Strategy / Reclaiming American Gambling Taxes
Reclaiming American Gambling TaxesLundi, 30 juin 2014
(The original article is published in www.gamblingtaxes.ca and can be read here) If you have played and won in an American gaming establishment, you might have seen the casino retain part of your winnings. As for any form of revenue, the Internal Revenue Service, IRS, considers winning money in a casino as a gain and as such it is taxable. You must know that from a certain amount won, depending on the casino, it must retain 30% of any winnings by a player. In return, the player may recuperate part or all of this money by producing an American Income Tax Return. A Canadian citizen has three years to fill such a claim.
What games are taxable? Every casino game, any tournament, horse or dog races, lottery tickets, TV show gains, etc.
A Canadian wishing to reclaim his taxes must first get a fiscal identification number, similar to our Social Insurance Number. In the US it's called an ITIN, for Individual Taxpayer Identification Number. An authenticated copy of a passport is now required to request an ITIN. Of course, Gamblingtaxes.ca can provide you with the details of how to obtain this mandatory document from Passport Canada.
Once your passport authenticated, you fill a W-7 Form, to which you join your authenticated copy. With your 1042-S, received from the casino/racino, detailing your gain, you can now go online and fill a 1040NR form, then download it. Of course you already know the amount won and the taxes deducted. All that's left to do is fill in the expenses allowed and you're on your way! Unfortunately, this is where it gets complicated. Who can claim what? What percentage can you claim? What proofs do you need?
This is where an expert firm becomes essential. For example, if you win 50 000$ in a slot machine while playing with your spouse, can you split this gain? Is it useful? If you win on a trip and lose on a subsequent trip, can you still claim expenses from the second? Can you reclaim the entire amount? Are there repercussions on your Canadian taxes?
As you can see, the expertise that Gamblingtaxes.ca has developed through the years can become a precious ally for players who are experts in their field but who have little knowledge on foreign fiscal matters.
Gains, losses and expenses
As in anything else, there is no absolute answer. The famous" it depends" rules here also. No two situations are alike. Still, some basic principles never change. The first one: all your losses must be registered and kept in a file. Obviously, telling the IRS that you lost x$ is not enough!
Let's start by separating the two kinds of players: the regulars and the leisure players. In the leisure group, we will find the winners of jackpots via a unique event. For example anyone winning 100 000$ in a slot machine doesn't expect to win the same the next day. On the other side, a solid poker player who wins a tournament today still expects to win the next day! He might be a regular.
The regular thus must keep an annual register at all times. This register will include every detail of his whereabouts. Lets follow Paul for instance: in January, Paul decides to take part in a few poker tournaments in Los Angeles. He keeps a record of each of his expenses, even those who probably won't be accepted by the IRS right now. He keeps track of plane tickets, hotels, meals and transportation( rental cars, taxis, limos, bus).
Not being a pro, Paul will not be able to present these as expenses. On the other hand, if Paul gets very successful, he might eventually decide to turn pro in the USA and will benefit from having kept his receipts.
Paul will also have to keep a detailed account of all of his playing sessions, no matter what game he played. Paul will then write in his log that on January 12th he played a poker tournament at the Commerce Casino, in which the buy in was 1 000$. he finished second in the tournament and won 31 000$. The casino gave him 22 000$, representing 30 000$ net, minus 30% of 30 000$, 9 000$. It is good to understand that the entry fee has already been deducted from the net purse.
The next day, Paul, after having celebrated his second place finish, decides to play some blackjack and goes on to lose 6 000$. His log for these 2 days will read, a win of 30 000$ in tournament X at the Commerce Casino on the 12th and a loss of 6 000$ at the Bicycle casino the next day, playing blackjack from 9 to 11.
When Paul goes to Las Vegas in March, he goes on filling his log. He keeps a record of every session, winning or losing, including where and when he played. Having done this all year, Paul has put himself in the best position (the only one as a matter of fact) to reclaim his dues from the IRS.
The log is the worst part of being a regular player. Nonetheless it remains essential and allows the player to face the IRS holding the right cards. The log also proves the seriousness of a player and usually sets him well when he reclaims the dollars he is eligible to get.
It's quite the same for an occasional player. Peter for example went to Atlantic City during his vacations. He won 50 000$, winning the jackpot at Caribbean Stud Poker. It is safe to assume he will keep on playing and, knowing the odds of this game, that he will lose part of his winnings. He should consequently use a log also. In his case though, no need to keep a record of lodging, transport and meals, of course! He certainly won't need them.
As a whole, each case is different and having specialists treating your claim is always the best solution. Knowing that a professional team like Gamblingtaxes.ca is taking care of you and counseling you as well as preparing your documents represents the best bet in a domain that few know and understand well.
You want to recover taxes paid on an American gambling win?
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