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Ask the Slot Expert: Lowering the W-2G threshold10 June 2015
I didn't include the fact that the threshold is not adjusted for inflation and hasn't changed since 1977 for a few reasons. First, the fact that the threshold hasn't changed in nearly 40 years is one of the talking points listed in the suggested script from the American Gaming Association. It was also included in a letter sent by a number of Congressmen to the IRS. (The AGA estimates that the W-2G threshold would be about $4700 today if it were adjusted for inflation.)
I wanted to write a completely original comment, under the assumption that an original comment carries more weight than one that merely parrots a prepared script.
I had to be careful not to say, as some commenters did, that the lower threshold would cause more people to pay taxes. Gamblers are supposed to pay taxes on any gambling winnings regardless of whether they received a W-2G. It's fair to say, though, that because one is not able to report a net figure on one line and has to report wins and losses on separate forms, lowering the threshold will cause many more people to report and be affected by a false win when in fact they actually had a loss overall.
I also thought it fair to point out that the IRS trusts table game players to report their results. Table game players are not currently subject to receiving W-2Gs. I think there are two reasons why table game players are spared The first reason is because locking up a slot machine to issue a W-2G affects only one player. Stopping a table game could affect two, three or even a dozen players. Granted, getting paid $1,200 on one hand only happens on a high-limit table, but issuing the W-2G will stop the action for all the players. The second reason is because a reportable win is easier to detect on a slot machine. Machines can be programmed to lock up on a reportable win and stay locked until cleared by a slot floorperson.
It reminds me of the old joke about two people speeding, one going 70 mph and the other 80. The trooper pulls over the driver going 70, who asks, "Why did you pull me over? The other guy was going faster."
The trooper replies, "Because you were easier to catch." Slot players are easier to catch.
The IRS received a total of 3,512 comments on the proposal. I haven't looked through them all, but I didn't find one comment in favor of lowering the threshold. What a surprise!
The next step for this proposal is a public hearing scheduled for June 17 in the IRS auditorium in Washington, D.C.
Let me answer your question in two parts.
First, how can you avoid a tax liability? You can't, at least not legally. You're supposed to report all of your income, even income from illegal activities. (An article I just read about Dennis Hastert's structuring of his withdrawals to avoid having the transactions reported to the government mentioned that the person to whom he paid the money could get in trouble by not reporting the income, even if it was extortion. The IRS doesn't care whether you got the money legally, just that you reported it. I believe the Feds could not prove that Al Capone's gains were ill gotten, but they could prove that he never declared them, so he won an 11-year stay in a beautiful federal prison.)
Now, how can you avoid a high tax liability? Speak with a professional tax preparer — preferably one familiar with gambler's returns — to see if you can file as a professional gambler. That's the only way I know to try to minimize your tax liability.
This method is known as a "slot marathon," but I don't recall who first suggested this method of play and coined the name.
I only attempted it once, many, many years ago at the MGM Grand. It takes much longer to do than you realize. My marathon was before the days of tickets, so I had to carry a bucket of coins and cash out any winnings. The action that really slowed me down, though, was waiting for my players card to register. I had a few extra cards made, and put my card in four adjacent machines at once. Then I played each machine, cashing out any winnings and removing my card after each spin. Then I moved to another group of four machines.
I don't remember whether I won or lost on my marathon. In any case, playing a slot marathon is one way to stretch your bankroll because it takes so long to play a relatively small number of spins.
Send your slot and video poker questions to John Robison, Slot Expert™, at firstname.lastname@example.org. Because of the volume of mail I receive, I regret that I can't reply to every question.
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