dantaxman52
Level 1
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How would I report a gambling session loss of $1000 for a client who does not itemized when the client receives a form w2-g reporting $2000 in winnings for the same session?   It is is the only activity for the year.

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TAXOH
Level 11
Level 11
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It won't be deductible on the federal if they don't itemize.

IRonMaN
Level 15
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Using tax lingo, that would be known as a SOL loss.

ACME Taxes, Tatoos, Tires and Turtles (I've expanded my line of products to better serve you)
TaxGuyBill
Level 14
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You can "back it out" as a negative number on the "other income" line (use the amount of the winnings as a negative number, don't create a loss on the tax return).

As you pointed out, if there was no "session" gain, there there is $0 of taxable gambling income to report.  But the IRS wants to see that W-2G, so you need to enter that same amount as a negative number (I would call it something like "per-session gambling W-2G offset").

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Veronica
Level 2
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Could you show me how to do this ? I would be happy to pay a consultation fee. I have several customers that could benefit from this information and it was not common in my area until this year.. 

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PhoebeRoberts
Level 9
Level 9
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"Could you show me how to do this ?"

In Lacerte, Screen 14.1 Miscellaneous Income, 2nd section titled Alimony and Other Income, 2nd to last entry, "Other Income (Ctrl+E)." Use Ctrl+E or click on the button just to the right of that field to open up the detail box. Enter some sort of description (I use "Session Netting") and the amount (losses are negative amounts).

 

Screenshot 2021-02-02 093527.png

BobKamman
Level 14
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@TaxGuyBill  Don't both the W-2G amount and the session losses show up on the same "other income" line?  I'm not sure that IRS sees anything but the net amount, not the gross and the subtraction.  I would try to attach an explanation, not that anyone will look at it but it will be handy to copy and send in response to an IRS notice.  

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rbynaker
Level 11
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Was this slot machines or something else?  If slot machines, keep reading, otherwise I agree with the SOL treatment.

There's an IRS CCM from 2008 that may be relevant:

https://www.irs.gov/pub/irs-utl/am2008011.pdf

The IRS also issued a notice of a proposed revenue procedure in 2015 but (as far as I know) never actually finalized anything so I'm not sure it has much value:

https://www.irs.gov/pub/irs-drop/n-15-21.pdf

You may also want to read the Schollenberger case (and the associated references therein):

https://www.morrellawpllc.com/court-cases/schollenberger-v-commissioner-us-tax-court/

If you determine that session treatment is appropriate, I would report a negative "other income" item to offset the W-2g and attach an explanation referencing the cites above.

Rick

TaxGuyBill
Level 14
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I haven't reviewed things lately, but to me, the same rules are likely applied to other forms of gambling as well.  There may not be direct statements from the IRS or courts stating that, but when I read the IRS information and court cases, the 'reasons' for the sessions apply to other forms of gambling as well.

But I admit, it has been a while since I researched it.

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rbynaker
Level 11
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Could be, but there's not as much to hang your hat on.  The IRS planned to issue a revenue procedure with a safe harbor that specifically applies to slot play so that's a pretty good indication that they acquiesce to the court rulings with regard to slot play.  To me it's less clear that they would treat other gambling the same way but there's probably enough evidence to meet the reasonable basis standard.

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