Big tax jump from small casino win

I am guessing that you are in the 25% Federal tax bracket and so the IRS took 25% of the $3750 ($937). If you itemized then the amount of medical expenses that you could deduct got smaller etc.

A problem with tax software is that you don't get to see what is going on.

The thing to do is print out the 1040 before and after the W-2G and see what lines have changed.

For example, if you were geting EIC before this additional "EIC investment income" you could lose it all. If you were within $3750 of going over the threshold cliff for obtaining Savers Credit, you could easliy lose say 200 that way. Other tax features and benefits also apply to higher AGI phaseout.

If you were getting social security, another 3750 could increase the amount of social security subject to tax.

Nothing beats line by line comparison.

Note that you get to deduct gambling losses up to your winnings. You may be able to get info on losses from your slot cards, including other casinos. Explain why you are asking.

that is a Federal marginal tax rate of 30% and a state marginal tax rate of

Although the IRS procedures call for winnings, epecially winnings shown on a form W-2G, to go on Form 1040 line 21, and losses, not exceeding declared gaoins, to go onSchedule A as a miscellaneous loss Not subject to the 2% reduction.

With all due respect to the DIYers here - THIS is the biggest problem I have with at home tax software. The return may be absolutely accurate as done, but because you have questions - and legitimate ones at that - you have no where to turn. So you turn here and ask - this is what this forum is for. The problem is that without seeing EVERYTHING that is on your return and essentially redoing your entire return, the best any of us can do is offer multiple guesses as to what happened. And none of the pros here are going to actually do your return for free, so you'll have to settle for guesses. And while some of these guesses may be right, you'll never know - not for sure.

With that said, here are my observations/guesses -

On your Federal return, if you're in the 28% bracket that would account for change - OR maybe you lost out on a credit, OR maybe more of your social security is taxable, OR maybe you lost some itemized deductions due to an increase in the floor OR addition phase outs due to higher income, OR maybe you made a mistake in keying it in, OR maybe there is a problem in the software.

On your state return, you don't say what state you're in and that will make a difference as state tax rates and brackets vary widely. BUT I'm not aware of any state that has an 18% tax bracket (Montana has a top bracket of about 11% and that is as bad as I've ever heard of).

For the amount of money involved I'd suggest you go see a local tax pro and have your return done. And please, P L E A S E, don't just ask them to check your return for a reduced fee. This is tax season and this is how we feed our families, pay our staff, keep our offices open and try to provide for our retirement so we won't be a burden on society in our golden years. It takes me TWICE as long to check a strangers work as it takes for me actually DO a return. Most tax pros, like myself, have developed systems and methodologies that allow us to work efficiently and quickly. Most of us make it a point to manually check our software's calculations early on to make sure the sofware is doing what it is supposed to do so we know we can rely on it when we get busy. Asking us to "JUST CHECK" your work is not as easy as you may think. We cannot rely on our systems and methodologies, instead we have to manually check that every number is correct, we have to manually add up all your W-2s gross income, check it against reductions for things like retirement contributions, then see if the right number hit line

1. Multiply this times all the line items on your return and all the odd little calculations that have to be done - like adjusting the taxable portion of Social Security for increase income, or reducing the retirement savings credit for increased income, or adjusting the floor or phase-out's on itemized deductions and it doesn't take long to spend way more time to check a strangers work than it takes to just do it right from scratch.

BTW - we do offer to check returns that were prepared elsewhere. We've had a lot of people ask if we could do this, but no one has ever taken us up on it. I wonder if it is because that fee is TWICE whatever the fee would be to just do the return to start with?

Good luck, Gene E. Utterback, EA, RFC, ABA

To clarify, if you bought a lotto ticket and didn't win anything, is that a loss? In this example, all losses but not more than $3750 are deductible on Schedule A.

You should double check if the gambling winnings are taxable by the state. In CA for example, CA lottery winnings are excluded from CA income.