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IRS wants to change rules

9 July 2015

The IRS requirement that winners of jackpots of $1,200 or more on electronic games sign a form W-2G before the casino can make payment has been with us since 1977. It affects big players far more than the low rollers.

Now the IRS is floating proposed changes that would affect more players, more often. In addition to the jackpot requirement, the IRS would have casinos use player tracking data to generate tax forms for any player who accumulated $1,200 in winnings above losses in one day.

That would bring some additional tax forms, but by far the more drastic change is a proposal to lower the W-2G threshold to $600. That could triple the number of tax forms required.

Players are responsible for taxes on casino winnings at any level, but it’s long been on the honor system for anything less than a $1,200 jackpot. Slot and video poker players make hundreds of bets per hour, often at high-house edge games. Winnings tend to dissipate over the course of a gambling day.

From a player perspective, a move to lower the threshold is backward. Today’s $1,200 jackpot has the buying power $306 did in 1977. To get the buying power $1,200 had in 1977, it takes $4,709 in today’s dollars.

There’s also been an uptick in bet size in the last 38 years, and it’s not uncommon for a winner of an IRS-sized jackpot to lose money for the day. In 1977, nearly all electronic games were three-reel slots, mostly with one payline. Quarters were the most popular denomination, with some dollars and some nickels. A $1,200 jackpot was a big, big event.

Today, on video slots with 30, 40, sometimes 100 paylines, even a penny player can wager more than a quarter or dollar player betting the max could in ’77. Wager size is not deducted from jackpot amount before a tax form is required. At the extreme, that gives us situations like the player who wrote that he received a W-2G after a $1,240 win at electronic roulette. He wagered $745, and what was left after taxes barely covered the cost of another bet.

For big bettors who play the five-coin max on $5 video poker, games such as Double Bonus Poker, Double Double Bonus Poker and others pay at least $1,250 on any four of a kind. Such games average an IRS-sized jackpot better than once per hour. A $1,250 coin payoff is equivalent to 250 bets, less than half an hour’s worth of play at an average speed of play. Losing money for the day despite multiple W-2G jackpots is part of playing the game at that level.

And from a casino perspective, there are all kinds of pitfalls. Locking games until players sign tax forms means time when the games aren’t open to make money. Some operators have said a requirement to track cumulative winnings in real time would mean expensive upgrades to player tracking systems.

There’s also the probability some players will decline to use or sign up for player tracking cards if they know data is being turned over to the IRS, and that would cost the casino valuable marketing data. Some players will track themselves and stop playing, or stop using the cards, if cumulative winnings get close to the threshold.

There is no national casino players lobby, and player opinions aren’t likely to be central to this debate. Whether the regulations are changed is likely to come down to how effective the casino industry’s objections can be in countering the IRS’ desire to generate more revenue.

Look for John Grochowski on Facebook (http://tinyurl.com/7lzdt44) and Twitter (@GrochowskiJ).
Recent Articles
Best of John Grochowski
John Grochowski

John Grochowski is the best-selling author of The Craps Answer Book, The Slot Machine Answer Book and The Video Poker Answer Book. His weekly column is syndicated to newspapers and Web sites, and he contributes to many of the major magazines and newspapers in the gaming field, including Midwest Gaming and Travel, Slot Manager, Casino Journal, Strictly Slots and Casino Player.

Listen to John Grochowski's "Casino Answer Man" tips Tuesday through Friday at 5:18 p.m. on WLS-AM (890) in Chicago. Look for John Grochowski on Facebook and Twitter @GrochowskiJ.

John Grochowski Websites:

www.casinoanswerman.com

Books by John Grochowski:

> More Books By John Grochowski

John Grochowski
John Grochowski is the best-selling author of The Craps Answer Book, The Slot Machine Answer Book and The Video Poker Answer Book. His weekly column is syndicated to newspapers and Web sites, and he contributes to many of the major magazines and newspapers in the gaming field, including Midwest Gaming and Travel, Slot Manager, Casino Journal, Strictly Slots and Casino Player.

Listen to John Grochowski's "Casino Answer Man" tips Tuesday through Friday at 5:18 p.m. on WLS-AM (890) in Chicago. Look for John Grochowski on Facebook and Twitter @GrochowskiJ.

John Grochowski Websites:

www.casinoanswerman.com

Books by John Grochowski:

Winning Tips for Casino Games

> More Books By John Grochowski