Lucky Day at the Casino? Don't Forget About the IRS
Whether you gamble all the time or only once in a blue moon, you are filled with hope and excitement every time you walk through those casino doors. If you have been gambling for even a little while, you already know that Lady Luck can be a fickle partner. Sometimes the gods of the casino smile upon you, and other times they turn their back. So, when you finally hit the jackpot, you are overjoyed and brimming with excitement…
At least until you consider the tax consequences of your good fortune.
Every time you walk through the doors of the casino, Uncle Sam is peering over your shoulder, and the IRS will be waiting with its hand out when good fortune finally smiles on you.
So, as you celebrate your big win, do not forget about your taxes; if you do, the IRS is sure to come calling. If you have any tax issues or find yourself owing a large amount in back taxes, reach out to our tax resolution firm and we’ll help you navigate any obstacles.
Ask About a W2-G
One of the first things you need to know about winning big at the casino is that the IRS will receive notice of how much you won. If you try to fudge the numbers or not report the win at all, chances are you will soon be on the wrong end of a tax bill.
It is important to report all of your gambling winnings, even smaller jackpots that may not warrant a W2-G, the form on which those monies are recorded. And if you do win a substantial jackpot, ask the casino workers about how and when the tax forms will be issued.
Understand Withholding
When you have a lucky day at the casino, it is easy to blow your winnings, especially if you have never been so lucky before. But before you spend your last dollar, you might want to keep some in reserve for when tax time rolls around. If you fail to keep that money available, you could be in for an unpleasant surprise, and a big tax bill, when you file.
Casinos know that their customers may have trouble paying taxes on their winnings, and that is why many of them will automatically withhold a portion of the jackpot. If you do win a substantial jackpot, make sure you understand whether, and how, this withholding will take place.
If you are concerned about having the money to pay the taxes due, you may be able to ask the casino to do the withholding for you. Not all casinos will be willing to do this, but it never hurts to ask.
Track Your Losses
The fact that you have to pay taxes on your gambling winnings may seem unfair and arbitrary, but the IRS is not entirely heartless. You may be able to write off some of the money you lost in the pursuit of your latest jackpot, but only if you can back up those numbers with hard data. If you are going to try to offset your winnings with losses, you need to know the rules upfront, so that you can keep the proper records.
Tracking your losses is never a fun thing to do, especially if you are a regular casino visitor. Even so, it is important to keep track, and many casinos will do the work for you.
If you carry a casino loyalty card, you may be able to log on or request a report showing how much you spent, and how much you won, while your card was in use. This is not a perfect solution, but it can be a good first step if you plan to write off your losses in hopes of reducing your final tax bill.
Having a lucky day at the casino feels good no matter who you are, as does leaving the casino with a stack of cash and a big jackpot to your name.
But the next time Lady Luck smiles on you, make sure you leave a little for Uncle Sam.
If you find yourself behind on your taxes and owe more than $10,000, contact our firm. We’ll schedule a no-obligation confidential consultation to explain your options to potentially settle your tax debt for less than what you owe.
Made a Mistake On Your Tax Return? Here’s What To Do.
Tax returns can be complicated and tricky to understand. Even for a professional, it can be surprisingly difficult to get every number and detail right.
Often, you only notice the mistakes when you take a casual look at your return days after you submit it online or drop it in the mailbox. Or worse, the IRS sends you a letter telling you something is off.
So, is there anything that you can do after your return is in?
Actually, there's a lot that you can do. But if you don’t know where to start, it’s best to leave it to a professional. Our tax resolution specialists can navigate the IRS maze so that you have nothing to worry about. We help people who owe back taxes or have back tax debt. Call us today for a free consultation.
3 Major Types Of Mistakes
There are many red flags the IRS looks for on each tax return, but here are 3 common ones taxpayers make.
1: Not reporting all your income. No matter how much or little you make, report everything. In some way or another, unless you run a strict cash business (another red flag), all of your income is reported to the IRS. W2, 1099 and other forms you receive are duplicated and sent to the IRS. If your reported income doesn't match theirs, that's a red flag.
2: Overstating business expenses. Depending on the type of job you have, there can be many legitimate expenses that your employer doesn't reimburse you for. If you’re a business, you might be tempted to write off just a little extra. These might be genuine deductions. But don't try to deduct something that's not on the approved list and don't claim deductions way outside the norm. Check with your tax professional and stay up to date with tax laws so you’re not padding your tax return with write-offs.
3: Math errors. Whether you file electronically or still file paper forms, your information gets entered into a computer. And one thing computers are very good at is doing math. If things don’t add up, or there was an honest mistake in inputting the information, it can raise a red flag. A math error won't necessarily get you an audit, but it will get the attention you may not want. Make sure to double-check your returns and have a qualified tax professional assist you and keep you out of tax trouble.
Filing an Amended Return - The 1040X
Individual income tax returns filed with the IRS can be amended up to three years after the due date of the original return by filing IRS Form 1040X.
On a 1040X form, the IRS only asks to be shown what was originally filed, what the corrected details are, and the reason why you need to make changes. The form also includes a section where you get to change the personal exemptions that you've claimed on your tax return -- just in case you make a mistake listing your dependents.
A few tips on filing your 1040X form
● For each year that you need to make corrections for, you need to use a separate 1040X form and mail it in, in its own envelope.
● Each form should have the return year mentioned at the top.
● On the back of the form, you need to explain the changes you've made and your reasons for them.
● Any schedules, forms, or anything else that is affected by your change needs to be sent in with the form.
● If the corrections made to your federal form affect your state taxes, you need to send in a corrected return for that as well.
However, we strongly suggest consulting a tax resolution professional to help with your amended return. They can often file multiple years of unfiled tax returns, help you settle for a fraction of what you owe, and at the very least save you a headache.
You Have 3 Years
Many tax filers only notice a mistake on a tax return only when they look at it preparing their taxes the following year. Mistakes may come to their attention in one of several ways. They may share something with their tax preparer that they may have neglected to mention in the previous year. The tax preparer, then, may notice the need for amendments to a previous year's return, as well.
There is no set time period within which you must correct your return. You can do it any time you notice it. A general rule that the IRS follows, though, is to entertain corrections for 3 years after an original return is filed.
The 1040X is a paper-only form
Even if you always e-file your tax returns, you'll need to file the 1040X form as a physical, paper form. The IRS still isn't equipped to handle the 1040X form electronically. You also need to pay attention to where you mail it in - 1040X forms do not go to the same IRS service center address as regular returns.
If Correcting Your Mistake Results In More Taxes Owed, You Should Still Amend Your Return
If your tax return contains a mistake that shortchanges the IRS in a more serious way, chances are good that the IRS will discover it. For instance, if you made money off a freelancing job that you didn't file a 1099 form for, the IRS could find out and you could end up paying serious penalties besides the tax owed. If you catch it yourself, you'll save on penalties.
If you know you’ll have outstanding tax debt and owe more than $10k to the IRS or state but can’t pay in full, contact our firm today. We help people find tax relief and sometimes settle their tax debt for a fraction of what’s owed.