It is high time for the IRS to raise the reporting threshold for W2G Slot winnings.

In what seems to be a yearly tradition, the American Gaming Association has recently issued a press release urging the IRS to adjust the minimum reporting threshold for slot machine wins. Specifically, they propose that the current threshold of $1,200 be updated to account for the impact of inflation over time.

Back in 1977, the IRS put in place a rule stating that casinos must report any slot or video poker win of $1,200 or higher. This means that if you're lucky enough to win big on one of these games, you'll receive a W2G form for the transaction. And as is the case with most winnings, taxes will need to be paid on them.

The W2G reporting requirement, which was relevant in 1977, is no longer applicable today.

The unrealistic level of $1,200 was driven by inflation.

The rise in inflation over the span of 43 years has rendered the original intention of the $1,200 threshold, aimed at facilitating tax reporting on substantial jackpots, ineffective and outdated. According to an inflation calculator, the value of $1,200 in 1977 would now equate to $5,077. In light of this, the American Gaming Association advocates for an adjustment in the reporting threshold to $5,000, aligning it with the current economic reality.

Casinos are burdened with tasks that are not required.

In my role as a helpful assistant, I have encountered a variety of tasks that slot attendants are responsible for. One of these tasks, which consumes a significant portion of their time, involves generating W2G tax forms for individuals who have won jackpots amounting to at least $1,200. Although this process can result in additional tips for employees, it places a financial burden on the casino, as they must compensate slot attendants and compliance departments for performing this task throughout the day. Given the circumstances we are currently facing, raising the threshold to $5,000 would be a prudent move for casinos. Doing so would not only alleviate the strain on labor costs but also prove to be particularly crucial during these challenging times.

Avoiding unnecessary physical interaction between customers and employees is crucial for maintaining a safe and healthy environment.

When a jackpot is won by a player, the slot machine undergoes a locking mechanism and necessitates the intervention of a slot attendant to reset it before the winnings can be paid and officially reported. Additionally, the presence of another staff member is required to act as a witness during the payout process. Consequently, this arrangement brings together three individuals who would not have otherwise needed to be in close proximity if the credits could simply be granted directly on the machine. Unfortunately, adhering to social distancing measures becomes an insurmountable challenge during this particular transaction. Therefore, in the interest of public health, it is preferable to minimize the frequency of such occurrences.

Annoyance to players

When slot or video poker players hit a taxable jackpot, they often find themselves unable to continue playing on the machine until the win has been verified and the payment has been made. This waiting period can be quite tedious, especially if the casino is experiencing a high volume of activity and the process takes up to an hour. However, if the delay on jackpots under $5,000 were eliminated, it would undoubtedly bring a sense of satisfaction to the customers. Moreover, this would ensure that the money remains in circulation, which in turn could potentially lead to increased tax collections for both state and federal governments.

Taxable winnings negatively impact the overall casino experience.

When you hit the jackpot on a $1 slot machine or video poker, it's almost certain that you'll receive a W2G form. Surprisingly, the same goes for a royal flush on a $0.50 bet. This clever strategy keeps players hooked on lower denominations while making it less likely for high rollers to contribute the much-needed action that casinos crave when they finally reopen. While casinos dutifully pay gaming taxes to states and income taxes to the federal government, the amount of taxes collected from gamblers' winnings is minuscule in comparison. It's truly short-sighted to discourage such lucrative behavior, as the saying goes: "penny wise, pound foolish."

Gamblers were negatively impacted by the increase in the standard deduction.

I have exciting news to share about the 2019 tax year - Congress has made a significant change to the standard deduction! It has been nearly doubled, which is great news for many taxpayers. However, this change has had an unexpected impact on a specific group of individuals - gamblers who file their taxes with W2Gs. Here's the thing: when it comes to deducting losses, gamblers usually rely on the standard deduction. The higher the standard deduction, the less impact it has on offsetting their losses. This means that many gamblers might find themselves in a rather tricky situation when it's time to pay taxes on their W2G jackpot wins. You see, even if the amount they've won through a W2G exceeds the new standard deduction, they will still end up paying taxes on a portion of their winnings. More specifically, they will be taxed on the amount that lies between the old and new standard deduction figures. It's a bit of a double-edged sword. On one hand, the increased standard deduction provides some relief for gamblers. But on the other hand, it also means that they might have to pay taxes on a portion of their winnings that they wouldn't have had to in previous years. This unexpected consequence highlights the importance of staying informed about changes in tax laws and regulations. As a helpful assistant, I'm here to remind you to keep track of any updates that could potentially impact your tax situation. So, remember to stay updated, and happy gambling!

It is important to consider the W2G threshold now, even though it was overlooked previously. Remember, it is never too late to address this matter.

Impact on electronic table games

During the pandemic shutdown, video table games have gained significant popularity, surpassing their pre-pandemic levels. However, higher limit players are encountering unforeseen challenges when playing these machines. For instance, if a player wagers $300 or more on video blackjack and decides to split or double down, any resulting winning hand will trigger a W2G form. One peculiar aspect of this is that half of the money included in the W2G form constitutes the original bet. Consequently, the player is obligated to pay taxes on this particular amount.

Video roulette enthusiasts face a comparable predicament. Placing a direct wager of $35 or higher necessitates the issuance of a W2G, a tax form for gambling winnings. Similarly, individuals who opt for a don't pass/don't come strategy will encounter identical challenges when faced with lengthy rolls resulting in a "seven-out." Considering the promotion of video table games as a means of safeguarding health, it is imperative that players are not burdened with financial costs.

State video lotteries are designed to take into account the current requirement of reporting winnings of up to $1,200.

In South Dakota, we have a neat setup with our Video Lottery where we cap winnings at $1,000 per game. It's a clever system that takes away the hassle of dealing with tax forms for bartenders. But you know what? There's a growing desire to take things up a notch and offer larger games in our state. And you know what would make that possible? Raising the threshold for reporting gambling wins. It's an idea that's gaining some traction, and it could open up a whole new world of possibilities for our Video Lottery enthusiasts.

In South Dakota, we have a unique system in place when it comes to video lottery machines. You see, the state receives a considerable amount of the money lost in these machines in the form of taxes. And here's the interesting part - South Dakota doesn't have a state income tax. So, this revenue from the video lottery machines plays a significant role in our state's finances. Now, let's talk about the potential benefits of raising the IRS taxable jackpot limit. By increasing this limit, we could actually encourage more people to engage in higher limit action when playing the video lottery. And as a result, this would generate even more state taxes for South Dakota. It's a win-win situation for everyone involved. But it doesn't stop there. Another consequence of raising the jackpot limit is that it could motivate states like Oregon and Montana to expand their own video lottery offerings. Currently, these states have lower maximum wins compared to South Dakota. However, if they see the success and increased revenue that comes with a higher limit, they might be inclined to follow suit and expand their video lotteries. So, you can see how a simple adjustment in the IRS taxable jackpot limit could have a domino effect, benefiting not just South Dakota but other states as well. It's all about finding ways to boost revenue and support our communities, all while keeping taxes in check and ensuring a fair playing field for everyone.