How do you document gambling loses?

[daveo6313]

If you are lucky enough to hit a $1,200 or more jackpot the casino is required to report to the IRS as gambling income.  What about loses?  How do you keep track and report loses to offset the winnings and reduce taxes owed?

[VentureMan_2000]

You're asking people to admit that they have gambling losses... ?  🤣

 

[icft]

First, unless you are a professional gambler you can only deduct gambling losses if you itemize your deductions and then only to the extent of your winnings:

 

https://www.irs.gov/taxtopics/tc419

 

As for keeping track of your winnings and losses, on Carnival you can request a win/loss report at:

 

https://oceanplayersclub.com/contact/win-loss-report/

 

[Elaine5715]

4 minutes ago, icft said:

First, unless you are a professional gambler you can only deduct gambling losses if you itemize your deductions and then only to the extent of your winnings:

 

https://www.irs.gov/taxtopics/tc419

 

As for keeping track of your winnings and losses, on Carnival you can request a win/loss report at:

 

https://oceanplayersclub.com/contact/win-loss-report/

 

Win/loss reports are not tax documents.   

[Elaine5715]

36 minutes ago, daveo6313 said:

If you are lucky enough to hit a $1,200 or more jackpot the casino is required to report to the IRS as gambling income.  What about loses?  How do you keep track and report loses to offset the winnings and reduce taxes owed?

It is pretty difficult to document gambling losses to withstand an audit.  A contemporaneous journal is required, not a complied win/loss statement. Your winning W2-G will identify  the exact slot machine that paid so you must also keep a record of the slot machines you lost.  

Edited May 4 by Elaine5715

[icft]

9 minutes ago, Elaine5715 said:

Win/loss reports are not tax documents.   

Neither is the hospital bill you use to back up your medical expense deduction, but it is a starting point. For the full drill, most of which one can get from the win/loss statement see:

 

https://www.idealtax.com/win-loss-statement-taxes/

[Elaine5715]

12 minutes ago, icft said:

Neither is the hospital bill you use to back up your medical expense deduction, but it is a starting point. For the full drill, most of which one can get from the win/loss statement see:

 

https://www.idealtax.com/win-loss-statement-taxes/

A w/l statement especially from Carnival is a sum +/- per cruise so worthless.  If it was a tax document, you would need to claim income on any cruise that you came out ahead, regardless of whether you got a hand pay.  Hospital bills also need to be detailed, not a lump sum.  

 

 

 

Edited May 4 by Elaine5715

[caribsun]

Go to a racetrack and pickup losing tickets off the floor. 

[Elaine5715]

2 minutes ago, caribsun said:

Go to a racetrack and pickup losing tickets off the floor. 

Doesn't work that way

[caribsun]

4 minutes ago, Elaine5715 said:

Doesn't work that way

Well I did it to show proof of loses vs winnings. I guess the IRA was not interested in a audit. 

[klfrodo]

The Win/Loss Statement worked fine for me to offset my winnings as Earned Income as stated on my W2G.  This was over 10 years ago though.

[icft]

1 hour ago, Elaine5715 said:

It is pretty difficult to document gambling losses to withstand an audit.  A contemporaneous journal is required, not a complied win/loss statement. Your winning W2-G will identify  the exact slot machine that paid so you must also keep a record of the slot machines you lost.  

                                           *                     *                    *

 

While I agree that for most folks, including me, the effort of documenting everything is not worth the gain, I think you are overstating the difficulty. For example, there is no need to document the exact slot machines on which you lost on each spin. To quote part of the article linked below:

 

"The IRS in 2008, and later clarified in 2015, created rules for deducting gambling losses called gambling sessions.

The idea was a gambling win wasn’t really a true win until the session was completed. The Tax Court ruled it is impractical to record each and every wager (pull of the lever, deal of the cards or throw of the dice) and therefore wins and losses can be tabulated for each gambling session versus each hand of cards played, et cetera."

 

See:

https://www.wealthyaccountant.com/2018/12/18/deducting-gambling-losses-with-the-new-tax-bill/

 

But even that stuff isn't worth it for me. I gamble for fun, not to keep records.

[May1cruiser]

If you charge the room, you will see the details on the end of cruise statement and shows room charges. Might be additional document to show charges. On the rare occasion of handpay, I can provide the details of charges and shows casino. Then simply pay the bill down with cash if you have any left. 

 

[Elaine5715]

44 minutes ago, icft said:

While I agree that for most folks, including me, the effort of documenting everything is not worth the gain, I think you are overstating the difficulty. For example, there is no need to document the exact slot machines on which you lost on each spin. To quote part of the article linked below:

 

"The IRS in 2008, and later clarified in 2015, created rules for deducting gambling losses called gambling sessions.

The idea was a gambling win wasn’t really a true win until the session was completed. The Tax Court ruled it is impractical to record each and every wager (pull of the lever, deal of the cards or throw of the dice) and therefore wins and losses can be tabulated for each gambling session versus each hand of cards played, et cetera."

 

See:

https://www.wealthyaccountant.com/2018/12/18/deducting-gambling-losses-with-the-new-tax-bill/

 

But even that stuff isn't worth it for me. I gamble for fun, not to keep records.

