Offsetting gambling losses against wins (taxed)

bj21abc

Well-Known Member
#1
Hi,

this is a pretty obscure topic, am hoping someone might know, though...

If you're a US resident or a Canadian you can claim gambling losses against W2G wins. I am neither - on a J1 visa and will have to submit a 1040NR - can I offset gambling losses against wins ?

The decision as to whether to play VP hinges on this - if I am stuck with a 30% withholding on royals, I drop ~ 0.6% on EV...

Thanks

D.
 

moo321

Well-Known Member
#2
I have no idea. My understanding is that you are supposed to itemize losses against wins. It's really unclear, however, whether you should do this per session, or what. It's also really unclear with your residency status.

I'd start doing some internet research, because a CPA that has the correct answer to that question is going to charge you at least $1k to tell you the answer.
 

moo321

Well-Known Member
#4
bj21abc said:
you're right about the CPA... internet research has turned up squat, though - I guess it's an obscure topic...
Very obscure.

My guess is that you won't have to pay the full 30% withholding. Should just be your marginal tax rate.

In all honesty, I've tried to get these questions answered, and I'm really not even sure there is a right answer. Just pay your taxes as best you understand it, and you shouldn't get in too much trouble if you're wrong.
 

21forme

Well-Known Member
#5
moo321 said:
It's really unclear, however, whether you should do this per session, or what.
It's total win and loss per tax year. Nothing unclear about it.

From http://www.thetaxguy.com/return.htm (bold added by me):

Not effectively connected income

U.S. source income that is not effectively connected with a U.S. trade or business is reported on page 4 of Form 1040NR (you cannot use Form 1040NR-EZ if you have this type of income). It is generally taxed at a flat 30% rate and cannot be reduced by deductions and exemptions. Treaty provisions between your home country and the United States might provide for a lower rate of tax. See "Where to Find Treaty Information" under Tax Treaties. Income that is typical of this category is dividends, capital gains in excess of capital losses, prizes, awards and certain gambling winnings. If you are a nonresident alien, capital gains on stocks, securities and other personal property are taxable to you only if you are present in the U.S. for at least 183 days during the tax year. Generally, you cannot offset gambling winnings with gambling losses. However, if you happen to be a resident of Canada, you can claim gambling losses to the extent of gambling winnings under the U.S./Canada treaty. (See the instructions for Form 1040NR.) Note that bank interest received by nonresident aliens is not taxable.
 

Sucker

Well-Known Member
#6
bj21abc said:
can I offset gambling losses against wins ?
\
Hard to believe you're getting the run-around on THIS.

In the United States, as far as the I.R.S. is concerned; gambling losses can ALWAYS be claimed up to the point of gambling wins. All professional gamblers in the U.S. know this; and if you call any C.P.A. in the U.S. he will almost certainly give you this information for FREE. I just can't imagine why he'd want to run off a potential client by holding back such simple information that only requires him to give a one-word answer.

The I.R.S also has hot-lines that they have set up in which they'll answer any and ALL questions for free. Go to the website: http://www.unclefed.com/Tax-Help/irsphonehelp.html and scroll down to "Telephone Assistance for people who live outside the United States". You'll find telephone numbers where you can get answers for this and any other questions you may have.
 

moo321

Well-Known Member
#7
Seriously, guys, this **** is not that simple. I've talked to multiple CPA's about this, and gotten different opinions.

My best guess is that the IRS wants you to report your total wins and then itemize off your total losses. You would probably also be ok reporting net.

The big question, though, is whether you are reporting. Get busted reporting wrongly, and you may face some penalties. Get busted with years of big gamblings wins you didn't report, it may be time for pound me in the ass prison.
 

bj21abc

Well-Known Member
#8
Reply

Thanks for the numerous comments -

for my (obscure) case, I did call one of the IRS hotlines and spoke with a "customer service representative".

As a non-resident and non-Canadian I cannot offset gambling losses against wins - so I would have to pay the 30% witholding on any W2G wins. i.e. 30% of gross wins. Which for all intents and purposes kills any potential VP opportunities unless I play for pennies. :mad:
 

NightStalker

Well-Known Member
#9
can you please elaborate?

bj21abc said:
Thanks for the numerous comments -

for my (obscure) case, I did call one of the IRS hotlines and spoke with a "customer service representative".

As a non-resident and non-Canadian I cannot offset gambling losses against wins - so I would have to pay the 30% witholding on any W2G wins. i.e. 30% of gross wins. Which for all intents and purposes kills any potential VP opportunities unless I play for pennies. :mad:
Are you on visa? Are you saying that L1/H1 visa who stayed for the whole year cannot offset gambling losses against w2g wins?
I think, if you have stayed for more than 183 days in US, then you are a resident for the year..
 
