• Electronic Gambling Tip Jar Tax Calculator
• Electronic Gambling Tip Jar Tax 2017

• Ok, so maybe this is an odd thing that's buggin me but. Me and a few friends of mine went to a casino last week.I brought like $20 with me because I used to be one of those that blew paycheck after paycheck in casinos. I ended up spending $5 in 50 cent pull-tabs because I refused to play slots and put myself back into that pattern, and well, I just felt like it.
• A state statute that legalizes certain forms of gambling and provides guidelines for the operation and taxation of gambling games. Gaming Control Board A state or county agency that enforces policies set by the gaming commission, investigates allegations of cheating and provides background information on persons or corporations requesting licensing as operators of gambling establishments.

. Increase sales tax from 5 to 6 percent. Increase state corporate income tax from 7 to 8.25 percent. Increase cigarette tax from $1 to $2 per pack. Increase vehicle titling tax from $23 to $25. Vehicle excise tax increase. Electronic gambling tip jar tax. Real property transfer tax.

Totaling a taxpayer's Forms W-2G, Certain Gambling Winnings, for the year would seem to be the straightforward way to determine the amount of gambling winnings to report on a tax return. Forms W-2G, however, do not necessarily capture all of a taxpayer's gambling winnings and losses for the year. How are these amounts reported and substantiated on a tax return? Does the answer change if the taxpayer seeks to make a living as a poker player? Do states tax gambling differently?

There are many nuances and recent developments under federal and state tax laws about gambling and other similar activities. With proper recordkeeping and guidance, a taxpayer with gambling winnings may significantly reduce audit exposure.

Income and Permitted Deductions

Under Sec. Casino euro no deposit bonus. 61(a), all income from whatever source derived is includible in a U.S. resident's gross income. Whether the gambling winnings are $5 or $500,000, all amounts are taxable.

A taxpayer may deduct losses from wagering transactions to the extent of gains from those transactions under Sec. 165(d). For amateur gamblers, gambling losses are reported as an itemized deduction on Schedule A, Itemized Deductions. The law is not as kind to nonresidents: While nonresidents must also include U.S.-source gambling winnings as income, they cannot deduct gambling losses against those winnings. Nonresidents whose gambling winnings are connected to a trade or business may deduct gambling losses to the extent of winnings, however, under Sec. 873.

Case law and IRS guidance have established that a taxpayer may determine gambling winnings and losses on a session basis.

Neither the Code nor the regulations define the term 'transactions' as stated in Sec. 165(d). Tax Court cases have recognized that gross income from slot machine transactions is determined on a session basis (see Shollenberger, T.C. Memo. 2009-306; LaPlante, T.C. Memo. 2009-226).

What Is a Session?

In 2008, the IRS Chief Counsel opined that a slot machine player recognizes a wagering gain or loss at the time she redeems her tokens because fluctuating wins and losses left in play are not accessions to wealth until the taxpayer can definitely calculate the amount realized (Advice Memorandum 2008-011). This method is also recognized in both Schollenberger and LaPlante, as a by-bet method would be unduly burdensome and unreasonable for taxpayers. To this end, the IRS issued Notice 2015-21, which provides taxpayers a proposed safe harbor to determine gains or losses from electronically tracked slot machine play.

Under Notice 2015-21, a taxpayer determines wagering gain or loss from electronically tracked slot machine play at the end of a single session of play, rather than on a by-bet basis. Electronically tracked slot machine play uses an electronic player system controlled by the gaming establishment—such as the use of a player's card—that records the amount a specific individual won and wagered on slot machine play. A single session of play begins when a taxpayer places a wager on a particular type of game and ends when the taxpayer completes his or her last wager on the same type of game before the end of the same calendar day.

