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Tax Advice for Casino Players: W2-G Handpay Jackpots, Filing as a 'Pro' and More
The feeling of stress and anxiety that comes when filing taxes can be overwhelming for anyone, but especially for casino players that hit slot jackpots or enjoy other high stakes gaming.
Everyone has a different opinion about how to file, and there are very few resources available that give gamblers peace of mind. That’s why I recently sat down with Ray Kondler of Kondler & Associates. Ray is a Certified Public Accountant based in Atlantic City and Las Vegas.
He’s also one of the top national experts on gambling taxes.
While Ray works closely with the World Series of Poker, he also serves slot and table players in all 50 states. In our fascinating conversation, Ray gave us the insider’s look at gambling taxes, keys for minimizing the chances of an audit, and tips for paying as little as possible… while staying within the bounds of the law, of course!
Here are the highlights from our great conversation. (You can also watch or listen to the full episode below.)
The First Thing Gamblers Should Know About Taxes
Want to protect yourself from an audit? Download our FREE Casino Player's Logbook to start keeping better records of your gambling activity.
Filing as a Professional Gambler
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How to Protect Yourself From a Tax Audit
Want to protect yourself from an audit? Download our FREE Casino Player's Logbook to start keeping better records of your gambling activity.
Comps and the IRS
Professional Help for Gambling Taxes
Want to protect yourself from an audit? Download our FREE Casino Player's Logbook to start keeping better records of your gambling activity.
The cards are always stacked in favor of the casino. Casinos exist for one reason, and one reason alone: to take your money. They do it legally, even if it's under cloudy circumstances.
Consider the case of an Alabama man who put $5 into an electronic bingo machine at the Wind Creek Casino in Montgomery, Alabama. The casino is on tribal land operated by the Poarch Band of Creek Indians. To the gambler's amazement, 'several noises, lights, and sirens were activated' when the machine announced that Jerry Rape had hit The Big One. The bingo machine indicated a jackpot of $459,000, then $918,000, and finally settled on a 'payout multiplier' of $1,377,000, according to the gambler's lawsuit.
The casino took Rape's payout ticket and made him wait for about 24 hours before saying no dice. He wasn't getting the monster payout. The machine, he was told by the tribe's casino, had 'malfunctioned.' (PDF)
It gets worse
Indian Casinos Not Paying Jackpots
The gambler sued the casino in the tribal court of the Poarch Band of Creek Indians. But the suit was dismissed. The court declared that sovereign immunity prevailed—that the tribe was an independent nation and immune from being sued.
'They said they were immune to any kind of fraud that I made in the complaint,' the gambler's attorney, Matt Abbott, told Ars in a telephone interview. 'They said rules don't apply to them, [and] 'have a nice day.'
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Unable to lodge a claim in tribal court, Rape rolled the dice with Alabama's state courts and sued the tribe there. On Friday, seven years after Rape thought he had hit the jackpot, the Alabama Supreme Court ruled that Rape could not sue the tribe in state court—the proper venue was tribal court. That's because the Poarch Band of Creek Indians is a nation of itself, and that's where disputes occurring on that land should be litigated, the court found.
The Alabama high court noted that it found itself in a 'Catch-22' of sorts. It said it couldn't decide the dispute even if the tribe wasn't entitled to sovereign immunity.
'The activity out of which Rape's claim arose, however, was gambling. If it occurred on land within the regulatory and adjudicative jurisdiction of the State of Alabama, that activity was illegal. Specifically, that land is located in Elmore County and, therefore, is not located in one of the counties in Alabama where even the game commonly and traditionally known as bingo is permitted,' the court ruled. (PDF)
It is well established that this Court will not aid a plaintiff seeking to recover under an illegal contract but, instead, will simply leave the parties where it finds them.
This is the third time we've seen a gambler hit an enormous jackpot only to be told that it won't be paid because the jackpot was a result of an electronic 'malfunction.'
Meanwhile, the Alabama gambler's attorney, Abbott, told Ars that his client's legal avenues have now been exhausted. 'It's over,' he said.
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The tribe said the Alabama high court did the right thing. 'We are pleased that the Court affirmed the ruling in favor of the Tribe,' spokeswoman Sharon Delmar said.