Talking Tax: Can I deduct the expenses of my winning Vegas trip?

Q: My wife and I went to Las Vegas recently and actually won some money (for the first time ever). I assume we will be required to pay tax on this, but can we deduct the cost of our trip to offset the income?

A: Congratulations on being a winner! It sounds like you won enough to pay for your trip, and then some. And yes, you are correct that the United States Treasury will want to share in your gaming success by making you pay taxes on the winnings. In fact, you may have received a Form 1099-G from the casino reporting the winnings to the IRS.

Generally, all gambling winnings, prizes, awards, and found treasures are considered taxable income. So whether your good fortune was from your trip to Las Vegas, winning big on The Wheel of Fortune, winning the lottery or local charity raffle, or finding buried gold coins, the new found wealth must be reported as Other Income on line 21 of your tax return.

The Tax Code plays a game with gambling losses called “heads, we win; tails, you lose.” If you go to Vegas and lose, the IRS is happy you had fun, but won’t let you deduct any of your losses. On the other hand, if you come back a winner, your winnings are taxable and you are allowed to deduct gambling losses on your return only up to the amount of your winnings. The catch is that the losses are deductible as Miscellaneous Itemized Deductions on Schedule A. These deductions are not subject to the two percent of adjusted gross income limitation, but they are potentially subject to limitations if your income is over a certain threshold. So your gambling losses are limited and may not offset all your income. You can’t directly offset your winnings and losses.

Obviously you will need to keep a good record of your gambling activity, including all receipts, Forms 1099-G, and other documentation. The IRS recommends that you keep a diary of your activity and carefully segregate your winnings from your losses.

As far as your trip to Las Vegas, I am afraid the IRS would frown upon taking that expense as a deduction. The travel expense is not a gambling loss, and I doubt an IRS agent could be convinced that the trip was somehow business related.

Of course if you are a professional gambler the rules are quite different. But I am assuming you have a real job not related to gambling. And that is probably a good thing since you did say this was the first time you have ever come home a winner. So enjoy the winnings, but save 30% or so of that money for Uncle Sam.

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Q: I filed my tax return before April 15th, but I still have not received my refund. How can I check on what is going on?

A: Most tax refunds show up within 10 to 21 days if you e-file your return, but there are a number of reasons refunds can be delayed. Paper filed returns always slow the process considerably – by weeks.

Your first step is to go to www.irs.gov and click on the “Get Your Refund Status” link near the top center of the page. You will need your Social Security number, filing status (single, married filing joint, etc.), and refund amount. Once this information is entered you will receive a message offering information on your refund.

Occasionally the IRS holds up a refund due to taxes owed from prior periods, review of income or deductions reported, or other administrative matters. And very occasionally a refund just gets locked up in the IRS computers. Consequently, if you don’t receive a satisfactory answer from the IRS website you will need to call and request further information.

You can also check the status of your Idaho refund by going to http://tax.idaho.gov/ and clicking on the “Check your refund status” link. Again you will need your Social Security number and the amount of your expected refund to get the information.

The IRS is actually pretty good about getting refunds out and eventually you will receive the money you are due. Just once in a while they need a gentle nudge.

To ensure compliance imposed by IRS Circular 230, any U.S. federal tax advice contained in this article is not intended or written to be used, and cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed by governmental tax authorities. The answers in this column are meant to offer general information. You should consult your tax adviser regarding the specifics of your situation. Peter Robbins is a partner in the Boise office of CliftonLarsonAllen LLP, specializing in tax matters for small businesses, individuals, and trusts and estates. Have a question for Robbins? Email your question to [email protected]. Enter “Talking Tax” in the subject line.