You missed the point of the ruling which establishes sessions.  If I am playing Dancing Drum and lose $500 and change machines, my session is over.  That a "session".  

If I move to Bufffffaallllooooo  and win $2000, get paid and go home.  That's a session.  Under the IRS session, my Buffalo win cannot be offset by my Drum loss. 

My accountant who is retired IRS said they disallowed every gambling loss during audits because only the pros could manage the documentation.  

 

The IRS's job is to collect taxes

 

https://www.journalofaccountancy.com/news/2009/dec/20092454.html  The actual ruling...  

The Tax Court held in a memorandum decision released Monday that taxpayers who were casual gamblers recognized wins or losses when they redeemed their tokens and that they could not net their wins and losses across the year ( Shollenberger , TC Memo 2009-306).

In this decision, the court accepted the IRS’ methodology for determining wagering gains and losses, which the Office of Chief Counsel put forth in a legal memorandum in 2008 (AM 2008-011).

The taxpayers in the case were a married couple who gambled occasionally at a casino in the small town of Charles Town, W.Va. On March 29, 2005, the husband hit a $2,000 jackpot at a dollar slot machine. The couple continued gambling and lost $400 from the jackpot; they left the casino that day with $1,600 in winnings. They did not report any gambling income on their tax return for 2005, and the IRS issued a deficiency notice for $2,000 in unreported gambling winnings.

IRC § 165(d) states that “losses from wagering transactions shall be allowed only to the extent of the gains from such transactions” but does not provide a technical definition of the terms “gains” and “losses.” As AM 2008-011 explains, the term “transactions” in section 165(d) could mean every single play in a game of chance or every wager made. That interpretation would require a taxpayer to calculate the gain or loss on every transaction separately and treat every play or wager as a taxable event and also to trace and recompute the basis through all transactions to calculate the result of each play or wager.

Because that method would be “unduly burdensome,” the IRS legal memo allows a casual gambler to recognize a wagering gain or loss at the time he or she redeems tokens.

At trial, the IRS conceded that under that method, the taxpayers should have reported $1,100 in gambling winnings rather than the $2,000 in the deficiency notice. According to the court, the lesser amount would be calculated as follows: $2,000 in jackpot winnings minus $500 in wagering money originally brought into the casino by the taxpayers minus the $400 lost by the taxpayers after the jackpot that day.

The taxpayers argued that they should be allowed to offset their gambling winnings with $2,264 of other gambling losses that they claimed to have incurred in 2005. Because section 165(d) uses the term “transactions,” the court held that the taxpayers could not net their gains and losses throughout the year. Instead, the court accepted the IRS’ treatment of transactions as occurring when the gambler cashes in his or her tokens at the end of play and held the taxpayers to have $1,100 of unreported gross income for the year.

According to the court, to allow the taxpayers to net gains and losses throughout the year would defeat the purpose of IRC § 63, under which losses of casual gamblers are allowable only as itemized deductions.

[Elaine5715]

59 minutes ago, klfrodo said:

The Win/Loss Statement worked fine for me to offset my winnings as Earned Income as stated on my W2G.  This was over 10 years ago though.

Were you audited?  

[Elaine5715]

1 hour ago, caribsun said:

Well I did it to show proof of loses vs winnings. I guess the IRA was not interested in a audit. 

Fun Fact-Many audits are triggered by unhappy relatives.  

[BlerkOne]

Significantly less than 1% of taxpayers are audited. 

[Elaine5715]

1 hour ago, BlerkOne said:

Significantly less than 1% of taxpayers are audited. 

Gambling losses are red flags

[BlerkOne]

1 hour ago, Elaine5715 said:

Gambling losses are red flags

There are many red flag. The IRS doesn't have the resources to audit everyone.

 

https://www.kiplinger.com/taxes/tax-returns/602068/irs-audit-red-flags

[kwokpot]

8 hours ago, Elaine5715 said:

You missed the point of the ruling which establishes sessions.  If I am playing Dancing Drum and lose $500 and change machines, my session is over.  That a "session".  

If I move to Bufffffaallllooooo  and win $2000, get paid and go home.  That's a session.  Under the IRS session, my Buffalo win cannot be offset by my Drum loss. 

My accountant who is retired IRS said they disallowed every gambling loss during audits because only the pros could manage the documentation.  

 

The IRS's job is to collect taxes

 

https://www.journalofaccountancy.com/news/2009/dec/20092454.html  The actual ruling...  

The Tax Court held in a memorandum decision released Monday that taxpayers who were casual gamblers recognized wins or losses when they redeemed their tokens and that they could not net their wins and losses across the year ( Shollenberger , TC Memo 2009-306).

In this decision, the court accepted the IRS’ methodology for determining wagering gains and losses, which the Office of Chief Counsel put forth in a legal memorandum in 2008 (AM 2008-011).