A taxpayer recognizes a wagering gain if, at the end of a single session of play, the total dollar amount of payouts from electronically tracked slot machine play during that session exceeds the total dollar amount of wagers placed by the taxpayer on the electronically tracked slot machine play during that session. A taxpayer recognizes a wagering loss if, at the end of a single session of play, the total dollar amount of wagers placed by the taxpayer on electronically tracked slot machine play exceeds the total dollar amount of payouts from electronically tracked slot machine play during the session.

There is little to no guidance defining a session for other casino games, such as poker. Furthermore, because there are different poker game formats (cash and tournament) and game types (Texas hold 'em, pot limit Omaha, etc.), it is unclear whether the one-session-per-day analysis would apply to poker in general. A taxpayer who plays different types of poker games may have to record separate sessions for each type of poker game played each day.

In a 2015 Chief Counsel memorandum (CCM), the IRS concluded that a taxpayer's multiple buy-ins for the same poker tournament could not be aggregated for purposes of determining the reportable amount on a taxpayer's Form W-2G (CCM 20153601F). This analysis implies that the IRS may view each poker tournament buy-in as a separate gambling session. A key point leading to the conclusion was that the buy-ins were not identical because the tournament circumstances were different each time the taxpayer made an additional buy-in.

Requirement to Maintain Accurate Records

In Rev. Proc. 77-29, the IRS states that a taxpayer must keep an accurate diary or other similar record of all losses and winnings. According to Rev. Proc. 77-29, the diary should contain:

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• The date and type of the specific wager or wagering activity;
• The name and address or location of the gambling establishment;
• The names of other persons present at the gambling establishment; and
• The amounts won or lost.

It is hard to believe the IRS would disallow a taxpayer's gambling loss deduction solely because the taxpayer did not write down in her diary the names of other persons at her blackjack table. The IRS does acknowledge that a taxpayer may prove winnings and losses with other documentation, such as statements of actual winnings from the gambling establishment.

Special Rules for Professional Gamblers

The professional gambler reports gambling winnings and losses for federal purposes on Schedule C, Profit or Loss From Business. A professional gambler is viewed as engaged in the trade or business of gambling. To compute business income, the taxpayer may net all wagering activity but cannot report an overall wagering loss. In addition, the taxpayer may deduct 'ordinary and necessary' business expenses (expenses other than wagers) incurred in connection with the business.

Whether a gambler is an amateur or a professional for tax purposes is based on the 'facts and circumstances.' In Groetzinger, 480 U.S. 23 (1987), the Supreme Court established the professional gambler standard: 'If one's gambling activity is pursued full time, in good faith, and with regularity, to the production of income for a livelihood, and is not a mere hobby, it is a trade or business.' The burden of proof is on the professional gambler to prove this status.

Despite receiving other forms of income in 1978, Robert Groetzinger was held to be a professional gambler for the year because he spent 60 to 80 hours per week gambling at dog races. Gambling was his full-time job and livelihood. Notably, Groetzinger had a net gambling loss in 1978. Thus, actual profit is not a requirement for professional gambler status.

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In addition to applying the standard established in Groetzinger, courts sometimes apply the following nonexhaustive nine-factor test in Regs. Sec. 1.183-2(b)(1) used to determine intent to make a profit under the hobby loss rules to decide whether a taxpayer is a professional gambler:

• Manner in which the taxpayer carries on the activity;
• The expertise of the taxpayer or his advisers;
• The time and effort the taxpayer expended in carrying on the activity;
• Expectation that assets used in the activity may appreciate in value;
• The taxpayer's success in carrying on other similar or dissimilar activities;
• The taxpayer's history of income or losses with respect to the activity;
• The amount of occasional profits, if any, that are earned;
• The financial status of the taxpayer; and
• Elements of personal pleasure or recreation.

What if a professional gambler's ordinary and necessary business expenses exceed the net gambling winnings for the year? In Mayo, 136 T.C. 81 (2011), the court held the limitation on deducting gambling losses does not apply to ordinary and necessary business expenses incurred in connection with the trade or business of gambling. Therefore, a professional gambler may report a business loss, which may be applied against other income from the year.

