Here's the story:

A holiday weekend trip to one of the nearby casino's, a nice dinner, and some slot machine play for fun. Suddenly, the bells start ringing, the lights start flashing, and you are sitting there wondering what just happened.

Next comes the slot attendant and out comes your driver's license and social security card. 

Questions begin in your mind: What is this? A IRS Form W-2G? Why are you giving me this right now? What do I do with this? Wait, I just won a jackpot!

I am seeing a rise in casual gambling audits (generally on unreported income audits) where taxpayers are not reporting their gambling winnings as income on their tax return. Let me lay out a few facts:

1. Gambling winnings, like most income, is subject to income tax.

2. When you receive a W-2G either at the casino or in the mail, do not ignore that form. It is reported to you AND to the IRS.

3. If you are more than a "casual" gambler who frequents casinos regularly, you should be keeping a win/loss log. You should also be "tracked" by the casino for their yearly win/loss report with a player's card or similar.

4. Just because you did not get a Form W-2G does not mean that gambling income is not taxable. 

Keep in mind that while you need to report gambling winnings, gambling losses TO THE EXTENT OF THOSE WINNINGS may be deductible if you itemize your deductions on your tax return. If you take the standard deduction on your tax return, you lose the ability to deduct those gambling losses.

If you receive a notice in the mail from the IRS regarding unreported gambling winnings, do not ignore it. Do not hide it from your spouse. Do not put it in your underwear drawer with your other important papers that you don't want to deal with!

Gambling income audits can be easily mitigated with proper documentation and explanation to the IRS.

Failing to report your winnings puts you on the defense--go on offense and make sure you are properly reporting the income and taking the allowable deductions you can.

GOOD LUCK AT THE CASINO!!!!