betting payoffs

[Josephus]

Question for all the big scorers out there.  Had a good day at Kee on Sat. including hitting the tri in the Breeders Fururity (3400+). When I signed ( I had it for a $1, $1700+) there was no deduction on the payoff. The clerk said it has to be over $5000 before the take-out kicks in. Now is that based on a $1 bet?  If you have a tri 10 times on a $20 bet and it goes over $5000 total, is there a takeout? Or somebody bets $1000 to win on a 6-1 shot and scores, do you sign and is there withholding?  And how does that work with those tracks that take  10,20,and 50 cent bets? Is there an advantage in making those bets multiple times and possibly avoiding  signing and IRS withholding taxes?  Any info would be appreciated.

[rosewood]

go to the drf page and read the steven crist blogs under community heading and he addressed that issue recently; probably in archives.

congrats on your score...

[Sandreadis]

My response does not address withholding but whether a ticket is an IRS claim form or not.
I had the the trifecta in the BC Classic last year. I had (4) separate $2 trifectas. The tri-paid $693. All 4 tickets required an IRS form. My friends also bet the tri but in a $1 bet. None of the same trifectas in a $1 form required an IRS form.
After that I always bet in the lowest denomination possible.
Make sure to save your losing tickets for tax purposes so you can claim losses equal to your winnings to avoid paying Uncle Sam.   Nice hit.

[Bravado]

Collecting over $600 on a bet that pays over 300-1 requires an IRS form.  Collecting over $5,000 on same requires withholding.

Thus, hitting a $653 triple for $2 triggers a reporting requirement, but hitting it for $1 twice does not.  Makes no sense but that\'s the way it is.  

Betting $1,000 to win on a 6-1 shot and collecting $7,000 does not trigger a reporting requirement because it\'s not over 300-1.

[miff]

Joe,

1.The odds on the winning bet must at least 300-1 for $2.00 bet($602.00 payoff before ANY Tax liability).Total payout over $5k requires withholding regardless of the bet, $1:00 or whatever, under $5k you must sign.All signers and witholders must be included on your tax return for that year.In case your tax preparer is lame, tell him the law  allows you to deduct losses to the extent of winnings(not more) to basically cancel out tax liability. It is a good idea to save losing tickets or get a print out from your account wagering company in case called by the IRS.I was called by the IRS on a large pick 6 win and presented offsetting losers with no problem.

2.Win bets are not subject to any tax issues as long as the odds are less than 300-1 which is always the case.You can bet ANY amount on that 6-1 shot without any tax implications.The law technically does reqiure you to include any type winnings on your tax return as income.I can\'t imagine too many people that do.

3.Exotic wagers including bombs should always be made in the SMALLEST denomination, i.e $1.00, .50 OR .10 CENTS in an effort to avoid the signer/tax withholding.Yes make multiple, $1.00 bets to avoid tax issues. The teller is supposed to ask if you have multiple winners on $1.00 signers, I have never seen it and if they did ask go to other windows.

There is a movement to repeal the foolish withholding law  because the IRS is not really ending up with any money from those who know the law, which is most of the people signing.It is also cumbersome for tracks and players.

Advice,never get someone else to cash your taxable ticket for you for.That can get you into serious trouble and it\'s not necessary. Just cash,include in your tax return and offset the winnings.

Nice hit,sign away!!


Mike

[colt]

Miff explained the withholding process very well, but I would like to follow up on the advice he gave out...\"never get someone else to cash your taxable ticket for you for\"...I cannot stress this advice any further...Say you hit for 100K...typically STATE & IRS will withhold ~30%...if you gave back 20K...you are essentially entitled to 30% of the 20K back, which is 6K...of course you overall taxable liability will dictate what\'s owed/refunded...etc....

As for saving tickets, that\'s a start, but a more detailed running spreadsheet is preferred. Unless you are scheming, you have nothing to fear with the IRS...present the facts and go from there....

