Bingo and Taxes
There is an old saying in the United States that was coined by founding father Benjamin Franklin: "In this world, nothing can be said to be certain, except death, and taxes." Most gamblers realize that this statement is just as true today as when it was first coined in the 18th century. All gambling winnings over a certain amount are subject to taxation by the Internal Revenue Service. In 2008, a couple who thought that the casino had paid the taxes they deducted from their bingo winnings found out the hard way that the IRS always gets its way. Gambling winnings and taxes are a source of concern for players of just about any game, from online bingo to video poker online.
In 2008, Miami residents John Ricone and Francys Tolon-Ricone played bingo at the Miccosukee Resort & Gaming Indian casino. The couple made two trips and won a total of $5,500. When the tribal casino paid them, they deducted about $1,500 for taxes. The Ricones say they got a very nasty surprise when they filed their 2008 tax return. The IRS informed them that the casino never remitted the $1,500 they had deducted from their bingo winnings. Not only did the tribe not pay the taxes, the Ricones are on the hook for back taxes plus interest. In early May 2012, the couple filed a lawsuit against the tribe.
The lawsuit has led to speculation that the tribe may be ripping off other winners. According to the Ricones' lawsuit, the couple won $2,961.66 in February 2008, and the tribe deducted $829.26 for federal income taxes. In July, they won $2,500, and the tribe subtracted $700 for taxes that were never paid, according to the lawsuit. The Ricones has produced their W-2Gs, returns for gambling winnings, as evidence in the case against the tribe. In 2010 the IRS said in a letter that the Ricones owed $1,621 with interest because the tribal casino had never remitted the taxed winnings in its own filings.
This is not the first time the Micosukees have been in trouble with the IRS. Over 100 tribal members owe the IRS just under $26 million dollars in unpaid taxes from casino payments. Billy Cypress, the former tribal chairman, owes the IRS $3 million after using tribal credit cards to go on a three-year, multimillion-dollar spending spree. The tribe is fighting with the IRS and claims that do not have to turn records over to the IRS because of tribal sovereignty. The tribe has filed lawsuits against their former lawyers, and claim that attorneys Dexter Lehtinen and Guy Lewis advised them that they did not have to pay tax on gambling winnings to the federal government. The question of "what gambling winnings are taxable?" is an interesting one, and there are many misconceptions about gaming taxation.
- Many people think "If I gamble on the internet, it's overseas and I don't have to pay any taxes." This is a blatant falsehood, and under US tax codes, all income is taxable - even winnings earned on the internet, in the US or overseas. Section 61(a) of the US tax code defines gross income as "all income from whatever source derived." This includes income derived from gambling. When dealing with the most powerful government agency, it is always best to be honest.
- Some online gamblers believe that "Since the government has no way of tracking how much I win, I won't report it and they'll never find out." This statement is partially true, but if you're ever audited, look out! If you are audited and the government finds any unreported income, you could face heavy fines, penalties, and interest payments, and if the IRS finds that you willfully evaded taxes, you could end up in a Federal prison. In addition, the government could seize all your assets and leave you and your family impoverished!
- Another misconception is "I don't have to claim the money until it is repatriated into the US." Many gamblers believe that if they leave their winnings in their overseas gambling accounts, they don't have to pay taxes until they withdraw their winnings. When you win any wager, online bingo game, poker hand or any other bet, you have earned gambling income, no matter where the bet takes place.
The bottom line is that it is never a good idea to play games with the IRS. If you think that because you didn't receive IRS form W-2 you don't have to report gambling income, think again! All gambling income is taxable. It is common practice for sites like BingoHouse to deduct taxes from large winnings. Trying to deceive the IRS can be very costly indeed.
Connect with author, Jeff Davis on Google+.