IRS Tax Reporting Obligations for Casino Gambling Winnings

Casino Gambling Winnings and IRS Tax Information Reporting Obligations 

Casino gambling winnings are considered to be taxable in the United States, and must be reported to the Internal Revenue Services (IRS). This applies to various forms of gambling winnings, including money won from slot machines, table games, and even game shows.

The IRS mandates specific tax reporting obligations for casinos related to payments to winners, covering required Tax Identification numbers, name and address and or Documentation (form W-9 and W-8’s), as well as where applicable Withholding obligations and of course mandatory Tax Reporting.

IRS rules for documentation, withholding and reporting can be complex and nuanced, especially when considering that individual states can have varying obligations.

Casino Documentation Obligation

If it transpires that winners are over the IRS reporting threshold, it is best practice for casinos to collect a completed tax form from the players prior to the payment of winnings. The purpose of the tax form is to fulfil a casinos obligation to obtain a person’s correct Taxpayer Identification Number (TIN) or Individual Taxpayer Identification Number (ITIN) name and address.

Taxpayer Identification Number (TIN) & Individual Taxpayer Identification Number (ITIN)

A TIN is an identification number used by the IRS in the administration of tax laws for a number of tax reporting purposes. A ITIN is a type of TIN used by IRS, most commonly used by US individuals who do not have an SSN or are not eligible to obtain one, or Nonresident alien who is required to file a U.S. tax return, a U.S. resident alien who is (based on days present in the United States) filing a U.S. tax return, a Dependent or spouse of a U.S. citizen/resident alien, a Dependent or spouse of a nonresident alien visa holder, a Nonresident alien claiming a tax treaty benefit, or a Nonresident alien student, professor or researcher filing a U.S. tax return or claiming an exception

W-9 Form

It is best practice for a  casino to  collect a W-9 form prior to making payments to domestic winners, as it is a valid way to collect a certified TIN. Domestic winners without the required W-9 tax forms may face a backup withholding of 24%.

W-8BEN Form

 A casino must also collect a W-8BEN for Non-US winners prior to making the winning payment. A W-8BEN form will allow non-US winners to reduce or avoid paying US withholding tax depending on eligibility, elections and validity.

Casino Withholding Obligation

Withholding tax is the money withheld from a payment and sent directly to the government. If one does not provide a U.S. TIN or a ITIN backup withholding rates can apply. Casinos need to have systems in place to withhold the money and deposit with the IRS in a timely manner in accordance with IRS deposit rules.

The backup withholding rate under Internal Revenue Code for casino winnings where the domestic winner does not provide a W-9 form or the correct taxpayer identification number (TIN) is 24%.  

There are select countries which have a tax treaty with the United States (US) that will reduce or eliminate the withholding tax on gambling proceeds. Non Us Winners with US gambling winnings who are residents of these treaty countries, will be subject to a backup withholding rate of 30% unless they provide a W8-BEN form, which will assist them in claiming treaty benefits along with providing their ITIN.

Casino Reporting Requirement

Casinos, like any business making reportable transactions during the calendar year, are obligated to file information returns to report those transactions to the IRS and furnish a copy of the information returns to the recipients.

The information collected by casinos, through W9 and W-8BEN forms, is used to do 1099’s and 1042’s fillings.

• The 1099 tax forms report a player’s winnings to the IRS and also provide the player information for completing their taxes.
• Form 1042-S is an information return filed by a withholding agent to report the amounts paid to foreign persons/ winners.

1099K Reporting Threshold

The 1099 reporting threshold is changing in the tax year 2024, necessitating the submission of the W9 form. Historically there was a $20,000 reporting threshold, but new 1099K rules that are transitioning in 2024 to drop reporting threshold to $5,000 and will drop even further to $600 starting in 2025. This rule change will result in more casino winners needing to be reported and means more need for W9 tax form collection.

How Can TAINA Help? 

Many casinos still have manual documentation, withholding and reporting processes, where winners over the IRS thresholds are handed physical W-9 and W-8BEN forms for completion. Once completed operation staff are being manually rekeying winners information into databases for accounts teams to use for completing and filing 1099s and 1042s, whilst physical forms are being placed into filing cupboard for storage. Often the information is not checked or validated, and if done incorrectly, the casino can be liable for the taxes on the proceeds that are paid and fines and penalties for improper reporting. Many casinos are moving towards automation, to improve their customer experience and streamline their processes, whilst reduce risks and maintaining audit readiness.

TAINA is a digitized TIN and W9 validation platform, with further capabilities that can also automate W8 form validation and FTIN formatting. TAINA’s advanced software can provide an automated process for solicitation, processing, and maintenance of W-9 and W8 tax forms from domestic and non-US winners and provides for withholding and information reporting data for 1099 and 1042S reporting. 

Using the TAINA Platform, our clients have substantially improved efficiencies, reduced costs, increased compliance and transformed their customer experience. Our solution is also adaptable and ensures seamless updates to meet regulatory requirements.

We would value speaking with you about your compliance process and how our award-winning Validation platform may help you comply with the documentation, withholding and reporting obligations of gaming companies.