#10
bj21abc said:
Hi,

this is a pretty obscure topic, am hoping someone might know, though...

If you're a US resident or a Canadian you can claim gambling losses against W2G wins. I am neither - on a J1 visa and will have to submit a 1040NR - can I offset gambling losses against wins ?
Yes. zg
 

Sucker

Well-Known Member
#11
bj21abc said:
As a non-resident and non-Canadian I cannot offset gambling losses against wins - so I would have to pay the 30% witholding on any W2G wins. i.e. 30% of gross wins.
This makes no sense, and makes me wonder if maybe this person misunderstood you. In other words; if you go into an American casino, put your rating card into a machine, lose $2000, and THEN get lucky & hit a $1500 jackpot; you owe the IRS an additional $450, even though you're already down $500 from that very same machine? Maybe I AM wrong, but it seems that you would at LEAST be allowed to file some sort of tax form in order to get that money refunded at the end of the year.

bj21abc said:
for my (obscure) case, I did call one of the IRS hotlines and spoke with a "customer service representative".
How can this be such an obscure case? Millions of people from all over the world come to Las Vegas every year. This sort of thing must pop up time after time.
 

bj21abc

Well-Known Member
#12
Nope - this is the way it works. I did some internet research and then called them up. Any payment that triggers a W2G (actually a different form for non-residents) is taxed on gross winnings. You appear to be looking for logic in the IRS - :grin:.

I guess that the millions of tourists who come here are so happy to hit a jackpot that they are quite prepared to share it with the IRS...

Quoting from the IRS: "Gambling winnings (Income Code 28). In general, nonresident aliens are subject to NRA withholding at 30% on the gross proceeds from gambling won in the United States if that income is not effectively connected with a U.S. trade or business and is not exempted by treaty. The tax withheld and winnings are reportable on Forms 1042 and 1042-S.

No tax is imposed on nonbusiness gambling income a nonresident alien wins playing blackjack, baccarat, craps, roulette, or big-6 wheel in the United States. A Form W-8BEN is not required to obtain the exemption from withholding, but a Form W-8BEN may be required for purposes of Form 1099 reporting and backup withholding. Gambling income that is not subject to NRA withholding is not subject to reporting on Form 1042-S.

Nonresident aliens are taxed at graduated rates on net gambling income won in the U.S. that is effectively connected with a U.S. trade or business.

Tax treaties. Gambling income of residents (as defined by treaty) of the following foreign countries is not taxable by the United States: Austria, Belgium, Bulgaria, Czech Republic, Denmark, Finland, France, Germany, Hungary, Iceland, Ireland, Italy, Japan, Latvia, Lithuania, Luxembourg
, Netherlands, Russia, Slovak Republic, Slovenia, South Africa, Spain, Sweden, Tunisia, Turkey, Ukraine, and the United Kingdom. "

Sucker said:
This makes no sense, and makes me wonder if maybe this person misunderstood you. In other words; if you go into an American casino, put your rating card into a machine, lose $2000, and THEN get lucky & hit a $1500 jackpot; you owe the IRS an additional $450, even though you're already down $500 from that very same machine? Maybe I AM wrong, but it seems that you would at LEAST be allowed to file some sort of tax form in order to get that money refunded at the end of the year.



How can this be such an obscure case? Millions of people from all over the world come to Las Vegas every year. This sort of thing must pop up time after time.
 

Tico

Well-Known Member
#14
bj21abc said:
Hi,

this is a pretty obscure topic, am hoping someone might know, though...

If you're a US resident or a Canadian you can claim gambling losses against W2G wins. I am neither - on a J1 visa and will have to submit a 1040NR - can I offset gambling losses against wins ?

The decision as to whether to play VP hinges on this - if I am stuck with a 30% withholding on royals, I drop ~ 0.6% on EV...

Thanks

D.
Deductible? Yes or no. Answers are two:

1) In a casino:

No can do. A big winning within a casino can not be offset right a way by losses. For example, you have lost $5,000 in slots, then you hit a jackpot of $5,000. IRS requires the casino to withhold $1,500 (in your case ) on the $5,000 jackpot regardless of your previous $5,000 losses in slots. By the $1,500 withholding, IRS forces you to do the final accounting by filing 2010-Form-NR1042.

2) on Form NR1042

Yes can do. Take the above example. Offset your losses against your winning on your 2010 non-USA-resident-return. Prepare the return correctly, file your 2010 Form NR1042 and claim your $1,500 tax refund.

