If you are an avid gambler, keeping track of both winnings and losses is essential in order to claim them on your taxes. For this, proper documentation must be kept.
Your records should include receipts, casino win-loss statements and an accurate log or journal of your gambling experiences. Keeping accurate records can protect you in case the IRS audits you.
Keep track of your winnings and losses
Gamblers must report all winnings and losses on their tax returns; however, subtracting losses from winnings would yield no profit. Furthermore, gambling losses cannot be deducted if you claim either standard deductions or miscellaneous itemized deductions. To ensure you’re properly reporting these winnings and losses it is vital that accurate records are kept.
Keep records of receipts, payment slips, wagering tickets, cancelled checks, bank withdrawal records and actual winnings statements to demonstrate any winnings in case of an IRS audit or inquiry. Keeping such records can save money when filing taxes; furthermore they ensure you pay only what is owed and will help avoid being subject to penalties for underreporting income.
When filing taxes, keep a receipt for any gambling losses you incurred – this may include receipts, statements and tickets from casinos or racetracks – this documentation will serve to back up any deductions claimed under gambling deductions should any questions arise about them. It would also be a good idea to keep a gambling diary or log as well.
Many people mistakenly believe that winnings from gambling do not fall under taxation; however, this is untrue. Winnings from gambling must be reported to the IRS just like other earnings and should be included on your tax forms as taxable income. Casinos and lottery organizations usually must submit W-2G forms for winners over certain amounts to help verify your winnings with them when filing your taxes – it is therefore vital to track both wins and losses throughout the year to avoid overpaying taxes; additionally keeping track of this data can help claim any losses as tax deductions!
Keep a journal
Regular gamblers would be wise to maintain a diary of their gambling activities if they are hoping to deduct losses from taxes. A journal can help keep important details straight, and could come in handy should an audit take place. According to the IRS’ recommendations, it would also be advisable for gamblers to keep detailed records of each gambling experience that includes date/type/site name/address/location information as well as names/numbers present and amounts won or lost at each venue.
Your gambling expenses, receipts, payout slips, wagering tickets and bank withdrawal records should all be kept for proof purposes with the IRS or any tax office. Hotel and airfare receipts can help provide evidence that supports gambling losses to them; as withholding tax is applied at 24% on winnings reported on Form W-2G it’s essential that they all be reported correctly.
Keep a record of your expenses
Gambling losses and winnings must be reported on tax returns, making accurate records even more crucial if you plan to deduct gambling losses from your taxable income. Maintaining a journal may help with this task – this should include information regarding winnings/losses as well as expenses incurred associated with them – and bank records/ATM receipts or casino win/loss statements should serve as backup.
Importantly, gambling losses can only be deducted if they equal or are less than your winnings and itemized (i.e. filling out Schedule A). Claiming standard deduction will prevent you from writing off these losses which can be an enormous blow – particularly for casual gamblers – thus it’s essential that taxes are filed before their deadline arrives.