Do Self-Excluded Gamblers Need to Include Gambling Winnings on Their Tax Returns?

Posted on October 10, 2014

If you gamble at a casino and win, a casino can issue a Form W-2G to the winner depending on the game that was played and the amount of money that was won. The gambler is supposed to include the gambling winnings reported on the Form W-2G to the IRS on their Form 1040 tax return when it is filed.

Gamblers can self-exclude themselves from a casino by enrolling in a voluntary exclusion program, usually because of a gambling addiction. After a gambler enters a voluntary exclusion program, he or she is treated as a trespasser on casino grounds and is subject to arrest.

Further, if a gambler wins at the casino, the voluntary exclusion program requires him or her to surrender any jackpot or item of value won. Instead, the winnings are paid to the state to fight gambling addiction.

However, does a winning gambler who is enrolled in a voluntary exclusion program have to report this income on his or her tax return?

Fortunately, the answer is no. The IRS recently concluded in a legal memorandum that a gambler who is enrolled in a voluntary exclusion program does not have to include any winnings on his tax return if the winnings are paid to the state under a voluntary exclusion program.

Do you have an IRS problem related to gambling? Call us, we can help.