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Don't gamble with your taxes

There are many ways to gamble in Ohio. There are major casinos throughout Ohio, including Toledo. There is the Ohio Lottery, and there are a variety of other opportunities, from poker tournaments to bingo games. Most people who gamble see it as an entertainment expense, akin to going to the movies or a football game. If you do win, you may be exultant at your good fortune. But don't forget the taxman in your excitement.

Gambling winnings typically must be reported on your federal income tax return. Casino winnings may be subject to withholding by the Internal Revenue Service and the Ohio Department of Taxation.

The amounts that trigger withholding to the IRS are $1,200 or more not reduced by the wager for bingo or slot winnings; more than $5,000 reduced by the wager or buy-in for poker tournament; or $600 or more if the payout is at least 300 times the amount wagered or are otherwise subject to federal income tax withholding.

It is important to remember that all gambling winnings are taxable as income, so absent some other law, you need to report those winnings as "other income" on line 21 of IRS Form 1040. While this may be disappointing to learn, the good news is that while you have to report winnings as income, you can report gambling losses up to the amount you have won if you itemize deductions.

If you tend to win and lose substantial sums in various types of gambling, it is important that you maintain detailed and complete records of your activity. Reporting $10,000 of winnings (which is likely as a casino would withhold the tax and issue a Form W-G2, so the IRS would know about this and expect to see it on your tax return) can be offset with $10,000 worth of losses, but such a claim is likely to increase the scrutiny of your return.

This means your potential for an audit is increased and it is in your interest to keep very clear and accurate records of your losses. If did claim gambling losses and your records do not support your claim, it could be disallowed and trigger penalties, interest and the tax on the disallowed amount. You do not want to create a need for litigation in an effort to prove your loss.

 

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