I.R.S. To Target Penny and Nickel Slot Machine Players With Lower Reporting Requirements
Jim and Joyce Matthews of Fayette County have had the good fortune of winning slot machine jackpots of $1,200 or more — that's a large enough amount to alert the casino to impose the IRS requirements to force employees to complete an IRS form, called a W2-G, to document the cash payout before forking over the cash.
Other fans of slot machines, such as Dick and Dolores Derbis of Shaler haven't had that honor, but they share the same feelings that their luckier counterparts feel: The IRS should reject a proposal to force casinos to report
slot payouts as low as $600.
“It's a terrible idea to change the threshold,” Jim Matthews says.
“We don't think that's fair,” Dolores Derbis says. “They don't ask how much you've lost.”
Casino representatives agree, arguing that the extra paperwork would increase their costs unnecessarily and reduce the amount of time players spend at machines.
As of now, The Internal Revenue Service is simply taking comments on the new proposal. The complete proposal is outlined in the March 4 Federal Register. The IRS is definitely considering a reduction in the threshold that has been established since 1977. The agency contends that advances in technologically in the gaming industry over the last 38 years and that other businesses must report payments of $600 or more in a tax year as the primary reasons. The lower reporting amount would also include any bingo or keno payouts that exceed $600.
The director of slot operations at Meadows Casino in Washington County, Michael Jankoviak, explains that the lower threshold would involve the massive job of completing thousands more W2-Gs each week. With the $1,200 minimum, Meadows averages 3,000 to 4,000 W-2 G's every month. With a $600 minimum, he estimates that that number would jump to 20,000 to 25,000 per month. The process generally requires about eight to 10 minutes now, he says, but players would have to wait closer to 30 minutes with the $600 limit and current staffing levels. There's no word yet if the new reporting requirements would also include the gathering of more personal information.
The lower threshold would “create unnecessary paperwork and undermine the customer experience,” says Chris Moyer, media relations director for the American Gaming Association, which represents the casino industry. Casinos would lose revenue as machines are locked up while the IRS forms are completed. State and local governments that reap taxes from slots would see less money as well, he says.
A March 9 analysis by Credit Suisse gaming analyst Joel Simkins says the proposal would have “real impact” on Pennsylvania and West Virginia, which each take more than half of casinos' slot revenue.
Simkins says the proposed change could cost Pennsylvania casinos about $7 million a year; nationwide, he puts the average cost at about $530,000 per year per casino.
“While $530,000 per casino is not game changing, the impact on a portfolio of 20-30 casinos begins to add up,” Simkins writes. “In the case of the requirement to service more jackpots, this reduction in revenue would come with an increase in labor, a double-negative.”
Pointing to inflation since the $1,200 level was established, Moyer says some reports suggest raising the W2-G threshold to $4,500 instead of lowering it.
The IRS proposal would allow players to report aggregate wins for a single playing session. A W2-G would be required when two conditions are met: a player's winnings exceed the limit, currently $1,200, and the player has won a jackpot of $1,200 or more. Simkins calls that plan a “slight positive” because it would apply mainly to high rollers.
By law, taxpayers are supposed to report all gambling winnings — even a few dollars won in an office pool — as income. Few adhere to that. Because each W2-G goes to the IRS as well as the jackpot winner, tax experts advise recipients to be sure to include those winnings on their returns. Gambling losses are a deduction for those who itemize, but losses cannot be more than winnings.
“If you are unable to itemize, you must pay taxes on the entire jackpot even if your losses are greater than your winnings,” Jim Matthews says. “If they change the threshold to $600, they should also change the deduction process. You should be able to deduct all losses before you have to pay taxes on winnings.
“I'm sure anyone who's ever won a jackpot would agree.”
Read more: TribLive
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