[BitPlayer]

The only thing I would add to what has been said already is that if you are betting online, the ADW company may aggregate multiple small-denomination hits.  I know I got a notice from NYRA (which is probably hypersensitive about tax issues given their history) saying they would do so.

[headstr8ner]

I have had many occasions to cash W-2 tickets with and without the withholding. I believe the \"real\" way to withhold is a concept/law that requires the cashier to ask if you have gambling winnings from IDENTICAL WAGERS. Thus, line 7 on the IRS Form W-2 which says \"winnings from identical wagers\"..winnings are to be aggregated to determine whether those winning are subject to 28% withholding tax. For example, when a winning ticket in the $600 to $5,000 range is presented for payment, the cashier at the designated IRS window is required to ask the patron if they have identical wagers, and if so, how many. All such wagers must be presented at the same time for aggregation by the cashier. Should the patron state that they have no additional identical wagers it will be shown on the form. The accuracy of a patron\'s action will be determined by the IRS. An IDENTICAL WAGER is one in the same race and wagering pool, not-withstanding that the type of wager is a box, key, or wheel.)

[sighthound]

Would like to bring this to the top again, from late last year:

I use ADW\'s.  2007 is the first year I\'ve had W2-G\'s from the ADW\'s, and I have multiples.  I\'ve never reported any gambling winnings in previous tax years, but now must.

miff wrote (10/10/2007):

> All signers and
> witholders must be included on your tax return for
> that year.

> 2.Win bets are not subject to any tax issues as
> long as the odds are less than 300-1 which is
> always the case.

My question is this:  I now do have to report all gambling winnings this year, not just the W2-G winnings, correct?  (and offset losses on Schedule A, of course)

[Mall]

There are a few items which might be worth adding to the mostly accurate discussion of the technical aspects of signers. Not all ADWs \"aggregate\" your bets so that you end up with signers which would otherwise not have been signers. Equally important, in what can only be described as an example of bonehead design, the United Tote self betting terminals where you swipe a betting card (like the ones at Sar) do aggregate your bets, so you will end up with signers you wouldn\'t have had if you went to the window or used one of the self betting terminals where you get a ticket for each bet. The only way to avoid that result is to log out and then log back in after every bet.

fwiw, I\'ve been audited twice, one a so-called \"super audit\", and did not have a problem with the \"all\" winning wagers language in the regulations. It\'s obviously a good idea to save losing tickets, but don\'t make the mistake a fellow I know made by indiscriminately collecting and using others\' losing tickets. He ended up being audited by what I\'m guessing is one of the few IRS agents who is a horseplayer, and had a hard time explaining why he bet all but one horse in a number of races, as well as why many of the tickets had shoe prints on them.

Also, if you make the kind of score which has you considering the possibility of changing your occupation to \"professional gambler\", get some advice from a competent tax professional before you take that step. If it\'s in their interest, there\'s a pretty good chance the IRS will challenge it, and even if they don\'t, there\'s a better than good chance that whatever you save in any particular year will be more than offset by what are mostly negative long term consequences.

The real reason for my post, however, is to expand on the comment that there is a \"movement to repeal withholding.\" There is indeed such a movement, as well there should be, given that despite inflation, there has been very little change in these numbers for decades, and witholding doesn\'t apply to any other form of gambling. I learned this week that the industry\'s efforts are much farther along than I realized, and are being spearheaded by politically savvy Peggy Hendershot of the NTRA, who is dealing with, among others,a gentleman I\'ve always thought of as a great American,one Charles Rangel. As an aside, Peggy\'s efforts are why the recently issued IRS rules on poker tournaments don\'t apply to handicapping contests. More to the point, the final push to make the withholding changes a reality will depend in large part on whether enough players are willing to get off their you know whats to make their voices heard. In case you\'re wondering, there\'s a way of doing just that which requires very little effort on your part. It\'s by putting up the modest $125 to join the NHC Tour, which includes automatic enrollment in the Horseplayers\' Coalition. In addition to Peggy\'s periodic reports on this and other issues which directly impact players and tracks, everything an interested player needs to make his or her voice heard will be available on a separate section of the site where sign-ups start on February 15, namely NTRA.com/NHCTour.

