All money earned during a year has to be accounted for by an individual. These winnings also apply to money won at racing or by betting or gambling. These gambling wins have also to be added or included in your taxable income and an account given to the Tax Authorities.
There are some gambling concerns that deduct the applicable tax amount from you winning amount and pay you the balance. These gaming businesses do give you a receipt showing the deduction and also a certificated showing the details of the win mentioning the total amount won and the tax deducted at a particular rate and the balance amount paid. These concerns provide you with an authentic legal Tax Deducted at Source or a TDS certificate. This certificate can be attached with your tax form to claim the deduction of taxes against your income which may be taxable.
Normally regular gamblers get a form titled W-2G delivered to them. But per chance this Form is not received by you, then also the gambling winnings have to be reported to the tax authorities and the amount filed with your regular income. A note must be made that you have to file your gambling income through form 1040. Any deductions you have to make then Schedule A must be utilized to list out these deductions you intend to claim.
1. While accounting for transactions related to your gambling, initially list out and total all the winnings earned through gambling. As per IRS the definition of gambling income covers but does not limit the definition to lottery wins, money won in raffles or horse racing and by gambling in casinos. As per the IRS, these wins can be in hard cash or by prizes paid in kind.
2. The entire winnings from games of chance have to be mentioned in form 1040 on 21. Also you have to take care that these winnings are included in the entire amount to be taxed.
3. Deductions made by gambling business at the time of paying your winnings should be filled in the form on line 61and form W-2G should also exhibit it.
4. All losses from gambling fall under the category of other miscellaneous deductions as per line 28 of the Schedule A. An amount equivalent to 2 per cent of your total income will be deducted from this amount and the balance utilized to lessen your taxable income.