Winning Big: Gambling is addictive. If you took a trip and won some cash, you might think you’re on easy street. But you’ll be in from a rude awakening if your earnings were not reported to the IRS. Yes, believe it or not, Uncle Sam wants a cut of those gambling winnings.
They want it all: So it’s established. The IRS wants to know every little detail about your income. That means if you win money from casino, report those earnings. And even cash prizes won from raffles, lotteries, and Sunday Night’s bingo round need to be reported. They are all considered income by the IRS.
Didn’t Report It: So what is the fate you suffer if Uncle Sam isn’t privy to your winnings? You’ll be in debt to the IRS. You’ll have to pay what you owe, plus interest and penalties if the debt was ignored for long enough. That means all that money you earned can be gone in a flash. Here are some methods the IRS may use to collect from you:
Asset Seizure: Already spent your winnings on luxury items? Now they’re in danger! If you ignore the IRS, the might come and seize the assets to satisfy your debt!
Bank Levy: The IRS can actually freeze your bank account! All the money will be gone in 21 days if you don’t contact them and work out a solution for payment.
Wage Garnishment: Payday’s here. But it’s an unhappy day for you if you owe the IRS. The IRS can legally seize a portion of your paycheck to pay on your debt. They’ll leave you with just enough money to pay for your basic needs. (Like buying food and keeping a roof over your head.)
Reporting Losses: The tables have turned. You can use the IRS’s rules about reporting gambling wins and losses to your advantage. You can deduct gambling losses. But the losses may only be deducted if you itemize deductions and you also have gambling winnings. To claim the gambling losses use Form 1040A. But keep in mind, the losses you deduct may not be more than the gambling income you report.
Don’t Forget: You have to prove it! You have to provide receipts, tickets, statements and other records to show both your winnings and your losses.
Playing it safe: If you are already in debt because of not reporting your earnings, there’s still hope. Don’t think you can get away with saying you didn’t know the tax rule. Because ignorance of the law is never considered an excuse. Instead, actively find a way to pay the debt off. If the IRS isn’t cooperating with you, consider hiring a tax professional that can help you pay the lowest amount possible.
