Us Tax Recovery Casino Winnings
- Us Tax Recovery Casino Winnings 2019
- Us Tax Recovery Casino Winnings 2018
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U.S. Gambling Tax Recovery
Nonprofessional gamblers report winnings as “other income” on line 21 of their tax returns. Gambling losses are deductible only to the extent of gambling winnings and are reported as itemized deductions on Schedule A that are not subject to the 2%-of-adjusted-gross-income threshold; therefore, deductions for gambling losses are not among the miscellaneous itemized deductions suspended. US Tax Recovery professionals will obtain a casino tax refund on your behalf. They will get back all or part of the taxes you paid on your gambling winnings. You don’t need to worry about confusing forms and documentation requirements, as US Tax Recovery will complete and file all the necessary forms for you.
Author: Brad Howland
First Posted: Jan. 2, 2007
Canadians who gamble in the United States may find that 30% of their winnings are withheld to cover U.S. non-resident's tax. Under certain circumstances, this tax can recovered by filing a U.S. tax return.
The IRS requires casinos and other gambling establishments to withhold 30% of the gambling winnings of Canadian visitors to the U.S. However, if you also have U.S. gambling losses during the year, it is possible to file a 1040NR return, deduct those losses from your winnings, and receive a refund of the tax withheld. You must have received 1042-S forms (or W-2G forms) from the gambling establishments showing income and tax withheld, and you must be a U.S. non-resident, for this procedure to work.
You must also have records to substantiate your losses. The IRS provides the following guideline on their website: 'It is important to keep an accurate diary or similar record of your gambling winnings and losses. To deduct your losses, you must be able to provide receipts, tickets, statements or other records that show the amount of both your winnings and losses.'
Your diary should record the date, location, and type of your gambling activities, as well as amounts won or lost. These records do not have to be submitted with the tax return, but must be available if requested by the IRS.
If you have winnings from blackjack, baccarat, craps, roulette, or big-6 wheel, and the casino gave you Form 1042-S showing that tax was withheld, you don't require gambling losses to claim a full refund of the tax.
The tax refund is obtained by following two basic steps:
1. Obtain an ITIN Number
If you do not have a U.S. Individual Taxpayer Identification Number (ITIN) you need to apply for one by submitting Form W-7 to the IRS along with your tax return. The application process requires you to submit certain documents as proof of identity and foreign status:
IRS has streamlined the number of documents the agency will accept as proof of identity to obtain an ITIN. There are now 13 acceptable documents.
An original, or a certified or notarized copy, of an UNEXPIRED passport is the only document that is accepted for both identity and foreign status. If you do not have a passport, you must provide a combination of current documents that contain expiration dates - we accept docs issued within 12 months of the application if no expiration date is normally available. The documents must also show your name and photograph, and support your claim of foreign status.
IRS will accept certified or notarized copies of a combination (two or more) of the following documents, in lieu of a passport:
- National identification card (must show photo, name, current address, date of birth, and expiration date)
- U.S. driver's license
- Civil birth certificate
- Foreign driver's license
- U.S. state identification card
- Foreign voter's registration card
- U.S. military identification card
- Foreign military identification card
- Visa
- U.S. Citizenship and Immigration Services (USCIS) photo identification
- Medical records (dependents - under 14 years old - only)
- School records (dependents and/or students - under 25 years old - only)
(Source)
Naturally, you probably don't want to send original copies of your documents to the IRS. Although it possible to send certified or notarized copies, there is a catch: copies must be certified by the 'issuing agency or official custodian of the original record,' or 'notarized by a U.S. notary public legally authorized within his or her local jurisdiction to certify that the document is a true copy of the original.' For Canadian residents who don't want to travel to the United States just to find a notary, U.S. notaries public are available at U.S. embassies and consulates in Canada.
In our practice we have used the notary services available at the Vancouver Consulate General, with good success and a reasonable turn-around time. However, it may be more convenient for you to drop into the nearest Canadian passport office and have them make a certified copy of your passport. At the time of this writing, it is free and seems to take about a week to get ready.
Alternatively, if you don't want to go through the somewhat onerous process of applying for an ITIN by yourself, you can use an official IRS 'Certifying Acceptance Agent.' An Acceptance Agent is authorized by IRS to assist individuals in obtaining ITINs, and will probably charge a fee for the service provided. The IRS posts a list of Acceptance Agents on it's website. The list is updated quarterly, and many are located in Canada.
2. Prepare the 1040NR Return
ITIN applications on Form W-7 are required to be submitted to the IRS with the tax return as an accompanying attachment, along with the necessary original, certified or notarized documents (as above). Your package is sent to the Austin, Texas mailing address at:
Internal Revenue Service
Austin Service Center
ITIN Operation, P.O. Box 149342
Austin, TX 78714-9342
In general you can expect it to take at least three-four months to process your return and refund. It is acceptable to file 1040NR returns and claim refunds for the previous three years. We provide Form W-7 and 1040NR preparation services for $300, plus 12% HST and shipping.
