Q. I filed the 1040 for 2009 and had gambling winnings of $2,500.00 but I lost that much and more so I did not put the winning on my return. Now I get a notice from IRS wanting $625.00. I did get a w-2g and I filed the short form, no itemized deductions. Do I owe the IRS since I lost more than I won?
A. Bad news. It sounds like you owe the money. Unfortunately, while you must claim all gambling winnings on your return, you can only deduct your losses if you itemize. So, if you’re not filing a Schedule A, you cannot deduct your gambling losses. For 2009, the standard deduction is $5,700 for an individual taxpayer and $11,400 for married.
“Casual gamblers” (in other words, nonprofessional gamblers) must report winnings on line 21 (other income) of a form 1040.
There are some additional rules with respect to gambling losses. You must be able to document your losses by type of loss, date, name and location of the gambling establishment and amount. You will need records of your losses. In addition, you cannot deduct more in losses than you report in winnings; even though you stated you lost more than you earned, your actual deduction is limited to the smaller of the two.
More bad news… you can most likely expect a notice from the state wanting their share.
Larry Kopsa CPA
