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Reporting and Procedure of Legalized Gambling

Reporting and Procedure of Legalized Gambling

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Reporting and Procedure of Legalized Gambling
Gambling tax with holdings apply on the federal level, if the winnings exceed the maximum threshold for gambling taxes. Taxpayers can deduct provable losses from that amount before taxes are applied. There are also gambling taxes that are applicable on the state level. 
However, each state has different tax laws that govern their individual gambling tax. There are states that do not impose gambling taxes in certain situations. For example, Texas imposes no tax on lottery winnings in that state. However, lottery winners in Texas would still be subject to the gambling tax on the Federal level.
Generally, casinos and gaming houses withhold taxes before dispersing winnings. There are specific rules that govern the manner in which that is done. For example, winnings from different types of gambling are withheld at different thresholds. Poker winnings incur a withholding for the gambling tax once the winner has won in excess of five thousand dollars. Whereas, winnings on slot machines are taxed once the winner has won in excess of one thousand and two hundred dollars. 
After the casino allows for provable losses for deductions, they issue the winner a copy of the W-2G. In order to furnish the copy, they will need identification form the winner as well as verification of their social security number. In the absence of that proof, the casino will withhold a higher percentage of winnings as a contribution to the winners gambling tax burden. That rate is usually twenty eight percent. 
The W-2G gambling tax form is the winners proof that they paid taxes on their winnings. The winner will need that document as proof for income taxes as well. Since the taxes that are withheld are Federal taxes, winners must remember that they will also be responsible for state taxes, if they apply. The W-2G will be utilized as proof of their amount gambling winnings, as well as taxes already paid.
Once a winner has had gambling taxes withheld from their gambling proceeds, there are several ways that they can reduce the amount of their gambling tax burden.Gambling taxes can be reduced by deducting all gambling losses. Gamblers must remember to have verifiable proof of those losses before they use them as a deduction. If the winner has no proof of losses, they can simply utilize the standard deduction.  
For example, in 2009, the standard deduction for gamblers was over five thousand dollars. If winners do not have proof of loses in excess of that amount, they should use the standard deduction. Even on gambling winnings as small as ten dollars, taxpayers are required to add that winning to their income for the year. Gamblers that are not subject to an immediate withholding on winnings, should remember that they are still required to report their winnings and pay taxes on them.

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