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Casino winning taxes: turn it to your advantage

Casino Winning Taxes: Turn It To Your Advantage

Going to casinos can be fun and exciting. It can be more exhilarating the moment you are in your winning streak. However, the excitement may turn sour knowing that the IRS charges around thirty percent to form part of gambling winnings tax. This can be disappointing but, the taxes withheld can be taken back from the IRS, in the form of tax refunds.

The U.S.-Canada Income Tax Treaty

Tax refunds do not only apply to residents of the United States. There is an agreement between Canada and America with regards to casino winnings taxes. The treaty between the two countries reflects how casino winnings taxes should be treated by Canadian citizens. It states that thirty percent should be withheld from the Canadian citizens based on their gross income from gambling. Adding to this privilege is Article XXII of the same treaty stating that those Canadian residents that are taxed by the United States is further entitled to deduct their U.S. source losses against their U.S. source wages. This simply means that residents of Canada can get casino tax refunds from the withheld gambling winnings tax.

Tax on Gambling

Casino winning taxes vary depending mostly on the amount won, the type of casino game and the ratio of the amount of winnings to the amount of bet. Meaning, even if you won in a casino game, you will not be automatically withheld thirty percent as gambling winnings tax, it still depends on the ratio between the winnings and losses. There are instances where total bet exceeds the total winnings, so that if you look at the situation, there is actually no winning to be charged with tax in the first place. But given situations like this, the IRS still needs a report on the income earned for them to determine how much gambling winnings tax to be charged.

The Need to Report

It is the responsibility of a gambling winner to report and declare the winnings but it is up to the IRS to determine whether the winnings needs to be charged with casino winning taxes. It pays to be a diligent taxpayer and being responsible enough to report even the minimal amount of winnings. Reporting the amount of winnings does not mean you have to pay taxes. The amount to be charged with gambling winnings tax can be further reduced by reporting gambling losses in the itemized deduction of Form 1040. The amount of losses reported can be as much as the amount of winnings so that there will no longer a need to be charged with casino winnings taxes.

Get Help

More often than not, a taxpayer can be confused in reporting gambling winnings and losses with the IRS. Even if in instances like this, all is done in good faith, it is possible that you may get into trouble with the government for not being able to reflect the right amount of casino winnings taxes. To resolve problems like this, all you need is to seek help from the professionals. There are websites that can will surely be able to give you the clarification and the assistance needed.  It is better to get all the help especially in filling up the tax forms to save yourself from trouble and litigation later on.

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