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Tax.appeal.168
Tax.appeal.168, Tax Accountant
Category: Tax
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Experience:  Nearly 30 years of varied tax industry exp. Tax Biz owner
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I wan a bad beat jackpot (aka Jumbo Jackpot) at a Station Casino

Resolved Question:

I wan a bad beat jackpot (aka Jumbo Jackpot) at a Station Casino in Las Vegas, NV, for $30,000 while playing $2-$4 limit Texas hold ‘em. You have to be in the hand playing and calling all bets to qualify for the bad beat jackpot. During the game, the casino rakes up to a maximum on each pot of$4 for the house and up to $5 for the Jumbo Jackpot (bad beat jackpot). In other words, you have to be gambling to win the jackpot. To me, it is similar to playing a progressive video poker machine where the jackpot increases with play. On the video poker games, the casino issues a W2-G. However, when you hit a bad beat jackpot, they issue a 1099Misc.

I believe that since they take a rake for the house and a rake for the jackpot and you must be gambling to win a jackpot, can I claim the amount on the 1099 as a gambling win?

I am very confused with this as I have heard you cannot claim the 1099 misc, box 3 amount as gambling winnings and therefore cannot offset it with gambling losses on Schedule A. The only reason I play live poker is for the chance to hit the jackpot and believe me tons of money is lost waiting for that to happen.

I feel I should be able to claim it as gambling winnings rather than other income and would appreciate advice on this matter. I would appreciate anything which would support an interpretation that I can claim the 1099 income as gambling winnings.

Thank you.
Submitted: 1 year ago.
Category: Tax
Expert:  Tax.appeal.168 replied 1 year ago.
Welcome, THANK YOU for using Just Answer. My goal is to help make your life...a little...LESS taxing.

Let me ask you this, are you a considered a professional gambler.

Definition of a professional gambler:

You must devote substantial time to gambling on a regular basis, and you must depend on gambling winnings as a meaningful source of income. It also helps if you conduct your gambling activities in a business-like fashion by keeping detailed records of wins and losses and developing and evaluating strategies.

I don't understand why they issued you a 1099-Misc instead of a Form W2-G, which is usually given for gambling winnings. For most types of gambling at a legitimate gaming facility, you will usually be issued a Form W-2G (Certain Gambling Winnings) if you win $600 or more. Of course, the IRS gets a copy too, so you better make sure the gross gambling winnings reported on Line 21 of your Form 1040 (or on Line 1 of Schedule C if you are a professional) at least equal the sum of the amounts reported on any Forms W-2G you receive.

My suggestion would be to find out why they issued you a 1099-Misc, instead of a Form W2G. Following is a link to the form W2G:

http://www.irs.gov/pub/irs-pdf/fw2g.pdf

Please let me know if I can be of further assistance to you regarding this matter.

Thank you again for using JUST ANSWER.
Customer: replied 1 year ago.

I am not a professional gambler as defined.


There are numerous (10+) Station Casinos in Las Vegas and they routinely issue 1099 Misc for bad beat jackpots. They do not explain why they issue these and it makes no sense to the players, but they do. I have no trouble with W2-G's and understand them fully. My question has to do solely with the 1099. I looked at an answer from one of your experts which was posed by someone else that had a bad beat jackpot 1099 question. The expert stated:


"Regardless - how gambling winnings are reported to you - you will report that amount on form 1040 line 21 - and mark it as gambling winnings."


I am trying to get confirmation and some backup information for that position.


 

Expert:  Tax.appeal.168 replied 1 year ago.
Hello again,

It is true that gambling winnings are gambling winnings and do need to be reported. However, how you report them depends on whether you are considered a professional gambler, or not, which you stated that you are not. It seems odd that they would report the gambling winnings on 1099-misc instead of a W2g, but ok. Following is a paragraph from an IRS webpage:

-----------------------------------------------

A payer is required to issue you a Form W-2G (PDF), Certain Gambling Winnings, if you receive certain gambling winnings or if you have any gambling winnings subject to federal income tax withholding. All gambling winnings must be reported on your Form 1040 (PDF), including winnings that are not subject to withholding. In addition, you may be required to pay an estimated tax on your gambling winnings. For information on withholding on gambling winnings, refer to Publication 505, Tax Withholding and Estimated Tax.

REFERENCE SOURCE:

http://www.irs.gov/taxtopics/tc419.html

I would say that as the income is gambling winnings, report the amount on Line 21 of the Form 1040. However, to report the losses, you will need to report these on the Schedule A, which means that you have to itemize deductions. If you do not itemize, you will not be able to deduct losses. Not that if you are questioned about reporting losses, let them know that the income was from gambling winnings, as the name of the Casino should be shown of the Form 1099-Misc.
Tax.appeal.168, Tax Accountant
Category: Tax
Satisfied Customers: 2519
Experience: Nearly 30 years of varied tax industry exp. Tax Biz owner
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