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Thursday
Jun262014

Win on the Triple Crown—and Pay Taxes!

Win on the Triple Crown—and Pay Taxes! from Sequence Media on Vimeo.

Tax attorney Rob Wood talks about gambling winnings and taxation, following up on his Forbes article “Big Winner In Triple Crown Bets? Hint: Not California Chrome.” Gambling winnings are always taxable.

 

Wood explains that there are a variety of mechanisms to make sure that gambling winnings are reported to the IRS. For example, “If you go to Las Vegas . . . and you win in a public setting,” there will be withholding and reporting. If you win a state lottery, there will be withholding. So in most instances, a taxpayer is protected from error by processes in place to make sure that tax dollars are deducted in advance and that the winnings are reported. But not always. IRS Publication 505 provides helpful information about gambling winnings and reporting.

But Wood also recommends that taxpayers keep good records so that losses can be deducted as an offset against winnings. His experience has been that many taxpayers who gamble are not diligent at recordkeeping, and they thus deprive themselves of a legitimate reduction in taxable income.

Wood also opines that big winners might be better served to take the big jackpot rather than the annuity. At the present, interest rates are not very good, so annuities may not perform as well as a lottery winner might hope.

For more information on the subject, please refer to Mr. Wood’s article in Forbes. Robert Wood is a tax attorney with Wood, LLP in San Francisco, California and spoke with The Tax Law Channel, an affiliate of The Legal Broadcast Network.  The Legal Broadcast Network is a featured network of the Sequence Media Group.

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