The IRS plans to lower the threshold on casino winnings
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The threshold on reporting and taxing casino wins has not been changed since its inception in 1977. At the time, the IRS decided that any customer winning more than $1 200 in slot machines or bingo, or over $1 500 at keno, had to pay taxes on their win. After so many years, it seems logical for the IRS to revisit that law and adopt it to 21st century standards. However, instead of moving the threshold up to follow inflation and higher jackpots being won, the IRS has decided it wants to lower it, moving it down to $600!
For the government agency, this would help them to better follow their citizens' wins and consequently diminish fiscal fraud. For us Canadian citizens however, this would represent a 30% deduction on more wins. It would mean, at least at the time they win, leaving more money behind. Considering most Canadian winners don't file to claim their money back, it would mean a lot more money for the IRS.
The American Gaming Association is not happy about the proposal. “This potential policy change could create additional burdensome and unnecessary reporting requirements for our industry,” Sara Rayme, senior vice president of public affairs for the American Gaming Association, told AGA members Wednesday.
As soon as a jackpot is won, the casino must stop the slot machine, fill the necessary paperwork, and pay the winner before play can resume on the slot machine. This is both time consuming and represents a loss for the casino.
The IRS believes the measure should not hinder the casinos too much, since more and more of the bookkeeping is done electronically.
One thing is certain for Canadian players: it would require more citizens to claim back their money from the IRS during income tax season. A $600 threshold is very low and, while there are some exceptions, there is no doubt that most players having won jackpots that low will have also lost amounts equal or greater than their win in the same year. This will represent a higher burden for the IRS, but it could be well worth their effort. For the players, it will still be possible to recuperate their money but they will have to leave it behind for a while, waiting for the start of the following year to file.
Anyone opposing the IRS view now has 90 days to respond to the proposals. No doubt the AGA will have an answer but the IRS will not necessarily have to consider their answer.
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