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Rob Heidrick

IRS Proposes Lower Threshold for Taxing Casino Winnings

by Rob Heidrick | Dun & Bradstreet Editor

May 18, 2015 | No Comments »

Slot-machine_1100pxUS casino operators are pushing back against a proposal by the Internal Revenue Service to reduce the threshold at which gamblers must report slot machine, bingo, and keno winnings for tax purposes. Under current law, casinos must require customers to fill out IRS paperwork when they win $1,200 or more in one day, but the proposed policy would lower that limit to $600. Analysts estimate that the lower threshold could result in three to five times as many taxable jackpots, increasing a casino’s annual costs by as much as $500,000, according to Law360.

The $1,200 threshold was put in place in 1977 and has never been adjusted for inflation; if it had been, the limit would be more than $4,600 in current dollars.

The gaming industry contends that the additional reporting burden would require operators to hire more employees to process paperwork, notify guests of rule changes, and handle more disputes over the accuracy of reported wins and losses for the day, Casino Journal reports. Many casinos would also need to overhaul their player tracking systems, which were primarily designed as loyalty programs rather than financial record-keeping tools.

The lower limit would likely lead to more frequent downtime at slot machines, which automatically lock up when a player hits a jackpot that exceeds the IRS threshold to give casino staff time to certify the win and complete the required paperwork. Longer periods of inactivity mean more lost revenue for the casino, and the industry argues that these interruptions and other inconveniences could deter some guests from visiting casinos altogether.

The change could also have an impact on tax revenues for states that allow gambling. Lawmakers in Massachusetts voted to increase the state’s threshold for reporting slot winnings from $600 to $1,200 in April after casino groups lobbied the Massachusetts Gaming Commission to match the federal standard. Gaming industry analysts interviewed by Law360 estimate that the state could gain $14 million-$15 million per year in additional tax revenue by raising the limit.

The IRS is gathering public feedback on its proposal and will hold a hearing on the issue in mid-June. If the new limit is approved, casino operators may need to adjust their budgets to account for additional staff and technology expenses.

For more insights on gaming industry trends and challenges, check out the First Research industry profile.


Related article: Why Casinos Are Struggling to Contain Costs


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