Gambling is a game of chance. And it means that the results don’t always go your way. Gambling could even lead to bankruptcies if it goes out of hand. Fortunately, the IRS provides some deductions and privileges that could help you avoid such unwanted circumstances while you are going through a rough patch. But for that you must know how to prove your gambling losses, and how to do it properly.
How to Prove Gambling Losses: Introduction
To enjoy the benefits the IRS provides for gambling losses you must follow the correct procedure and file your claims in a way which increases your chances of winning that claim. For this you must provide the IRS with an itemised and organised list so that they can go through it without much difficulty. You must also provide all the necessary evidence to support your claims.
Keeping Track of Your Winnings and Losses
The first thing to be done is make an itemized list of all gambling exchanges in that particular tax year. This list must be accurate and have all the information necessary to file your claims. The gambling activities which qualify for a deduction are:
- Poker games
- Casino games
- Horse and dog races
- Lotteries
- Raffles
- Sports betting
The tax office expects the reports to be accurate. They want all the information they deem necessary to verify the claims and the numbers provided in the report. A person must provide a detailed report of the following:
- Name and address of the gambling joint.
- Type of gambling activity involved.
- All wins or losses incurred in the process.
- Names of people present who gambled.
With a clean report which is accurate and detailed it becomes easier to claim tax deductions. Tax offices usually sanction the claims once they have investigated the matter and find the claims to be true. For this a complete report is necessary.
The Internal Revenue Service contacts the people mentioned in the list. This would include fellow players as well as casino owners. They would need to corroborate your win and loss claims with the other parties involved. Reporting just the gambling losses and not the gambling winnings may lead to consequences.
Documents You Need to Prove Gambling Losses
You should keep all the records or documents you receive from licensed gambling joints such as books and receipts. Some of the documents you might require while filing for deductions are:
- Form 5754
- Form W-2G (issued by the casinos)
- Betting tickets
- Canceled payments or bets
- Receipts from licensed gambling joints
The documents and records are only valid if they come from a licensed gambling venue. To prove the gambling losses or wins the paperwork must be accurate. The payers issue a Form W-2G and give you one copy while sending the other to the IRS as some of the gambling income falls under the tax bracket.
It should also be noted that the amount of deduction cannot be greater than the amount reported as gambling income.
Reporting Winnings and Losses as a Nonresident of the United States
The IRS has provisions to take care of the gambling losses of non-residents of the United States as well. To prove gambling losses as a nonresident, one should use the appropriate form, Form 1040-NR of the United States which falls under the category of Nonresident Alien Income Tax Return. But the catch is that nonresident aliens usually cannot deduct losses unless they are residents of Canada.
Reporting Gambling Losses
You should file your report to the IRS under the specified form for the purpose and must provide them with a proper and detailed list so that they can go through it without much difficulty. You must also provide all the necessary evidence to support your claims.
FAQs
How do I prove gambling losses to the IRS?
You can get certain relaxations on your taxes if you can prove your gambling losses to the IRS or any similar government revenue collection body. But to do so you must have a detailed report of all your gambling losses as well as your gambling income during that tax year. You need to file the correct forms with all the required evidence and information to the tax office.
Does IRS accept win/loss statements?
Yes the IRS accepts win/loss statements for gambling but they need to be accurate and properly organised for them to sanction tax deductions based on these statements.
Do casinos send win/loss statements to the IRS?
Yes casinos are required to send a copy of win/loss statements to the IRS if you win or lose more than a specified amount.
How do I deduct gambling losses without itemizing?
You cannot deduct your gambling losses without itemizing them. You can file for tax deductions only if you have itemized your deductions on Schedule A (Form 1040) and have evidence to support your claims.