Limitations on Loss Deductions

Electronic Gambling Tip Jar Tax Calculator

Some states do not permit amateur taxpayers to deduct gambling losses as an itemized deduction at all. These states include Connecticut, Illinois, Indiana, Kansas, Massachusetts, Michigan, North Carolina, Ohio, Rhode Island, West Virginia, and Wisconsin. A taxpayer who has $50,000 of gambling winnings and $50,000 of gambling losses in Wisconsin for a tax year, for example, must pay Wisconsin income tax on the $50,000 of gambling winnings despite breaking even from gambling for the year.

Because professional gamblers may deduct gambling losses for state income tax purposes, some state tax agencies aggressively challenge a taxpayer's professional gambler status. A taxpayer whose professional gambler status is disallowed could face a particularly egregious state income tax deficiency if the taxpayer reported on Schedule C the total of Forms W-2G instead of using the session method under Notice 2015-21. In this situation, the state may be willing to consider adjusting the assessment based on the session method if the taxpayer provides sufficient documentation.

Changes Ahead Likely

Tax laws addressing gambling and other similar activities will continue to evolve as new types of games and technologies emerge. Some related tax issues that will come to the forefront include session treatment for online gambling activity and whether daily fantasy sports are considered gambling. As more and more states legalize online gambling and daily fantasy sports, Congress or the IRS will have no choice but to address these issues.

Electronic Gambling Tip Jar Tax 2017

EditorNotes

Mark Heroux is a principal with the Tax Services Group at Baker Tilly Virchow Krause LLP in Chicago.

For additional information about these items, contact Mr. Heroux at 312-729-8005 or mark.heroux@bakertilly.com.

Unless otherwise noted, contributors are members of or associated with Baker Tilly Virchow Krause LLP.

A pull-tab is a gambling ticket that is sold as a means to play a pull-tab game. Other names for the game include Break-Opens, Nevada Tickets, Cherry Bells, Lucky 7s, Pickle Cards, Instant Bingo, Bowl Games, or Popp-Opens.^[1] Physical pull-tab tickets are multi-layered paper tickets containing symbols hidden behind perforated tabs. The object of the ticket is to open the perforated windows on the ticket and reveal a winning combination. The winning pull-tab ticket is turned in for a prize. Electronic analogues have also been created.

• 1Description

Description[edit]

A pull-tab is a gambling ticket that is sold as a means to play a pull-tab game. Other name for the game include Break-Opens, Nevada Tickets, Cherry Bells, Lucky 7s, Pickle Cards, Instant Bingo, Bowl Games, or Popp-Opens.^[1] The physical pull-tab tickets are usually multi-layered paper tickets containing symbols hidden behind perforated tabs. The object of the ticket is to open the perforated windows on it and reveal a winning combination. The winning pull-tab ticket is turned in for a prize—typically cash.

Game manager operate the game by selling tickets and distributing prizes. The tickets may be provided by mechanical pull-tab dispensers. Several different games may be offered for sale at any one time; each may have different prices and payouts. Pull-tabs are typically sold for 25¢, 50¢, $1, $2, $3, and $5 and have prizes as high as $5,000.

Pull tab games are relatively unique among wagering games in that each game, when new, has a predetermined quantity of tickets/chances, which can range from 5,000 to 50,000 total, among which are a predetermined and fixed quantity of winning chances each of which rewards a predetermined prize value.

In many setups, a potential player can see through the transparent box roughly how many chances remain and they can view on the associated tally sheet how many major winners remain at any given time. When several major winners remain among a few chances, players buy as many as they can at a time. When no major winners remain among unsold tickets, the organization takes the game out of play or retires that deal and replaces it with a brand new deal. No other finite-probability based game provides more information to players about the status of the game.^{[citation needed]}

The key attributes that make something a pull tab—electronic or paper—is the finite probability basis of having a predetermined quantity of chances among which there are a predetermined quantity of winners that pay a fixed and predetermined value of prize. Redemption of one losing chance actually does mean one chance closer to a winner. This opposed to, for instance, slots that operate on near-continuum probability premises, where each event is a separate activity without bearing on the next outcome and without having been influenced from past events.

