JEAN SCOTT
This Second Edition of Tax Help for Gamblers is the culmination of 10 years of continuing research into the ever-changing tax world for gamblers. Because of the expansion of gambling into so many new areas of the country, there have been advances, as both the IRS and state governments have become more knowledgeable about gambling issues. Yea, I might even say that some have become more sympathetic to gamblers. But it’s still a very rocky road, just as it was when I first thought about it a decade ago.
Actually, this whole thing began as a single chapter in my earlier book More Frugal Gambling. Due to my own experiences and the many questions casino players asked me, I knew that tax implications connected to gambling were a big mystery to most people, and I began researching the subject. I read as many IRS publications as I could find and searched widely for tax information on the Internet. I talked to present and former IRS agents and to many tax preparers, accountants, and lawyers.
I discovered that the IRS offers surprisingly few details to guide gamblers through the tax maze in which they find themselves. Furthermore, I found what the IRS does say is often general, vague, open to individual interpretation, and even contradictory. This may have been done intentionally, so that most gambling issues would fit under a large umbrella of general guidelines. Or, more likely, it’s typical government bureaucracy that is slow to keep up with changing times.
Whatever the reason, it’s difficult for an individual taxpayer to know exactly how to treat his particular gambling circumstances, and it has even ended up confusing the IRS itself. Therefore, you can’t call one IRS phone number and get the final and absolute answer to your questions on gambling and federal income taxes—calling and talking to 10 different IRS representatives might give you up to 10 varying pieces of advice. Two auditors sitting next to each other in the same office could hear the same information and come up with entirely different results.
In addition, I quickly learned that many tax preparers aren’t knowledgeable about gambling issues, even if they’re experts in other tax areas. For many years before we moved to Las Vegas, I had to educate my otherwise-excellent accountants about gambling issues, though my own knowledge was extremely limited at the time.
However, when we moved to Vegas, Brad and I were fortunate to find a fellow gambler who was also a tax accountant—Marissa Chien. Finally, I had someone who, as a gambler as well as an Enrolled Agent, was knowledgeable about both gambling and taxes and could do our tax returns in such a way that we could be relatively certain that all the bases were covered accurately. Marissa gave me so much valuable input for my tax chapter, which she had kindly offered to edit, that I realized this was a much broader subject than I’d originally imagined.
A lightbulb came on in my head: I needed more of Marissa’s input to cover this subject adequately, and it was definitely too much for one chapter in a book. It needed a whole book to itself, one that Marissa and I should write together. So that is how Tax Help for Gamblers was born.
We’ve retained most of the text of the original chapter, written in my folksy layman’s style. Marissa went through it and added important information to explain some of the whys and hows of this complex subject, including tax-code specifics, relevant court cases, and professional comments. She also prepared the charts and forms in the section on state taxes and in the Appendix, to help readers better see the practical application of the information we cover.
Although the publisher has put a disclaimer in the front of this book, Marissa and I want to add some cautions here. I’m a teacher and a writer by profession, not an accountant or lawyer. Although I try to be clear in differentiating between facts and opinions, I want to emphasize that no one should base his or her actions solely on the information in this book. Even though Marissa is a qualified Enrolled Agent and has more technical knowledge in this area than I do, she strongly concurs. The information here is provided merely to help you become more knowledgeable about some of the thorny issues in this complex field.
Another caution: There are limitations with any tax information written in this (or any) book. Government tax policy is not a placid pond. It’s an ever-changing river, with treacherous rapids along the way. Even professional tax preparers wage a constant battle to keep up to date on the changes; most individual taxpayers don’t have a chance. Often, the first versions of commercial software you buy to help you do your own taxes have to be updated during the same tax season. This is the reason many knowledgeable and experienced do-it-yourself taxpayers still have a professional look over their returns just before they submit them to the government.
As always, we advise that you seek the advice of a tax professional to guide you in your personal tax decisions.
MARISSA CHIEN
I’m a gambler myself. I owe a lot of what I know about video poker and maximizing my gambling dollar to the expertise of Jean Scott and her writing about smart gambling. Even with my specialization in taxes, when I tried to accurately report my gambling activities on my own tax returns, I began to realize that the laws relating to gambling are not very specific as they pertain to today’s gambling environment. Even as a tax professional, I was finding it difficult to find clear guidance.
And if it was intricate for me, it’s no surprise that the general public doesn’t have a clue. Just from writing a couple of columns a year for the Las Vegas Advisor on the subject and preparing other gamblers’ returns, not a week goes by that I don’t get a call from someone from around the country asking for my help. No book out there deals with the nuances of gambling and tax returns completely enough to show how the IRS auditors look at this issue, and the IRS publications leave you with more questions than answers. With the proliferation of casinos—combined with the increased focus by the IRS on gamblers—this will become more of a problem for more taxpayers in the future.
Many people say, “I just give my tax preparer any paperwork I get from a casino and he/she takes care of all the details; I don’t need to know all this stuff.” The problem with this is that many of these tax professionals aren’t gamblers themselves, thus aren’t knowledgeable about the accompanying tax issues. So even though you don’t do your own tax returns, you should have at least a basic knowledge of tax issues so that you’re able to choose a knowledgeable tax preparer and provide enough records that he or she can do the best job.