If a win/loss statement from a casino shows a negative amount for the year even though I had reportable winnings, which are sent to the IRS, can I add these reportable winning to get the total amount of losses? Can I use that total amount to report losses on 1040 schedule A?
State/Country relating to question: California
I am being audited by the IRS and I need to prove I wagered at least the amount I won.
Hello and thank you for using Just AnswerUnfortunatly, the IRS does not accept the cassino statements as evidence of actual wins and losses. IRC Section 165(d) is focused on “transactions” and not “totals.” The gambler is required to report total winnings on the 1040 and then can, if itemizing, report their winnings on Schedule A. The IRS would require that the gambler have an accounting or diary (Revenue Procedure 77-29) of their actual gambling activity. The IRS does not look at a cassino statment as actual proof based on many factors, one being that for slot machine players :Can the gambler prove that he used the Player’s Card every time he gambled?
Can the gambler prove that he only played one slot machine at a time?
Can the gambler prove that he was the only one that used the Player’s Card?You would need to be able to show more than the cassino statement if you wanted to prove losses.
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I understand but there have been court cases in Tax Court where the court found that the exact expaliantion you have given is not enough. The IRS faced a similar situation in the case of Pan v. Commissioner of Internal Revenue, T.C. Memo. 2011-40, (U.S. Tax Ct. 2011)
That is why the statements are not enough.
The diary is what the IRS wants to see. They really do expect someone to sit and track every wager. It is unfair! Unless you have exact dtaes and amounts to track they are seldom swayed. It's like mileage on your car when you want to claim for business, they will accept a list of the actaul mileage written by the Taxpayer (I guess the think if someone would go to all that trouble...)
Another expert just informed me too that almost all the casino win/loss statements have some type of “disclaimer” language discouraging their use as reliable accounting records.
You can and need to report all your winnings on Line 21 but make sure that you can prove the amounts you wish to claim as losses on the Schedule A.
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I thank you for using Just Answer and even though your question was not a cut and dry YES or NO answer I know you can appreciate the complexity and will rate my assitance favorably.
You are correct, the proof of the expnse is on the taxpayer and in this situation it is a unfair burdn.
You are correct. The burden of proof on the taxpayer is a unfair. Many do not think to keep a written diary.
Thank you for using Just Answer and I wish you the best in your tax situation.