26.7 Withholding on Gambling Winnings

Gambling winnings are generally reported by the payer to the IRS and to the winner on Form W-2G if the amount paid is $600 or more and at least 300 times the amount of the wager. The payer has the option of reducing the amount paid by the wager in applying the $600 test. Different reporting rules apply to winnings from poker tournaments, keno, bingo, and slot machines. Poker tournament winnings are reported on Form W-2G if they exceed $5,000, reduced by the wager or buy-in. Keno winnings are reported on Form W-2G if they are $1,500 or more, reduced by the wager. Winnings from bingo or slot machines of $1,200 or more, not reduced by the wager, are reported on Form W-2G.

Caution

Backup Gambling Withholding

Winnings from bingo, keno, and slot machines are not subject to income tax withholding. However, if your slots or bingo winnings are $1,200 or more, keno winnings are $1,500 or more, or tournament poker winnings are $5,000 or more, and you do not provide a taxpayer identification number, the payer will withhold tax at the 28% backup withholding rate (26.11) on the winnings reduced, at the payer’s option, by the wager.

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Your winnings from gambling are subject to 25% withholding if your winnings minus the wager exceed:

If your winnings exceed the $5,000 threshold, 25% withholding applies to your gross winnings less your wagers, and not just the amounts over $5,000. Any withholdings will be shown on Form W-2G.

The IRS requires you to tell the payers of gambling winnings if you are also receiving winnings from identical wagers; winnings from identical wagers must be added together to determine if withholding is required.

If you have agreed to share your winnings with another person, give the payer a Form 5754. The payer will then prepare separate Forms W-2G for each of you.