Gambling Winnings for 2018

Forum|Forum|7 years ago
December 26, 2018
3 replies
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I had a question on gambling winnings for 2018. From my research a casual gambler can use the session accounting method to track winning and losing sessions (winning sessions entered under Miscellaneous Income for Schedule 1 and losses entered as an Itemized Deduction). My questions is about how to enter information into Turbotax when using the session accounting method if you have received W2G's for 2018.

Let me share an example:

On 01/15/2018 I received a W2G for $1,300 however from my session for that day ended up as a $1,000 loss.

How would I handle the entry of that into Turbotax? In years past I would enter the W2G for the $1,300 then an itemized deduction of $1,300 ( capping the loss to extent of win). Under the session accounting methodology I should technically not have to enter anything for Miscellaneous Income since my net session result was a $1,000 loss.

This year it is highly advantageous for me to use the session accounting method as it will result in tax savings for my state taxes (my state also recognizes the use of session accounting for gambling wins).

Can turbo tax handle this methodology for tracking gambling income?

MaryK1

Employee

In Turbo Tax, you can enter your winnings as Gambling Income. To report the losses- in Miscellaneous Income go to Other Reportable Income. Write “Revenue Procedure 2015-X” as the description and enter the amount of session losses as a negative number. This will net the session losses above the line, but still report the total winnings.

NOTE: The rule of losses not exceeding winnings still applies so you are audited, you MUST provide the IRS with a written log which includes the date, winnings and losses for each session (so no individual loss can be more than the winnings per session)

Under the safe-harbor, a taxpayer would recognize a wagering gain if, at the end of a single session of play, the taxpayer’s total gains exceeded his or her losses and would recognize a loss if, at the end the session, the total amount of wagers exceeds the amount of payouts. A session would be treated as beginning when a gambler places the first wager on a particular type of game and ending when the same gambler completes his or her last wager on the same type of game before the end of the same calendar day, i.e., beginning on or after 12:00 a.m. and ending at 11:59 p.m.

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KR16_2

Employee

Does this mean that in a single session in which I won $42,000 (13 w2g's on one machine) and continued to play that machine until leaving with a net gain of $5,000, I would have to pay taxes on the $5,000 even if I returned the next day and lost it all?

kellygary6

I have been researching this and it appears a SESSION ends at the end of the day, or in some cases, when you "cash out".

Some folks tried to call the entire year a session and lost. See this post

RowdyTuckah

Hello,

Thank you all for your contributions helping casual gamblers like me navigate the “session gambling” method and hopefully save some money in taxes!

I have some questions I am hoping someone here can answer, and hopefully others looking to file taxes using this method can benefit too:

-Using this reporting method, it sounds like we forego entering W2Gs and instead enter the total of all session wins, and are allowed to offset that with total session losses (itemized up to the session win amount at maximum), if applicable. What happens to taxes already withheld on W2Gs from the past year? Are these applied anywhere on the session method return? It seems like with this method it may make more sense going forward to have no taxes withheld (in case you lose all of the winnings in that session). Could someone answer how this factors in?

-Specifically in TurboTax, how would one complete this session gambling entry? Is it possible? It seems like TurboTax isn’t set up for this method of accounting for gambling entries, but is there a “hack” or workaround that might allow one to enter or override this? If I do not put in w2g information, where would I complete these session entries? I’ve seen some recommend 1099-MISC with session win as one entry and losses in another entry (listing it as negative). Others have said use schedule 1 for winnings and schedule A for itemized losses. What has worked for others and how is this entered into TurboTax?

-Will the return need to be submitted via mail or can it be electronically filed? If so, is there a way to complete the notification form 8275 to disclose session method calculation? If filed electronically, will the return be rejected because the w2g doesn’t line up with IRS totals? If so is there a workaround to this?

Thank you in advance for all your help!

RaifH

You can still report the taxes withheld, even if you do not report the W-2Gs themselves. You can report them in the Federal > Deductions & Credits > Other Income Taxes Paid in 2021 > Withhlding not already entered on a W-2 or 1099.

I am not as well-versed on this topic as previous posters in this thread, but you would enter your sessions in TurboTax using the gambling winnings section in Federal > Wages & Income > Less Common Income > Gambling Winnings. You would enter that you didn't receive a W-2G and just enter the winning sessions on the next screen. For example:

Session 1 you won 1,500 and lost 6,000
Session 2 you got a W-2G for 50,000 and lost 45,000
Session 3 you won 1,800 and lost 600

Using the regular method of reporting, you would report your W-2G and other winnings for a total of 53,300. You would then report losses of 51,600 which would be an itemized deduction.

If you opt for the sessions method, you would just report gambling winnings of 6,200 (5,000 for session 2 and 1,200 for session 3).

Form 8275 is not supported by TurboTax and neither is the sessions method of reporting. You would have to paper file to include Form 8275. This Form is basically used to tell the IRS, "Look, I know I'm doing something weird, even if you don't agree with it, at least take a look and don't add any penalties." If you do opt to paper file and include Form 8275, no TurboTax accuracy guarantees would be enforced.

I can't speak to what the IRS will do after that. It will certainly raise red flags if you received a W-2G and opt to report it this way and your entire gambling winnings do not add up to what is on the W-2G. What happens next is probably based on prior rulings, how much money is at stake, and if any regulations specifically addressing session gambling have been enacted. What I can say is that if you are opting to report this way, have a very good log of your gambling records and be able to defend what you have chosen to define as a gambling session.

@RowdyTuckah

RowdyTuckah

@RaifH

What an incredibly helpful and timely post - thank you for this info! This forum is one of the top searched “session gambling” listings on Google so between you and the others who contributed here you’re helping a lot of folks navigate this. Cheers!!