[toppled]

In 1995 I had $10 on a winning trifecta, all in $1 increments.  It paid over $1,300 for $2-therefore over $600 for $1. I had to fill out 10 forms. They took the takeout.  I don\'t know if things are any different now.  

On the issue of having someone else sign-I\'ve always signed for my own, but I have a friend who gets others to sign because he doesn\'t always itemize and doesn\'t want his wife knowing when he has a big hit. I don\'t agree with it, but when you consider that when itemizing you only gain the difference between the standard deduction and the itemized amount, I can see where giving someone 10% might be profitable. For example, say you hit for $1,000 over the standard deduction of $5,350.  When you write off the $6,350 in losses you only gain say 25% of $1,000 or $250. Since the hit added $6,350 to your income and say the taxes were at 25%, you paid over $1,500 in taxes & only got back $250 of it.  By paying someone 10%, you lose less than 1/2 of what you would otherwise lose to the IRS.  Now add the state in & you\'ve saved even more.  Of course the people who won the pick the year at the breeder\'s cup where they sent all the signers more money the next year must have really been kicking themselves for breaking the law.

[miff]

Sight,

There is also IRS statistical data which shows the \"gambling\" withholding to be a bust as far as it being the revenue producer originally thought.Studies also show that the withholding monies does nothing more than reduce churn to the industry and may even have a negative impact overall, tax revenue wise.

If the people that are trying to get this law amended persevere, that should be successful as there are no reasons to keep as is.Re audits, it is also helpful to keep racing data, drf,tg top sheets along with betting records in case of audit.In 2000 I got audited, presented my losers and other data and received a letter that no further tax was due(I did not declare total off-set losses that year only because I hit a large p6 late in the year)

A few guys in NY cash millions, get audited and never pay a dime but you must have records or you will be assessed and lose on appeal in tax court.There is also a very hidden thing going on related to money laundering and the Patriot Act. Not that this applies to us degenerate gamblers, but more flags are now in the IRS computers.

Be careful!

Mike

[Thehoarsehorseplayer]

Regarding the elimination of withholding, I understand the advantage to the players, the advantage to the tracks, but not what the advantage would be to the Feds.

And since, from a practical standpoint,  all negotiations are usually about give and take, in the absence of a legal ruling declaring that withholding, if it applies only to horse racing, is discriminatory, I don\'t see the motivation for the IRS to alter their policies.

One suggestion I would make (and remember this is a negotiation) is for the IRS to forgo the 24% withholding in return for an immediate 10 percent tax on winnings over $5,000.

Caesar gets Caesar\'s, and the horseplayer gets more money in his pocket on the day of his score.  But the other advantage for the horseplayer is that all  other monies won at the track would be non-taxable.  To prevent money laundering, players would still have to sign for large scores, and report money won at the track on their tax forms, but such earnings would not now count as taxable income.

On the other hand, since losses could no longer be deducted from winnings, those players who managed to lose as much, or more than they won during the course of a year, despite signing for a super-size or two, would lose their tax return.

Such are the trade offs.  Still, for both the IRS and the horseplayer, it seems such a system would simplify the paperwork and the reduce the onus of record keeping.

Which brings us to the New Jersey tax situation.  In NJ withholding is 28%, because a 4% State bite is added.  This, mind you, in a jurisdiction where lottery winnings are not taxed.  Now, because it seems to me that New Jersey Racing would benefit much more directly, and much more immediately, from the cash infusion into the game generated by the elimination of withholding than the Federal government, it seems there should be some lobbying going on in the State Capitols (presuming other States also demand their share).  Seems like a much easier case to make, even without a trade off.