Lower Threshold on Casino Winnings Proposed by the IRS

The Internal Revenue Service has proposed a change under IRS regulations in order to lower the reporting amounts for casino customers who play slot machines, bingo and keno. A possible change has caused many concerns especially from the American Gaming Association whoclaim that the proposal could cost states millions of dollars.

It is well-known that gambling winnings are fully taxable and that all winnings must be reported by gamblers on their federal income tax returns. The IRS proposal released last week could reduce the tax reporting thresholds for casino visitors from $1,200 to $600 for gambling winnings. Under current IRS regulations, casinos must file tax information forms on winnings of $1,200 or more on slot machines or bingo, and winnings of $1,500 on keno.

Depending on the amount of the winnings, gamblers receive one or more W-2G forms that are used for reporting income or withholdings related to gambling. The IRS suggests that gamblers should keep records of their winnings and losses because they can deduct gambling losses only up to the amount of total winnings.

The American Gaming Associations expressed its concerns about the IRS proposal and revealed its plan to submit their comments. Chris Moyer, a spokesman for the trade group that represents the gaming industry, explained how the IRS proposal will have a negative impact on gambling revenue.

When someone hits a jackpot, the machine can’t be used until IRS forms are filled out. If the proposal passes, the number of times that a slot machine is shut down will be increased. The changes would cover all casinos including Indian casinos so there is a possibility that there would be a decline in gambling revenue.

The senior vice president of public affairs for the AGA, Sara Rayme, criticized the IRS proposal and thinks that it will cause unnecessary reporting requirements for gaming companies, while the IRS maintains that customers must be honest and report their winnings.

The IRS will be accepting public comments over the next 90 days. The AGA tax working group will submit its comments to the IRS on behalf of the industry and even though they are against lowering the reporting level for casino customers, they support other IRS proposals that are applicable to the casino industry.

Photo: watchdog.org