Ask the taxgirl: Gambling Winnings and Losses

Taxpayer asks:

I filed the 1040ez for 2009 and had gambling winnings of 2500.00. I got a notice from IRS that I owe an increase of 625.00.
It was reported on a w-2g I did not file a sched. A.
How can I report my gambling loss of up to 2500.00
Since I have already filed the 1040ez.
Or am I destined to pay this amount.
I certainly lost more than I earned.

taxgirl says:

In most cases, so long as the statute of limitations has not run, you can file an amended return. The statute of limitations for most individual tax returns is three years from the date the return is due or the date of filing, whichever is later; see this prior post for more information about the IRS and statute of limitations.

You file an amended return by using a federal form 1040X (downloads as a pdf). Read the instructions carefully.

All of that said, you have a bigger problem here which is that I am guessing you did not file a Schedule A because you do not have enough deductions to itemize. For 2009, the standard deduction is $5700 for an individual taxpayer – you need at least that much in deductions before it makes sense to itemize. Unfortunately, while you must claim all gambling winnings on your return, you can only deduct your losses if you itemize. So, if you’re not filing a Schedule A, you cannot deduct your gambling losses.

You cannot use a form 1040-EZ to report gambling winnings. “Casual gamblers” (in other words, nonprofessional gamblers) must report winnings on line 21 (other income) of a form 1040. The form 1040-EZ isn’t equipped to handle gambling winnings or the forms W-2G (which are the forms issued to you when you win).

There are some additional rules with respect to gambling losses. You must be able to document your losses by type of loss, date, name and location of the gambling establishment and amount. You will need records of your losses. And finally, you cannot deduct more in losses than you report in winnings; even though you stated you lost more than you earned, your actual deduction is limited to the smaller of the two.

In a nutshell, the actual gambling is a lot more fun than the reporting. If you’re having trouble figuring it all out, make sure that you check with your tax professional.

Like any good lawyer, I need to add a disclaimer: unfortunately, it is impossible to offer comprehensive tax info over the internet, no matter how well researched or written. And remember, I love my readers but having me bookmarked on your computer doesn’t make you a client: before relying on any information given on this site, contact a tax professional to discuss your particular situation.

Have a question? Ask the taxgirl! – On twitter at http://www.twitter.com/taxgirl and on Facebook at http://www.facebook.com/taxgirl

Comments

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  2. Lillian Barden

    Walletpop, please correct your information. As a 17 year tax preparer, you give incorrect information. IF a person is able to use a Schedule A, gambling expenses can be deducted up to the amount of the winnings! BUT many people don’t have enough deductions to qualify for a Schedule A. I would wish that all the comments about credits are verified thru a REAL tax preparer. Anyone who prepares taxes for a fee, as I do, is required to be certified with an ID number given thru the IRS. What you have just said is just as much mis-information as a recent report that I heard about Earned Income Credit. It gets peoples hopes up BUT does not tell them of the restrictions for qualifications. People hear what they hope and nothing more! Most published comments don’t go thru with the REAL facts.

  3. Author
    Kelly

    Thanks for writing but I’m not sure that I understand your point…
    First, this isn’t Walletpop, it’s taxgirl. I do occasionally write for Walletpop but the sites are very different.
    At any rate, the post on this site makes it clear that you can only deduct losses to the extent of winnings if you itemize (and I don’t expect that this taxpayer does).
    On the original post, the list was not meant to be exhaustive or detailed – that’s why there are links to other articles (including this one) with more information.
    Finally, I don’t know of any sites that monitor comments for veracity – that would be nearly impossible. I think the availability of community allows for responses to clarify when there is misinformation posted by commenters. With respect to the author (me), I can assure you that I am quite familiar with the Tax Code. I am also happy to admit when I make a mistake (I can and do on the blog). But in this case, the information is, in fact, correct.

  4. fran

    Okay–I’m an English major–and I’m confused with the wording and the mathematics of the gambling filing. I received a win/loss document from a casino (at my request) and it shows no wins, but a loss amount of $14,548. So, are you saying that I cannot use that amount in my itemized deductions when I file my taxes because I don’t have any winnings?
    If that’s the case, what’s the point of getting a win/loss statement?

  5. Author
    Kelly

    Fran, you can only deduct losses to the extent you have winnings. So if you don’t have any winnings, you cannot deduct your losses.
    You get the win/loss statement as proof of your wins and losses. If you had winnings, you’d want those loss statements. Additionally, you might have losses at one casino and winnings at another – not all taxpayers gamble at the same casino!

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  10. Miguel

    If I win lets say 1 million in the lottery, can I write off 1 million in losing tickets if the tickets arent mine but now in my possession – lets say i collected from everyone I knew.

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  12. mr prieto

    ok, i did not report my winnings :( now irs says i owe. i won 3000 on slots but lost over 24000 for the year!! i have my casino report and it shows net loss/win of a net loss of 24000. I can’t claim that?!!!! how not right! first i worked for the money i spent and paid taxes on it already and i surely have not win!! so it’s reallyt like I am then having to pay taxes twice

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