1099 G Question

[CaptHomer]

You can offset with your spouses losses if you file a joint return.
You can offset your winnings with your losses only if you itemize your deductions and don't take the standard deduction.
You can't deduct your gambling expenses unless you file as a pro player.

Capt. Homer CPA

[bodie]

HI fishyak,

I've looked into this pretty carefully the last few years since I've gotten some substantial winnings - event though they gave you a 1099, the same laws/rules would still apply as it is still gambling winnings.

-- you can not write off your spouse's losses, only your own
-- you can *only* use gambling losses to offset gambling winnings
-- you are supposed to claim *all* winnings, assuming that you've gambled more than just what it shows you won
-- you are supposed to be able to substantiate losses, i.e.:
a) if you are playing video poker or slot machines by writing down the dates you were playing and the numbers of the machines you were playing on - having evidence that shows you were there (such as valet tickets, restaurant stubs, hotel receipts, etc, also you can get a Win/Loss Statement from the casinos if you have a Player's Club Card.

b) If you only play poker, then you would want to have dates you were playing, hopefully some evidence you were there, such as the above - and it's best to have some sort of "diary" of how long your sessions were, what table numbers you were playing at, etc. and how much you won/lost at each session.

c) As someone said above, you can't write off any sort of expenses unless you are a Professional, which isn't something that's easy to declare yourself as.

d) if you try to "make" a diary, be careful not to just sit down and write it all at once for the whole year - the IRS knows that people do that and I've heard they go to great lengths at times to catch people at these things. Part of this probably depends on how much winnings we are talking about. One year I totally forgot to declare a W2-G for about $1100.00 - and about two years later the IRS sent me a penalty thing for it and I had to pay it then, that was all they did.

Good luck,
bodie

[fishyak]

To summarize so far - I got a 1099 Misc for jackpot winnings. That goes on my 1040, not a Schedule C, because I am so NOT a pro.

We have a concensus, that expenses cannot be taken against this amount. As a poker player, I would have a produce my spreadsheat showing all wins and losses and put that into the mix. Also, any losses would come off of Schedule A for itemized deductions, so I have to itemize my deductions to be able to reduce this addition to my Adjusted Gross Income.

We have a conflict of opinions about whether my wife's slot losses can offset this income. CaptHomer (CPA) says "Yes." bodie says: "No." IRS Publication 529 is not helpful on this issue. I'll set the stage specifically - I am a California taxpayer married filing jointly. Can anybody cite an authority to resolve this question?

[bodie]

I just won a jackpot a couple of weeks ago (video poker, a weakness of mine) - the slot manager went out of his way to explain that the IRS won't recognize any of my losses unless I'm using my own Player's Card (I was using my husband's but they put the win against my social security number).
Also - our CPA has told me that according to what she knows I can't use any of my husband's losses against "my" wins (which is too bad since he loves craps), even though we file jointly. She explained that: you can't claim gambling losses against regular income, only against a gambling win to offset it, therefore if the W2-G (or in this case, the 1099) is made out to *you*, the losses also have to be verifiable to *you*, and proved in some way.
The losses can be from any type of gambling, as far as I know - and I do collect parking tickets from the card room that I frequent as well as evidence of playing sessions in casinos.

However, I am not a CPA, and I see that Capt. Homer is - so you will probably have to get a third opinion, as my accountant seemed pretty sure about this, as did the manager of the casino I just was at.

[Wake up CALL]

You should present the casino with IRS form 5474, using your spouse as an equal partner in the winnings.

IRS Form 5474 Instructions

[CaptHomer]

I double checked with a tax attorney and here is his reply:

As long as the couple files married, filing jointly, the combined losses of the spouses from gambling are allowed to the extent of the combined gains of the spouses from wagering transactions. In other words, a husband and wife are considered one person when it comes to gambling winnings/losses.

Capt. Homer

[bav]

Guess I don't understand how you could expect otherwise? When you're married filing jointly, you pool everything. All the income gets lumped together and all the deductions are lumped. Use your wife's losses to offset your gains and let 'em come get you if they think it's wrong.

But I still could swear I read someplace online on a gambling taxes website that you can do this. Just can't find it now that I'm looking for it again.

[broiler]

I believe that I quoted it in a prior thread in the last month or so. The source is Reg 1.165-10: Gambling gains and losses of a husband and wife are pooled if they file a joint return so that losses of one are deductible against gains of the other.

You can put me in the CPA category and I'm somewhat shocked that any CPA would say otherwise. It took me all of 2 minutes to look it up using the firm's research software. Good research software helps a great deal in looking up these specific situations since the IRS site stinks for answers.

[bodie]

Both CaptHomer and broiler seem sure that the law says husband and wife can use each others' losses against individual winnings - which now causes me to wonder about *why* my CPA told me otherwise. Did she not really look it up? This is scary. I would like to assume that my CPA would actually know the correct things while doing our taxes.
Hmmm.

[bav]

I've visited a CPA a couple times in the past years when I had particularly sticky tax situations I couldn't figure out. The guy I talked to was a senior partner at the place, too, and each time it was clear I knew more about it than he did.

In one case I went in, explained everything, pointed out where the problem was, and asked "now what?" He said "do X". I quote the regulation that says you can't do X. "Ok, try Y". I pointed out why that didn't apply. He finally kinda tossed up his hands and says "this is so complicated I don't think any IRS agent would ever try to sort it out so don't worry about it...what you're doing is reasonable, if not technically correct, so no auditor is going to be upset by it."

The other time he referred me to a partner legal firm they work with and said "I don't endorse what they do, but you're smart--listen to them and make up your own mind". What said legal firm was suggesting was OBVIOUSLY illegal. I asked how they thought they could get away with it and the answer was that each and ever step along the way they took was legal...it's just the end result of this convulted many-step process of money laundering was you completely evaded paying any taxes. So they agreed, if anybody ever got caught they'd almost certainly have to pay the taxes that were avoided but he claimed because each step along the way was legal that there wouldn't be any criminal penalties. I thanked him and said "no thanks" and reported back to the CPA that they need to find a new firm to partner with. A year later I start reading in the press and 60 Minutes does a story where people from major firms who pedaled identical-sounding schemes are going to trial and their clients are facing huge penalties.

So my opinion of CPA's (with due respect to the folks here who seem to be well-informed) is a bit jaded. Why should I pay a CPA to tell me to do something clearly illegal, or to tell me do whatever seems reasonable?

I think I probably just need to find a competent accountant.