Certain Gambling Winnings, to report gambling winnings and any federal income tax withheld on those winnings.
The requirements for reporting and withholding depend on
⦁ the type of gambling,
⦁ the amount of the gambling winnings, and
⦁ Generally the ratio of the winnings to the wager.
All gambling winnings must be reported on tax return as ‘other income’ on schedule 1 in Form 1040
Special consideration when filing Form W-2G
⦁ Regular withholding
⦁ Backup Withholding
The gambling facility is required to withhold 24% of tax payer winnings from cash payments when the winnings minus the wager total $5,000 or more. This is known as regular withholding.
Regular holding applies to winnings from:
⦁ Wagering pools
⦁ Other wagers (if the winnings amount to at least 3,000 times the amount of the wager)
The rate is 24% for non-cash payments as well, if the winner paid the withholding tax to the gaming or lottery sponsor. The rate goes up to 31.58% when the payer contributes the withholding tax.
Payments for bingo, slot machines, keno, and poker tournaments may be subject to backup withholding, which is also 24%.
Backup withholding is made when any of the following occurs:
⦁ The winner didn’t provide a correct ⦁ taxpayer identification number (TIN) to the gaming facility.
⦁ The regular withholding for gambling wasn’t made.
When reporting gambling income, the most important information
⦁ Reportable winnings: This amount indicates gross winnings.
⦁ Date won: This is the date of the winning event, not the date on which you were paid the winnings.
⦁ Type of wager: If other than a regular race bet, enter the type of wager, such as Daily Double, Big Triple, or Pick 6.
Multiple W-2G Forms
They must enter the winnings for each of them when preparing tax return. They must also report winnings even if the payer doesn’t send a Form W-2G. Track your winnings by keeping accurate logs and receipts, such as:
⦁ Entry tickets and fees
⦁ Wager statements
⦁ Payment slips