Complete Guide to Video Poker Taxes
NOTE - While this article attempts to provide sound advice, we are not legal experts. For expert advice please seek out an accountant, lawyer, or other tax expert. We are not responsible for any losses or troubles incurred by using the below advice.
Ok, now that we have the disclaimer out of the way, let's get into it. Taxes can be confusing for new gamblers, but in all actuality they aren't that bad once you know what you're doing. This article will attempt to serve as a complete guide to video poker taxes, but like we mentioned before, don't rely completely on our advice if you want to be 100% accurate.
The information on this page was compiled by reading the IRS tax page here.
W-2G Forms
The first form we'll discuss is the W-2G. This form is specifically for video poker winnings that are greater than or equal to $1,200. When you hit a jackpot that is equal to $1,200 or more you'll have to present government issued identification before you can receive any money. If you don't have ID the casino will hold all the money until you go and get your ID.
Once you present your ID you'll also be asked for your social security number. If you present your number the casino will fill out the W-2G form and pay you 100% of your winnings. However, if you refuse to provide your social security number then the casino must withhold 28-31% of your total winnings for tax purposes.
Once the W-2G is completed the casino will keep a copy and will also provide you with a copy for your records. Make sure to hang on to your copy so you know exactly how much money you owe when tax time comes around. Keep in mind that the casino reports all W-2G forms to the government, so Uncle Sam will know every time you win over $1,200.
W-2G Session Logs
Another topic I wanted to cover is W-2G session logs. If you're playing high stakes machines ($50/hand or even higher) you'd rack up a ton of W-2G's every session. There would be so many paying hands over $1,200 that it would slow the play down immensely. To counter this most high limit casino rooms use "session logs".
How this works is that at the start of a session you sign a blank W-2G form and fill out your info. Then, after each taxable win the amount is written onto the form and you initial and sign after you're paid. Then, at the end of the night they add up all your jackpots and give you one W-2G form with the total amount on it. This saves a ton of time (and paper).
Form 1040
Once you've filled out the W-2G form and received your money, your next concern is the Form 1040 when tax season comes around. To report your gambling income, you list it under "Other Income" on the Form 1040. You should list every W-2G payment that you received, and you are also supposed to list every single other gambling win you had regardless of size (they even expect you to report something as small as a $1 win).
Keep in mind that you can also report gambling losses as a deduction to your gambling winnings, but make sure you have proper records to back up your claimed losses. Most professionals keep a log book and record every single session they play throughout the year. Amateur players try to get away with putting a few losses on the sheet to take away from their W-2G wins, but we don't really recommend that.
Be very careful with reporting deductions against your W-2G wins. It is very suspicious to see only W-2G wins and losses on the tax form, and the government will get curious as to where your smaller wins are. If you're going to deduct losses, we recommend keeping a full log book of all your gambling action throughout the year.
Also, make sure to note that you cannot deduct gambling losses that exceed your gambling wins. In other words, you can deduct enough losses up to the point where you broke even on gambling, but you cannot continue deducting gambling losses against your job salary or other forms of income.