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IRS Tax Topic 419
Gambling Income and Expenses
Las Vegas is one of the favorite destinations of foreign nationals visiting the USA. If the luck strikes, these foreign nationals can win thousands of dollars at casinos. Nonresident aliens or foreign nationals visit the USA for a short time so most of the time foreign nationals are confident about leaving the USA with the entire amount of gambling winnings. However, the IRS has its own set of rules. Nonresident alien might be subject to 30% tax on gambling winnings so it is essential to understand the IRS regulations in regards to gambling winnings tax.
This is an email from one of our clients, a foreign national visiting the USA. “I visited the USA in 2012 for 1 month. Specifically, I was in Las Vegas and won $200,000 at the casino. I cannot even describe how happy I was. However, the casino refused to pay me the entire amount of gambling winning. Moreover, I was assessed 30% gambling winnings tax. I will appreciate if you can clarify whether I can claim this money back. I do not think that gambling winnings tax was legitimate in my case.”
The above situation is quite common. Casinos follow the IRS guidelines, however, there are several ways to avoid or to minimize gambling winnings tax on foreign nationals.
Us Tax Recovery Casino Winnings 2019
IRS Rules and Gambling Winnings Tax on Foreign Nationals
There are several scenarios that might happen.
Foreign Professional Gambler and Gambling Winnings Tax
Las Vegas is famous for hosting professional poker tournaments and other gambling events. Consequently, foreign professional gamblers can win millions of dollars by participating in these events. If foreign nationals or nonresident aliens are engaged in a US trade or business at any time during the year, then they are taxed at regular US rates. Moreover, the US net taxable income is calculated as a difference between US gross income and all applicable deductions. Pending particular circumstances, these foreign professional gamblers will fall into the category “engaged in a US business”. As a result of it, they will not be subject to 30% withholding gambling winnings tax. However, each situation is unique so it is important to analyze specific circumstances.
A taxpayer can be treated as engaged in a US trade or business if their activities in the US are continuous, regular and substantial rather than sporadic or isolated. If it is considered from the context of gambling, this would mean that the non-resident alien (NRA) is inside of the US often enough to be treated as engaged in gambling activity on a regular basis. The NRA would also have to be in the US long enough to be treated as a resident, and subject to the US tax on worldwide income. This fact is determined by using the substantial presence test, where your physical presence inside of the US is evaluated over a 3 year period.
It may also be possible to obtain the professional gambler status if you were in the US only a few times in the year, if the gambling activity involved a significant amount of money. In this circumstance the quality of the type of gambling could outweigh the quantity, allowing you to be considered a professional gambler for US tax purposes.
Your ability to be able to file a tax return as a professional gambler will make a significant difference in the outcome of your tax due. Winnings can be be offset by your losses, and the net gains are taxed at a graduated tax rate. At the graduated rate you may find that the tax rate imposed is substantially less than the 30% rate imposed by the withholding system. Whether or not you are able to receive this financial benefit on your tax return will depend on how the facts submitted to the IRS are interpreted. So a proper guidance from an expat tax CPA is suggested.
Foreign Nationals and 30% Withholding Gambling Winnings Tax
Foreign nationals with US gambling winnings by accident face a different story. These foreign nationals will be subject to 30% income tax rate or lower tax treaty rate because this income is not effectively connected with US trade or business. Some types of gambling winnings are exempt from this tax. Per the IRS regulations the list includes the following games: blackjack, craps, baccarat, roulette or big six wheel.
Foreign Nationals, Tax on Gambling Winnings and US Tax Treaties
The USA signed an income tax treaty with various countries. Several of these income tax treaties have a provision for the gambling income.
There are select countries which have a tax treaty with the United States (US) that will reduce the 30% withholding tax on gambling proceeds. If you are a resident of one these treaty countries, you only need to present a form to the casino that will prevent any withholding tax from being applied.
The nationals of the following countries are exempt from US income tax on gambling winnings.
- Austria
- Belgium, Bulgaria
- Czech Republic
- Denmark
- Finland, France
- Germany
- Hungary
- Iceland, Ireland, Italy
- Japan
- Latvia, Lithuania, Luxembourg
- Netherlands
- Russia
- Slovak Republic, Slovenia, South Africa, Spain, Sweden
- Tunisia, Turkey
- Ukraine, and the United Kingdom
The form that you need to present is W8-BEN. This form will assist you in claiming the treaty benefits along with your Individual Taxpayer Identification Number (ITIN).
If a a tax was withheld on your gambling earnings, you do have the option of filing a US tax return and request the IRS for a refund. In order to do so, you will need to file Form 1040-NR, once the tax year has been completed.
How to claim a tax treaty rate on gambling winnings of foreign nationals?
Foreign nationals must file the IRS Form 1040NR to claim a tax treaty rate and to minimize the amount of gambling winnings tax. Some other countries have a lower tax treaty on gambling winnings too.
Us Tax Recovery Casino Winnings 2018
Conclusion
Foreign nationals with gambling winnings are suggested to contact an expat tax CPA that specializes in working with nonresidents with US interests. There are several ways to minimize US gambling winnings tax so it is important to review each individual situation with an expert. International tax experts at Artio Partners are pleased to assist foreign nationals with US interests.