Be aware of this:
IRS' big tax refund check may "get lost in mail". If so, don't give up. You may need to contact an IRS problem resolution officer to get your refund & interest back--- It may take a few years, but you will definitely get your money plus interest eventually .

For an IRS joke...
No kidding :laugh:
 

Sucker

Well-Known Member
#15
Tico said:
Deductible? Yes or no. Answers are two:

1) In a casino:

No can do. A big winning within a casino can not be offset right a way by losses. For example, you have lost $5,000 in slots, then you hit a jackpot of $5,000. IRS requires the casino to withhold $1,500 (in your case ) on the $5,000 jackpot regardless of your previous $5,000 losses in slots. By the $1,500 withholding, IRS forces you to do the final accounting by filing 2010-Form-NR1042.

2) on Form NR1042

Yes can do. Take the above example. Offset your losses against your winning on your 2010 non-USA-resident-return. Prepare the return correctly, file your 2010 Form NR1042 and claim your $1,500 tax refund.
This is exactly what I was trying to say; that there WAS a way to get the money back. I am quite sure that Tico is 100% correct about this.
 

fubster

Well-Known Member
#16
I've had to deal with this before. Yes, it's absurd and yes, it makes no sense. You are able to recoup it come tax season though. They do it for large poker tournament wins.
 

bj21abc

Well-Known Member
#17
Can I ask where this information is from ?

I called the IRS again, going through the whole cycle of winning, the casino filing an NR 1042 (filed by the casino, not by the gambler), and me then filing an NR 1040. There seems to be no provision at all for a non-resident to deduct itemized gambling losses. Unless you happen to be Canadian.

do you know of any non-residents who have successfully offest losses ?


D.

Tico said:
Deductible? Yes or no. Answers are two:

1) In a casino:

No can do. A big winning within a casino can not be offset right a way by losses. For example, you have lost $5,000 in slots, then you hit a jackpot of $5,000. IRS requires the casino to withhold $1,500 (in your case ) on the $5,000 jackpot regardless of your previous $5,000 losses in slots. By the $1,500 withholding, IRS forces you to do the final accounting by filing 2010-Form-NR1042.

2) on Form NR1042

Yes can do. Take the above example. Offset your losses against your winning on your 2010 non-USA-resident-return. Prepare the return correctly, file your 2010 Form NR1042 and claim your $1,500 tax refund.

Be aware of this:
IRS' big tax refund check may "get lost in mail". If so, don't give up. You may need to contact an IRS problem resolution officer to get your refund & interest back--- It may take a few years, but you will definitely get your money plus interest eventually .

For an IRS joke...
No kidding :laugh:
 

Tico

Well-Known Member
#18
bj21abc said:
Can I ask where this information is from ? ....
do you know of any non-residents who have successfully offest losses ?


D.
I plead the 5th amendment to the U.S. Constitution against the 2 questions above :grin:. However, I can help you get a 2nd opinion. Call Heather Spinks, an expert in Canadian and American Tax Laws at 416-489-8100. Ask her a question about filing a Form 1040NR (not 1042NR, excuse me for my senior moment:laugh:), a Non-USA-Resident-Tax-Return for a gambler. Hey she may pick you up as a paying tax client :rolleyes: .
 

bj21abc

Well-Known Member
#19
Thanks for the info - I will indeed give her a call.

Tico said:
I plead the 5th amendment to the U.S. Constitution against the 2 questions above :grin:. However, I can help you get a 2nd opinion. Call Heather Spinks, an expert in Canadian and American Tax Laws at 416-489-8100 begin_of_the_skype_highlighting**************416-489-8100******end_of_the_skype_highlighting. Ask her a question about filing a Form 1040NR (not 1042NR, excuse me for my senior moment:laugh:), a Non-USA-Resident-Tax-Return for a gambler. Hey she may pick you up as a paying tax client :rolleyes: .
 

bj21abc

Well-Known Member
#20
Just spoke with her - she couldn't really help.... She deals with Canadians mainly, as I understand, and that's an easy call - can definitely offset. She suggested I ask any US CPA... So I guess I am back to square one...


Tico said:
I plead the 5th amendment to the U.S. Constitution against the 2 questions above :grin:. However, I can help you get a 2nd opinion. Call Heather Spinks, an expert in Canadian and American Tax Laws at 416-489-8100. Ask her a question about filing a Form 1040NR (not 1042NR, excuse me for my senior moment:laugh:), a Non-USA-Resident-Tax-Return for a gambler. Hey she may pick you up as a paying tax client :rolleyes: .
 
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