david ingram's US/Canadian Newsletter Aug 22, 1996
U S Gambling Returns - DO YOU GET A REFUND? Page 181
U S GAMBLING RETURNS
Canadians love gambling in the U.S. You just can't keep them away from Reno, Las Vegas, Laughlin, Atlantic City, and the Lummi Island Casino.
The problem is that, unlike Canada, The United States' IRS TAXES Gambling winnings whether from a lottery, keno ticket, bingo or blackjack.
There are no withholding taxes if the amount won is under $1,200. However, at $1,200 and up, the payer (usually the Casino) is required to withhold 30% and remit it to the IRS.
This is very unfair in many situations. For instance, if you had taken $6,000 to Reno and had already put $5,000 of it into the slots and then "won" $4,000, the casino is obligated to deduct $1,200 (30% of $4,000) as withholding tax if you are a non-resident of the United States (if you are a U.S. resident or citizen, they are still going to deduct 15%).
From 1985 to 1996, it was illegal to claim a refund if you were a non-resident of the U.S. In fact, a fellow named Michael Damasiewiez of the IRS in Washington, D.C., threatened to charge anyone who "tried" to get a refund with criminal fraud. He was particularly keen on charging any tax consultants who might assist UNLESS the person could be considered a professional gambler.
The Good News
The good news is that as of January 1, 1996, you may now claim a refund based upon your losses. Simply put, if you keep a record of your losses, you can net them out against your gains on an annual basis and by filing a 1040NR, claim a refund. This means that if you spent $5,000 making $4,000, you would get back the entire $1,200.
However, if you walk through the airport in Reno and put a dollar in a slot and win $100,000 and that was the only bet you made all year, you will leave $30,000 behind with the IRS. If you lost $9,000 winning $10,000, the IRS will withhold $3,000 but you will get a refund of $2,700 after filing your tax return. Please note that you do not get any personal exemptions or other deductions on this return. The only deduction is gambling losses. The tax rate is 30% on the balance.
What do you do for proof?
You can ask for a "gambling loss report" from the casino. After you have put $400 into your favourite slot, go to the pit boss and tell him or her that you want a gambling loss report. They can actually make a very accurate receipt for you based upon their computer records for how long you were on a particular machine.
Keep a detailed diary of your income and expenses and other details.
Americans have been keeping track of this for years. It is not that hard and can be worth substantial money to you in the future.
CEN-TA Cross Border Services - Tax, Visas, Immigration