Wednesday, January 27, 2010

Who gets a 1099?

Q. My wife and I built a house last year. Do we need to give 1099s to the contractors?

A. No, you only need to issue 1099s to people who work for you in the course of a trade or business, but who are not employees. Personal payments are not reportable.

Can I Deduct Gambling Losses on my Tax Return?

Gambling winnings are fully taxable and must be reported on your tax return. You must include all of your winnings, including winnings from lotteries, raffles, horse races, and casinos. It includes cash winnings and also the fair market value of prizes such as cars and trips.

Gambling losses are deductible, but only when they offset gambling profits. And you MUST keep detailed records of those losses or the IRS will disallow them if you are audited. You'll need to list exactly how much you lost on a particular day at a specific machine or game (identified by machine number, game type, and casino).

The catch: you may deduct gambling losses only if you itemize deductions. You claim gambling losses as a miscellaneous deduction not subject to the 2% limit. However, the amount of losses you deduct may not be more than the amount of gambling income reported on your return.

This means that if you win, you must report all winnings; but, if you lose, you can only deduct gambling losses if you itemize deductions (and your winnings are more than your losses.)

It is important to keep an accurate diary or similar record of your gambling winnings and losses. To deduct your losses, you must be able to provide receipts, tickets, statements or other records that show the amount of both your winnings and losses.

Keep in mind that Federal taxes apply to ALL your gambling income even if a win doesn’t reach the threshold for mandatory reporting by the casino to the IRS. Jackpots between $1,200 and $5,000 are reported, but are not subject to Federal withholding when the player provides a social security number. Amounts above $5,000 require withholdings.