Reporting Gambling Sessions
- Reporting Gambling Sessions Legal
- Reporting Gambling Sessions Against
- Irs Gambling Sessions
- Reporting Gambling Sessions
- Keeping Records by Gambling Session. Until recently, the IRS claimed that an amateur gambler must report the full amount of winnings from each roll of the dice and every spin of the slot machine from casino euro on page one of Form 1040. This results in higher adjusted gross income (AGI) than just reporting net winnings from each gambling session.
- When there are no specific rules governing the online world, the rules of the real world govern. The rules for gambling income are quite clear. You must keep a log of your sessions, you must report wins and losses by session, with your wins going on Line 21 (Other Income) and losses as an itemizable deduction not subject to the 2% limitation on.
Section 165(d) of the Internal Revenue Code provides that losses from wagering transactions are allowed only to the extent of the gains from such transactions.
The IRS acknowledged this reality several years ago for slot machine play and now allows casual slot machine players to keep records of winnings and losses for a gambling “session.” Suffice it to say that the IRS will probably accept a log or other record that details the activities for a day at a particular venue.
Focusing on the term “transaction”, the Courts and the IRS refuse to let gamblers report their gambling activity in total.
On the other hand, the Courts and the IRS also recognized that it is impractical and onerous to record every roll of the dice, spin of the wheel, draw of a card or pull of a handle.
Consequently, the concept of a gambling session has evolved.
A gambling session requires a gambler to organize and report his or her gambling transactions by time, place and activity. For example, if a gambler plays the slot machines at two separate casinos in the same day, the gambler has two gambling sessions. If a gambler plays the slot machines in the morning, blackjack in the afternoon and poker in the evening all at the same casino, the gambler has three gambling sessions. But on the other hand, if a gambler plays in a three-day poker tournament, the tournament counts as one gambling session. And by the way, every individual horse or dog race counts as a separate gambling session.
In 2008, the IRS published Chief Counsel Advice Memorandum 2008-011: Reporting of Wagering Gains and Losses. In this document, the IRS summarizes the case law relating to gambling sessions and provides ten examples of how to calculate the amount of wins and losses for gambling session.
In essence, the IRS is not concerned with the fluctuating wins and losses. There is no accession to wealth until the gambling session is concluded and the wagering gain or loss can be definitively calculated.
REMEMBER: The more detailed and specific you can describe each of your gambling sessions the more likely you are to prevail against the IRS! For more information, please consult with a qualified tax professional.
By Sally P. Schreiber, J.D.Notice 2015-21 contains a proposed revenue procedure that would permit gamblers engaging in electronically tracked slot machine play an optional safe harbor method to determine a wagering gain or loss from their slot machine play based on day-long play sessions.
Under the safe-harbor, a taxpayer would recognize a wagering gain if, at the end of a single session of play, the taxpayer’s total gains exceeded his or her losses and would recognize a loss if, at the end the session, the total amount of wagers exceeds the amount of payouts. A session would be treated as beginning when a gambler places the first wager on a particular type of game and ending when the same gambler completes his or her last wager on the same type of game before the end of the same calendar day, i.e., beginning on or after 12:00 a.m. and ending at 11:59 p.m.
Reporting Gambling Sessions Legal
Reporting Gambling Sessions Against
A gambler using the safe harbor would be required to use the same session of play if he or she stops and resumes the same game in the same establishment during the same calendar day. Also, gamblers cannot offset gains and losses from separate sessions. Once a gambler goes to another gaming establishment, a new session would begin, even if it is on the same calendar day.
Under current IRS rules (Chief Counsel Advice Memorandum AM 2008-011), gamblers are allowed to calculate gambling gains and losses when they cash out of a single gambling session—in the words of the memo, “at the end of slot machine play.” However, determining what constitutes a single session has been difficult, especially with the advent of electronically tracked slot machines, which have led to less redemption of tokens by players.
The safe harbor will not be available until it is published as a final revenue procedure, after which it would apply to tax years ending on or after that date. A provision permitting taxpayers to claim this treatment on their tax returns by providing a note that the return is filed using these procedures will not apply until tax years beginning on or after Jan. 1, 2016.
Before it issues the final rules, the IRS is asking for comments. Specifically, taxpayers should comment on:
Irs Gambling Sessions
- Alternative definitions for the term “slot machine”;
- Whether an interruption in play should result in more than a single session;
- Whether a session should be based on a period other than a calendar day;
- Whether the definition of a single session should be determined by other factors;
- Whether the safe harbor should include merchandise and bonus reward payouts;
- Whether the issue should be part of the IRS’s Industry Issue Resolution program;
- Whether a safe-harbor method should be developed for other forms of gambling; and
- Whether the proposed safe harbor poses problems in administration for stakeholders.
Reporting Gambling Sessions
—Sally P. Schreiber is a JofA senior editor.