Paper tickets[edit]

Each ticket has two sides. Typically, one side lists the winning combinations of symbols, the cash payout for each combination, the number of tickets that contain each winning combination, and the total number of tickets in the game. This information is generally also posted in a large printed sheet called a flare. The other side of the ticket contains the perforated tabs. After purchasing the ticket, the player pulls the perforated tabs to reveal their winnings, if any. Cash prizes may be claimed immediately.

Electronic tickets[edit]

An electronic pull tab is derived from paper pull tabs. The first electronic pull tab patent was filed in November 1990.^[2] The electronic game closely resembled pull tabs in that when new, there are a fixed and preset quantity of chances among which are a fixed quantity of winning chances of a predetermined prize value. Furthermore, it brings the unique features of allowing players to view the quantity of chances for each given prize value in each deal, as well as other pull tab features common to pull tab operations in Minnesota, Virginia, North Dakota, and other jurisdictions.

There have been several renditions of electronic pull tabs since 1990. The latest rendition was that authorized in Minnesota in the 2012 legislative session. These devices are available for use by state licensed charitable organizations. This version of an electronic pull tab uses a hand-held device, similar to a tablet computer, with a touch screen interface. All such devices are subject to control and monitoring from a central computer. Each device must have access to one or more finite sets of chances not to exceed a maximum number per set or 'deal' as they are called in pull tab lingo. Sizes of the sets are under jurisdictional control and vary between maximums of 7,500 to 25,000. Among the chances are a predetermined quantity of winning and losing chances. Furthermore, the legislature stated that pull tab devices have 'no spinning reels or other representations that mimic a video slot machine.' The Minnesota statute states an electronic pull-tab game means a pull-tab game containing '(a) facsimiles of pull-tab tickets that are played on an electronic pull-tab device.' One value of such systems is that they not only are much more secure than paper based systems, but afford an opportunity to present games that fall within pull-tab definitions, yet have an enhanced presentation and are more suited to the desires of an electronically oriented public. Innovative manufacturers of such gaming systems expand the entertainment value of the gaming experience through the introduction of new game presentation styles.

The devices are linked wirelessly to a master computer within the bar or restaurant or to a central computer which controls many sites. In Minnesota control computers are linked to the Minnesota Gambling Control Board, which oversees all of the devices.

Legality[edit]

In 2010, approximately 20 states authorized and or licensed the use of pull tabs. The largest volume state in terms of dollar value sold is Minnesota.^[3] In some states, no pull-tab game may offer a single prize higher than a certain amount and/or may not cost more than a certain amount. For instance, in Indiana, pull tabs cannot cost more than $1 per play, and no single prize can be more than $599.^[4]

In Minnesota as well as some other states, pull tabs are offered nightly from vending booths often called jar bars. All of the tickets in a game (called a 'deal') are poured into a transparent container that has attached to it a 'flare' or poster that displays all of the winning symbol combinations, the quantity of winning tickets at each reward level, the name of the game, etc. Also attached to the container is a tally sheet that shows a potential player exactly how many of the 'major winners' (major winner is one equal to or above 50x the value of the price paid for the chance) remain in that particular game at a given time.

See also[edit]

References[edit]

1. ^ ^ab'Everything You Need to Know About Bingo and Pull Tabs'(PDF). Arrow International. p. 15.
2. ^'Computerized gaming device'. Joseph J. Richardson, Richardson Joseph J. 1990-11-20.Cite journal requires |journal= (help)CS1 maint: others (link)
3. ^'National Association of Fundraising Ticket Manufacturers'.
4. ^'Indiana Charitable Gambling'. Gambling-law-us.com. Retrieved 2018-01-24.