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Accounting for gambling proceeds on a tax return

| Sep 28, 2017 | Gambling Tax

Maryland residents who gamble casually should report all of their winnings on their federal income tax return. Individuals should also report the fair market value of any prizes won such as a car or vacation. Examples of gambling include playing the lottery or betting on horses at a track. Money won at a casino is classified as gambling winnings as well.

Parties that pay individuals their winnings may be required to send a Form W-2G. The amount recorded on that form should be listed as other income on a Form 1040. Any additional winnings not listed on such form should also be reported as other income, and it may be necessary to pay estimated tax on winnings. Losses may be deducted up to the amount reported on a tax return, and it can only be deducted by those who itemize deductions.

Individuals who are engaged in recreational gambling may find multiple ways to make money while having fun at the same time. However, those who make money from their endeavors may experience many consequences by not reporting the winnings on a tax return. For instance, it may be possible to be charged interest on any taxes owed as well as a penalty for not reporting income depending on how much was not reported.

Those who have been contacted by the IRS can negotiate with the agency on their own, but it may be advisable to have an attorney do so instead. This may be beneficial because information obtained during an audit could potentially widen its scope.