Whether you have some great online poker skills or you like to visit casinos in other states or countries on your weekends or vacations, you need to know how to deal with the taxes from your winnings. In particular, the winnings you get from online gambling can be tricky to report to the Internal Revenue Service (IRS). Here are some tips on properly dealing with the taxes that you owe from winning online gambling.
Who Has to Pay Taxes
All winnings from gambling are taxable. This includes cash prizes, material goods and experiences. This is true whether you gamble in a bricks-and-mortar casino or from the comfort of home at your computer or on your tablet. You have to pay taxes on your online gambling winnings even if the website is hosted by another country. Your gambling winning counts as a type of income, and you have to report it on your annual tax returns.
Which Online Gambling Winnings Are Taxed
All online gambling winnings are taxable. This includes if you win at online poker, raffles, horse races, a lottery, a slot game or something else. If your winning from a single game is more than $5,000, the company or website may mail you and the IRS a copy of Form W-2G. In some cases, the federal tax may be withheld for you before your winnings are paid to your account. When the entity withholds the taxes for you, the winnings are taxed at a flat rate of 25 percent. If you win a smaller amount or the taxes are not withheld on your behalf, you will owe 28 percent federal tax on your online gambling winnings.
Taxes on Gambling Winnings in Europe
If you win money through gambling in Europe, the tax situation gets tricky. The European Union stipulates that the supplier of the gambling is responsible for paying the tax. The tax is not actually on the amount that you win. Instead, it is a tax on profit or revenue. Who pays the tax also varies based on the type of online gambling you do. For example, an online pinball machine would incur a value added tax, but online poker would incur an income tax. If you gamble through a European website while in the United States, plan on paying taxes on your winnings to the IRS.
Reporting Gambling Winnings to the IRS
You are responsible for reporting an accurate listing of your gambling winnings when filing your income tax return with the IRS. You need to list each winning on the W-2G form. You can attach multiple hard copies of the form if you do your taxes on paper. Electronically, you can enter as many lines as you need to for each time you win money through online gambling. The winnings you get are reported as other income. If you win a lot of money through online gambling, you may have to begin filing quarterly estimated taxes with the IRS. This involves making quarterly payments based on your estimated income. When you complete the year’s tax return, you account for any discrepancies and pay any additional taxes that you owe or get a refund on any taxes that you overpaid.