The taxpayers in the case were a married couple who gambled occasionally at a casino in the small town of Charles Town, W.Va. On March 29, 2005, the husband hit a $2,000 jackpot at a dollar slot machine. The couple continued gambling and lost $400 from the jackpot; they left the casino that day with $1,600 in winnings. They did not report any gambling income on their tax return for 2005, and the IRS issued a deficiency notice for $2,000 in unreported gambling winnings.

IRC § 165(d) states that “losses from wagering transactions shall be allowed only to the extent of the gains from such transactions” but does not provide a technical definition of the terms “gains” and “losses.” As AM 2008-011 explains, the term “transactions” in section 165(d) could mean every single play in a game of chance or every wager made. That interpretation would require a taxpayer to calculate the gain or loss on every transaction separately and treat every play or wager as a taxable event and also to trace and recompute the basis through all transactions to calculate the result of each play or wager.

Because that method would be “unduly burdensome,” the IRS legal memo allows a casual gambler to recognize a wagering gain or loss at the time he or she redeems tokens.

At trial, the IRS conceded that under that method, the taxpayers should have reported $1,100 in gambling winnings rather than the $2,000 in the deficiency notice. According to the court, the lesser amount would be calculated as follows: $2,000 in jackpot winnings minus $500 in wagering money originally brought into the casino by the taxpayers minus the $400 lost by the taxpayers after the jackpot that day.

The taxpayers argued that they should be allowed to offset their gambling winnings with $2,264 of other gambling losses that they claimed to have incurred in 2005. Because section 165(d) uses the term “transactions,” the court held that the taxpayers could not net their gains and losses throughout the year. Instead, the court accepted the IRS’ treatment of transactions as occurring when the gambler cashes in his or her tokens at the end of play and held the taxpayers to have $1,100 of unreported gross income for the year.

According to the court, to allow the taxpayers to net gains and losses throughout the year would defeat the purpose of IRC § 63, under which losses of casual gamblers are allowable only as itemized deductions.

The IRS left to interpretation what constitutes a gambling session. As long as one keeps accurate records and is consistent within a tax year you can define a gambling session any way you want to. 

 

The way my husband defines a session is the time period he's on the casino floor at one time playing slots. He uses his mobile phone to take notes. Then he transcribes these cellphone notes into written notes that's forwarded to our accountant. My husband has been generating W2-Gs in the 6 figures range for over 10 years. We have always written off losses against the W2-G reported earnings so that we don't pay taxes on the full W2-G winnings. Our 2022 taxes were questioned by the IRS with regards to not paying the full taxes on the reported W2-G winnings. We countered that the IRS didn't look at the submitted worksheet which detailed how we arrived at the lower winnings figure to which we had to pay taxes on. After several months the IRS agreed with the calculations we submitted and no further review/audit was necessary. This confirmed that our methodology for calculating gambling sessions and loss offsets was,at least in this instance,OK in the eyes of the IRS. We are under no illusion that the IRS won't again question the gambling calculations, and we are ready for additional inquires if it occurs. For 2023 the W2-Gs were again in the 6 figures amount and the same loss offsets were used to pay taxes on less than the reported W2-G winnings.

[kwokpot]

9 hours ago, Elaine5715 said:

You missed the point of the ruling which establishes sessions.  If I am playing Dancing Drum and lose $500 and change machines, my session is over.  That a "session".  

If I move to Bufffffaallllooooo  and win $2000, get paid and go home.  That's a session.  Under the IRS session, my Buffalo win cannot be offset by my Drum loss. 

My accountant who is retired IRS said they disallowed every gambling loss during audits because only the pros could manage the documentation

That's incorrect. The IRS had no definition on what constitutes a gambling session. It isn't spelled out Anywhere.

Edited May 5 by kwokpot

[MRVEGAS711]

Win / Loss statements work just fine as well as dead scratch tickets and Yes, sweepings from a Horse track floor. 

I have W-2 Gambling claims every year. My losses don't always cover my winning, but majority of the time, 100% backed up by various forms of losses.

[Elaine5715]

8 hours ago, kwokpot said:

That's incorrect. The IRS had no definition on what constitutes a gambling session. It isn't spelled out Anywhere.

The ruling is in the above post.

[Elaine5715]

4 hours ago, MRVEGAS711 said:

Win / Loss statements work just fine as well as dead scratch tickets and Yes, sweepings from a Horse track floor. 

I have W-2 Gambling claims every year. My losses don't always cover my winning, but majority of the time, 100% backed up by various forms of losses.

Won't hold in an audit so you would be responsible for taxes, fees, interest, penalties and attorney fees.  Like must be applied to like.  

[kwokpot]

1 hour ago, Elaine5715 said:

The ruling is in the above post.

We were already challenged by the IRS and it reviewed our methodology of sessions and did not ask for a further audit. (It was actually out 2020 taxes and the challenge letter was in 2022,so it took two years for them to question us). In that tax return the 2020 W2-Gs totaled 6 figures but using detailed records we brought it down to 4 figures in which we had to pay taxes. They agreed with our methodology,which we have been using for over 10 years. We and our accountant are fine with how we account for W2-Gs and are not recommending anyone do what we do, but just discussing what works for us. 

https://www.legacytaxresolutionservices.com/blog/what-is-a-gambling-session/904126