The U.S. Internal Revenue Service (IRS) has recently published proposed changes to the tax information reporting policies observed by casinos. The changes include the reduction of reporting threshold for gross casino winnings down to $600 or more, to replace the previous $1,200 or more, for slot and bingo payouts and $1,500 winnings from keno games.
The IRS made it clear though, that the rule for all winnings derived from gambling remains taxable and must be included in a taxpayer’s income tax return. The proposed threshold changes pertain to reporting requirements of casino operators in connection with the obligation to report amounts paid out as winnings to casino customers. The purpose of which is to simplify reporting processes in order to reduce the burdens posed by existing tax information reporting requirements, whilst maintaining balance in the fulfillment of measures pertaining to compliance risk.
The American Gaming Association (AGA) commented that some of the proposed changes introduced by the IRS, such as the introduction of the single-day reporting for a customer’s multiple reportable gambling income could prove to be helpful to operators. However, the AGA contends that the reduction to $600 of the reporting threshold limit for all winnings paid to customers, poses some serious concerns on the part of casino operators.
A spokesperson for the AGA explained that a slot machine is programmed to lock up whenever a player hits a jackpot, because the machine has to be reset and the required IRS forms have to be accomplished. During those instances, the affected machines will not be available for play and therefore resulting to potential loss of revenue that could have been derived from wagers placed by would-be players. The AGA asserts that the proposed reduction of the reporting threshold for winnings could eventually bring about losses in gaming revenues not only for casino operators but also for the state.
According to the U.S. Treasury Department, the IRS regulations for reportorial requirements regarding winnings from slot machines, bingo, and keno necessitate updating in view of the subsequent changes and technological developments that transpired over the years, since the introduction of tax reporting requirements in the late 1970s. Consequently, the Temporary Income Tax Regulations under Section § 7.6041-1 do not take those changes and developments into account.
Under the current reporting system, determining the amount of winnings paid to keno game winners requires the reduction of the amount wagered by players in that game, which also satisfies the matter of reporting the wagers that represent the turnover or revenue gained by casinos. However, for bingo and slot machine play winnings, casino operators are not required to deduct the amount wagered by players because back then, the IRS did not have sufficient data for determining if such a requirement is feasible.
The IRS cites the advancements in technology that enable operators and players alike to track wagers and winnings, which eliminate the compliance concerns that had prompted the institution of higher reporting thresholds four decades ago. The introduction of the backup requirements for electronic filing of tax information returns, and the submission of IRS Form W-2G are other examples of changes cited by IRS. Apparently, the IRS believes that reducing the threshold for reportorial purposes will not adversely affect casino operations, since almost everything can now be tracked electronically. Nonetheless, the Federal Treasury Department and the IRS are requesting submissions for hand-delivered or electronically transmitted written comments through June 02, 2015, pertaining to topics outlined in the Federal Register.