Information reporting of bingo, keno and slot machine winnings

Reporting of bingo, keno and slot machine winnings

The Treasury Department and IRS today released for publication in the Federal Register proposed regulations (REG-132253-11) concerning information reporting of winnings from bingo, keno, and slot machine play pursuant to section 6041.

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The proposed regulations [PDF 261 KB] concern information reporting of payments from winnings of $1,200 or more from bingo and slot machine play and $1,500 or more from keno.

In a related development, the IRS today released an advance copy of Notice 2015-21 [PDF 40 KB] as a proposed revenue procedure that, if finalized, would provide an optional safe harbor method for individual taxpayers to determine a wagering gain or loss from certain slot machine play

Background

Since 1977, when the current regulations governing information reporting of winnings from bingo, keno, and slot machine play were published, there have been changes in gaming industry technology. As noted in the preamble to today’s regulations, many gaming establishments now employ electronic slot machines and other mechanisms, such as player’s cards, that permit electronic tracking of wagers and/or winnings. Also, there have been changes in the tax information reporting regime since the late 1970s, such as the enactment of backup withholding and requirements for electronic filing of information returns, including the Form W-2G, Certain Gambling Winnings.

Current temporary regulations do not reflect either the changes in the gaming industry or in the tax information reporting regime. Accordingly, the IRS and Treasury have decided to update the regulations for reporting winnings from bingo, keno, and slot machine play in an effort to reduce burden and simplify reporting.

Proposed regulations

The proposed regulations retain a general rule from the temporary regulations that every person engaged in a trade or business who, in the course of its trade or business, pays reportable gambling winnings must make an information return with respect to such payments.

  • The proposed regulations clarify that, with regard to reportable gambling winnings, the term “persons engaged in a trade or business” includes not only those engaged in a trade or business for profit or gain, but also organizations whose activities are not for profit or gain—such as tax-exempt organizations and governmental entities.
  • The proposed regulations retain the threshold amounts for when winnings from bingo, keno, and slot machine play (other than electronically tracked slot machine play) will be treated as reportable gambling winnings—$1,200 or more in the case of one bingo game or slot machine play, and $1,500 or more in the case of one keno game (and not the $600 threshold that generally applies to other payments of fixed or determinable income).
  • The preamble to these proposed regulations states that the IRS and Treasury will continue to monitor the effectiveness of the existing (and proposed) reporting thresholds, and may propose to reduce the thresholds at a future time. Comments are specifically requested regarding the proposed reporting thresholds, including the feasibility of reducing those thresholds to $600 at a future time, whether electronically tracked slot machine play needs a separate reporting threshold, and whether the amounts need to be uniform for bingo, keno, and slot machine play.
  • The proposed regulations also include new rules for determining the reporting threshold for electronically tracked slot machine play that are intended to simplify reporting by allowing payors to leverage their existing technology and processes. Under the proposed rules, in addition to at least one single win of at least $1,200 during a session, the total winnings earned from electronically tracked slot machine play during a single session netted against total wagers placed during the same session must total $1,200 or more to trigger reporting.
  • The proposed regulations retain the requirement in the temporary regulations that a payor of reportable gambling winnings file a Form W-2G, Certain Gambling Winnings, or successor form, on or before February 28 (or March 31, if filed electronically) of the year following the calendar year in which the reportable gambling winnings were paid.
  • The proposed regulations address the rules for identifying the payee and for payee information. The proposed rules expand the type of acceptable identification to include a properly completed and signed Form W-9 to verify the payee’s identifying information.
  • The proposed regulations provide an alternative method for reporting multiple winnings from bingo, keno, and slots.
  • Concerning winnings from horse races, dog races, and jai alai, for which identical wagers are combined and offset against winnings to determine proceeds from the wager for purposes of determining whether the reporting thresholds are satisfied, the IRS and Treasury have indicated that they intend to amend the regulations that apply to winnings from these games in a manner consistent with these proposed regulations and have requested comments on this topic.

The proposed regulations are proposed to apply to payments made on or after the date the regulations are adopted as final in the Federal Register. A public hearing on these proposed regulations is scheduled for June 17, 2015.

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