Avoid IRS Problems and Claim Gambling Income and Losses

Whether you are a passive or professional gambler, any gambling income and losses incurred in the year must be reported on your tax return. With tax codes being so complex, it is always advised that tax returns be prepared by a notable and reputable accountant who can help avoid any issues with the IRS.

In reference to the IRS, gamble winnings are fully taxable and need to be reported on your return - if you choose not claim any, then you could face IRS tax penalties down the road. If you are not a professional gambler (a casual gambler) any income made through this avenue should be reported on Form 1040 under “Other Income” (line 21). If you are a professional gambler, meaning you gamble full time to earn a livelihood, then you must report your income and any related expense to this profession as self-employed income on a Schedule C form. Gamble winnings include monetary winnings from a casino or lottery ticket to the fair market value of prizes such as trips and cars.

When filing your return, you also have the ability to deduct gambling losses but only to the extent of your winnings; this means that your loss deductions can never surpass the winnings that you report as part of income. A simple example would be if you won $10,000 when gambling but also have $15,000 in losses. You are limited to $10,000 in deductions and cannot write off the remaining $5,000 nor carry it on to future years to be able to claim it then. The IRS does not allow for anyone to deduct losses without reporting any winnings.

It is important and highly recommended that you keep accurate track of your winnings and losses on a notebook. If you are claiming any gambling income and losses, you must be able to show proof of receipts, tickets or some sort of record that shows the amount loss or won. If you want to make sure you are accurately claiming your winnings and deducting your losses, contact a tax preparer in Miami who can provide you with tax preparation services. Filing your taxes correctly the first time around will help avoid hassles, headaches and any future IRS tax problems.