There are two types of withholding
on gambling winnings: (1) regular gambling withholding at 25% (33.33% for certain noncash payments) and (2) backup withholding
at 28%. If a payment is already subject to regular gambling withholding, it is not subject to backup withholding.
Regular Gambling Withholding
You may be required to withhold 25% of gambling winnings for federal income
tax. This is referred to as regular gambling withholding. Withhold at the 25% rate
if the winnings are more than $5,000 and are from:
Other wagering transactions
if the winnings are at least 300 times the amount wagered.
Do not withhold at the 25% rate on winnings from bingo, keno, or slot machines or any other wagering transaction if the winnings are $5,000 or less.
Regular gambling withholding applies to the total amount of gross proceeds (the amount of winnings less the amount wagered), not merely to the amount in excess of $5,000.
You may be required to withhold 28% of gambling winnings (including winnings from bingo, keno, and slot machines) for federal income tax. This is referred to as backup withholding. You should backup withhold at the 28% rate if:
The winner does not furnish a correct taxpayer identification number (TIN) and
25% has not been withheld or the winnings are from bingo, keno, or slot machines.
Backup withholding applies to the total amount of the winnings reduced, at the option of the payer, by the amount wagered. This means the total amount, not just the payments in excess of $600, $1,200, or $1,500, is subject to backup withholding at 28%.
Let me know if you have any question.
Please note: This advice is provided with the understanding that all the relevant facts have been provided by you. Any change in facts might affect the advice given and hence may not be relied on in such cases.