Can I Write Off Casino Losses

You are able to itemize your deductions and you have gambling losses of $3,258 and winnings of $2,947. The 2 percent threshold for you will be $1,200. Because your winnings are less than your losses, only $2,947 of your losses can count toward the threshold. But then you must subtract $1,200 from $2,947 to arrive at $1,747 of deductible losses. In fact, what you should do is deduct your losses only to the extent that you report your gambling winnings. For example, if you were to report you had won $5000 gambling but had losses of $20,000, this could cause a red flag. Also, only professional gamblers can write off the costs of meals, lodging and other expenses related to gambling. The IRS does let you deduct gambling losses from gambling winnings, though. Youcan’t deduct more than your winnings, of course, the IRS isn’t that stupid.You can’t say you won $1,000 and lost $5,000, for a net loss of $4,000. Amount of your gambling winnings and losses. Any information provided to you on a Form W-2G. The tool is designed for taxpayers who were U.S. Citizens or resident aliens for the entire tax year for which they're inquiring.

• Can I Write Off My Gambling Losses In 2019
• Can I Write Off Gambling Losses On My Taxes
• Can I Write Off Gambling Losses In 2019
• Can You Write Off Gambling Loss

We doubt that anyone ever woke up thinking, “Gee, I hope I get audited by the IRS this year”. An IRS audit could easily be one of the worst things that could happen to you this year. So if you want to avoid receiving that ominous letter from the IRS that your 2015 tax return is being audited here are seven red flags you need to totally avoid.

Not reporting all of your taxable income

Those 1099’s and W-2s you received this past January? You weren’t the only one that got them. The IRS got them too. It’s important to make sure you report all of the required income on your return. The computers used by the IRS are pretty darn good at matching the numbers on your return with the numbers on your 1099s and W-2s. If they turn up a mismatch this will create a red flag and the IRS computers will spit out a bill. If those darn computers do make a mistake and you receive a tax form that shows income that wasn’t yours or lists incorrect amounts of income, you will need to get the issuer to file the correct form with the IRS. And what about that income you earned on those side jobs? In most cases you should have received a 1099 documenting your earnings. If not, this is definitely a case where it’s better to be safe than sorry and report it.

Taking deductions that are higher than average

If the IRS spots deductions on your return that are disproportionately large in comparison with your income, it may pull your return for review. For example, a very large medical expense –again out of proportion to your income – could cause a red flag. However, if you do have the documentation to support the deduction then don’t be afraid to claim it.

Claiming really big charitable deductions

Charitable deductions can be a great write off. Plus, when you contribute to a charity it can make you feel all fuzzy and warm inside. However, if those deductions are disproportionately large in comparison with your income, it will raise a red flag. The reason for this is because the IRS knows what is the average charitable deduction for people at your level of income. Did you donate some very valuable property? In this case we hope you got an appraisal for it. Did you make a non-cash donation over $500? Then you better make sure you file form 8283. if you don’t file this form or if you don’t have an appraisal supporting that big donation you’ll become an even bigger target for auditing.

Claiming big gambling losses or not reporting gambling winnings

If you’re a recreational gambler you must report your winnings as “other income” on the front page of your 1040 form. If you’re a professional gambler you will need to report your winnings on Schedule C. If you don’t report gambling winnings this can draw the attention of the IRS – especially in the event that the casino or other venue reported your winnings on form W-2G. It can also be very risky to claim big gambling losses. In fact, what you should do is deduct your losses only to the extent that you report your gambling winnings. For example, if you were to report you had won $5000 gambling but had losses of $20,000, this could cause a red flag. Also, only professional gamblers can write off the costs of meals, lodging and other expenses related to gambling. And the surest way to invite an audit is by writing off what you lost at gambling but no gambling income. If you’ve done any of these things, or are worried about some other common tax return mistakes, it might be wise to file an amended tax return and account for those wins or losses correctly.

Writing off a hobby as a loss

You will dramatically increase the odds of “winning” an IRS audit if you file a schedule C showing big losses from any activity that could be considered a hobby such as jewelry making, coin and stamp collecting, dog breeding, and the like. IRS agents are especially trained to ferret out people who improperly deduct losses associated with a hobby. You must report any income your hobby generated or whatever but can then deduct your expenses up to that income level. But the IRS will not allow you to write off losses from a hobby. So if you want to write off a loss you must be running your hobby as if it were a business and must have the reasonable expectation of generating a profit. As an example of how this works if your hobby generates a profit in 3 out of every 5 years then the IRS will presume that you’re actually in business to make a profit unless it can prove something to the contrary. Of course, if you’re unfortunate and win the audit lottery the IRS will make you prove that you do have a legitimate business and that it’s not just a hobby. So make sure you keep all documents that support your expenses.

If you report income from self-employment of $100,000 or more

Let’s suppose that you’re self-employed, had a really great year and had earnings of $100,000 or more you are reporting on schedule C. This is likely to trigger an IRS audit because according to the IRS people who file a schedule C are more likely to under report their income and overstate their deductions. What this means is that if you earn $100,000 or more and are reporting it on schedule C you’ll need to make sure you have the documentation necessary to support your deductions and again, make sure you report all your income very accurately.

If you work in certain industries

The IRS knows based on past audit experience that there are certain activities or industries that have a higher incidence of what’s technically called noncompliance but really means cheating on their taxes. Included in this group are the tax returns of air service operators, gas retailers, auto dealers, attorneys and taxi operators. So, if you’re employed in one of these industries or activities and don’t want to suffer an IRS audit, it’s best to follow the old adage that honesty is the best policy.

A Toronto man trying to write off casino and racetrack losses against his income tax bill has gambled and lost at Canada's Federal Court of Appeal.

Giuseppe Tarascio claims that gambling is how he earns the bulk of his income. He filed tax returns for several years, claiming both his wins and losses.

By day, Tarascio is a technician with Bell Canada. But on evenings and weekends, he responds to what he claims is his true calling: horses, slot machines, casino games and lotteries.

He claims to have won tens of thousands of dollars. For years he claimed those winnings as income, but he also deducted his losses and expenses.

In his income tax returns for 2002 and 2003, he deducted from his gambling winnings his losses and associated expenses: $40,933 in 2002 and $56,000 in 2003.

But Tarascio’s luck ran out when the Canada Revenue Agency (CRA) stepped in and disallowed those deductions.

Tarascio objected and went to tax court. He presented his books and records, but lost there too.

No 'systematic method,' court rules

Hoping his courtroom losing streak would end, Tarascio pushed his luck further, taking his case to the Court of Appeal.

He claimed that his degree in mathematics — coupled with his experience in probability theory — gave him the expertise to register his gambling as a business.

But the court turned him down, saying Tarascio had no 'systematic method' for gambling and had spent no time practising his skills. He was also required to pay court costs of $1,000.

Can I Write Off My Gambling Losses In 2019

It didn't help that Tarascio admitted that win or lose, it was really the thrill that drove him to the tables.

Colin Campbell, who teaches tax law at the University of Western Ontario, said the test of whether or not gambling losses are a legitimate writeoff depends on whether it’s a personal or commercial activity.

Can I Write Off Gambling Losses On My Taxes

'That's the dividing line,' said Campbell. 'And in the case of gambling, the courts have generally found that gambling is predominately a personal activity.'

Can I Write Off Gambling Losses In 2019

Tarascio didn't want to talk about the decision when contacted by CBC News.

Can You Write Off Gambling Loss

Asked if he planned to appeal to the Supreme Court, he said no. That would require a lawyer, but Tarascio said he can’t afford one.