win of $600+ (or any other drawing with no entry fee, even if it was at a casino) would receive a 1099-MISC. A qualifying gambling win would get a W2G. One has nothing to do with the other. You cannot deduct your gambling losses from a 1099-MISC. What am I missing here?

[psandman]

Originally Posted by Jigsaw

Great! Here is a question that I have been wondering about:

If I win big at the WSOP for $millions, can I then establish a residence in Las Vegas by the end of the calendar year to avoid state taxes on the winnings, or is it necessary to have already had established the Las Vegas residence before I win big?

Thanks.

Understand that having a residence in las vegas is irrelevent. People can have multiple residences. If you reside in state A ...... state A's tax laws will apply to you. Gnerally the tax laws will address how to handle non-fulltime residence you will have to consult your states law for that purpose.

[Thousand Tigers]

Originally Posted by Jigsaw

Great! Here is a question that I have been wondering about:

If I win big at the WSOP for $millions, can I then establish a residence in Las Vegas by the end of the calendar year to avoid state taxes on the winnings, or is it necessary to have already had established the Las Vegas residence before I win big?

Thanks.

It's up to the state to determine if you are/were a resident, and it's not at all based on calendar year.

[Thousand Tigers]

Originally Posted by Pokeraddict

I am confused here. A game show win is not the same as a gambling win. A game show win of $600+ (or any other drawing with no entry fee, even if it was at a casino) would receive a 1099-MISC. A qualifying gambling win would get a W2G. One has nothing to do with the other. You cannot deduct your gambling losses from a 1099-MISC. What am I missing here?

"Freerolls" end up on 1099-MISC and any instance you put money up as a wager ends up on a W2-G. You are taxed on your income: be it cash, a car, a vacation package in Maui, etc. You can only deduct gambling losses if you itemize, and it's limited to your wins.

The code reads:

You may deduct gambling losses only if you itemize deductions. However, the amount of losses you deduct may not be more than the amount of gambling income reported on your return.

[repulse]

Yeah, I heard this too, found it quite ridiculous.

[repulse]

Originally Posted by AngusThermopyle

Why don't you quote the entire segment then? ie, "technically, you are supposed to report it". I think his point is that the casino/racetrack, etc, will report it if it if it is over $X. If it is under $X, you are supposed to be a good citizen.

Right, the segment itself only strongly implied (IMO) that it wasn't actually required to self-report winnings, which was bad enough for such a mainstream audience, and especially for an issue where the average Joe would assume that he never had to self-report anyway. The little blurb on the page accompanying the archived recording is outright wrong, though (emphasis mine):

Did you know that the amount of money you can win without having to report it on your taxes is different for horse race betting, slots and poker?

[Gioco]

Let's hope you win big.
A state is probably always going to try to claim you were a resident but you need to get good tax advice from a CPA or tax lawyer. Every state I am familiar with has laws on how to determine residency for tax purposes. These take into account certain types of contacts and length of time of those contacts. You might think more than 180 days but one state, where I used to practice law, used 120 days to determine residency for a calendar year.

What you need to know is that each state is unique in this matter and to get good professional advice. Remember that good advice is not necessarily what you want to hear but what is correct.

[ngrund]

Originally Posted by Jigsaw

Great! Here is a question that I have been wondering about:

If I win big at the WSOP for $millions, can I then establish a residence in Las Vegas by the end of the calendar year to avoid state taxes on the winnings, or is it necessary to have already had established the Las Vegas residence before I win big?

Thanks.

since 6 months of the tax year 2012 have already happened, the state will probably come after you for income tax on the win. I know NY would.

But if it happened to me, I would still move to Vegas and then not pay state income taxes next year.

[AngusThermopyle]

Originally Posted by Thousand Tigers

Also the CPA interviewed is incorrect about timing on when you "receive" a prize.

So, if you win $X tomorrow, you are liable for all the taxes next April 15?

Even if you do not receive the money until, say, Dec 2013?

[GaminDeBuci]

Originally Posted by AngusThermopyle

So, if you win $X tomorrow, you are liable for all the taxes next April 15?

Even if you do not receive the money until, say, Dec 2013?

Generally when you receive the money determines when it is taxable. You are deemed to have received the money when you have a unilateral right to receive it (i.e. under the rules of constructive receipt you can't say something like "hold off on giving me the money until 2013" and then say you didn't receive the money until 2013, because you were the one who chose to receive the funds later).