Worried I owe IRS for gambling winnings

Nancy · Post by **Nancy** » Wed May 16, 2012 1:39 pm

Background info - Canadian living in Canada. Visited US and won $3200 in 2011 playing slots in casino in Wisconsin. Casino did NOT withold any tax after seeing my Canadian ID saying it was not required under tax treaty. In May 2012, I received a 1042-S showing $3200 gross income, blank for all withholdings and Tax rate of 0.00. Exemption code listed on 1042-S is 04 which is "exempt under tax treaty".

I am worried that I owe US federal and possibly state income tax on these winnings. All the reading I have done on IRS website and internet suggests that casino erred and should have withheld 30% of my winnings. That would have satisfied my tax liability but I could have filed for refund to them if I obtained ITIN and had proof of gambling losses.

I do not have an ITIN and have never filed a 1040-NR with IRS in past. I do not have proof any gambling losses in US.

Complicating matters further, I do infrequent work in US under a TN-1 but have always just claimed this income on my taxes in Canada.

Help - need advice quick as I think I would have to file 1040-NR by June 15 or at least file for extension by that date....

JGCA · Post by **JGCA** » Wed May 16, 2012 6:46 pm

File the 1040NR you will owe no tax and in Canada its tax free this way you are filing as required the amount in question will result in no tax owed.

nelsona · Post by **nelsona** » Thu May 17, 2012 12:48 am

JC, Why would you sat that no tax is owed. The witholding on gambling winning should have been 30%, and without documented losses, that is what is owed on the return. It is not connected income. so is flat taxed.
The casino made a mistake, but she does owe the 30% tax.

nelsona · Post by **nelsona** » Thu May 17, 2012 12:56 am

In fact, JG, idf no money was owed, and none was withheld, no tax return would need to be filed at all. This is not the case.

Unfortiunately, the casino's error is now forcing the poster to file this for herself, or face a letter from IRS asking for the money.

JGCA · Post by **JGCA** » Thu May 17, 2012 1:20 pm

If she files the 1040 nr the winnings were $ 3,200 her exemption is $3,700 she owes no tax so eventhough she did not have witholdings the tax is nil. What tax does she owe?

Nancy · Post by **Nancy** » Thu May 17, 2012 1:41 pm

I did not find any reference to $3700 exemption anywhere related to casino winnings on IRS site.

All I could find is that slot machine wins over $1200 were subject to 30% withholding. The amount of tax taken based on 30% of win could be reduced for Canadians who have proof of gambling losses. Unfortunately, I am not a regular casino patron in US and was only at the casino in WI for a few hours on one day and did not even register for a player card so there is no way to ask casino for a 2011 win-loss statement.

JGCA · Post by **JGCA** » Thu May 17, 2012 2:07 pm

No the $3,700 is the personal exemption on your 1040NR, I was asking if this in anyway could reduce the tax owed to zero on the 1040NR since your earning were only $ 3,200.

Nancy · Post by **Nancy** » Thu May 17, 2012 2:34 pm

Unfortunately, it looks like any deductions, including personal exemption amount, apply only to business income and NOT to other income like gambling winnings. On the 1040-NR, business income and relevant deductions are totalled first and then other income is added on.

I feel like the hassles involved with this are far outweighing the amount of money won. Would have been much easier if they had just taken the $1k or so off the top like they were supposed to....

JGCA · Post by **JGCA** » Thu May 17, 2012 3:34 pm

Yes it seems so.

nelsona · Post by **nelsona** » Fri May 18, 2012 6:56 am

Nancy, you and I are ccorrect. If the casino had correctly withheld, you would have nothing to do. Too bad. SEnd 1040NR and $900 check.