I know that you have to declare winnings. Losses are deductible only to the extent of winnings. How is gambling supposed to be handled, accounting-wise. Take these examples:
I go into a casino and bet $500 on an even-money bet and win. I then immediately make a second bet and lose. That's my extent of gambling for the year. Does the tax code expect me to declare this win and loss on my tax return? If yes, does the IRS try and enforce it? Suppose I don't itemize.
Same question, but suppose the two bets are six months apart.
I have relied up "Now, what exactly is a session? Unfortunately, there have been no court cases or IRS Revenue Rulings on point.[9] Thus, we must determine the answer indirectly."
Based on my reading of his article, if you are at a roulette wheel and place a bet on Red and lose $500 and then place another bet on Red and win $500 and then stop playing roulette, you have completed one session and there is nothing to report. If on the other hand, you lose $500 on your first bet on Red and leave the casino and don't return until 6 months later and win $500 on Red on your first bet and leave. You had two sessions. You would report $500 of winnings on Line 21 of the 1040 and you could deduct $500 of losses if you itemize deductions.
One is expected to report ALL winnings. If one does not itemize, those winnings are taxed IN FULL no matter how much one has lost. Many people take into account only their W2-G reported winnings and deduct losses on Schedule A (only to the extent of their wins). Many who report their W-2 G wins are not able to deduct their losses up front and are unable to use them on Schedule A. They are obligated to pay tax in spite of losses which exceed winnings. Others, who are able to deduct losses IN FULL have an increased liability because their Social Security benefits become taxable. Veterans, and others, lose their medical/social benefits, even though they've actually sustained a loss.
Gamblers are losers. Knowing that, its difficult to understand how anyone, in general, could qualify for the benefit of using a Schedule C. Their are some who are able to claim professional gambler status. These few, who are likely to be audited, must follow stringent rules. They report their income and expense on Schedule C but, even there, losses/expense may be claimed only to the extent of the winnings. I do have one client who insisted on filing schedule C in order to avoid being taxed on her losses. Initially, IRS denied the claim. When she pursued the matter, without a sit down audit (all was done by mail) the claim was allowed saving her a nice chunk of change and no loss in social benefits. Frankly, I think that those who gamble at table games/slots/etc. should be given the same consideration as those who gamble in the markets. Gamblers contribute to the livelyhood of people who earn their living working in that industry and to the building of facilities which house them!!-:) In many cases, these gamblers are not hobbyists and actually believe they will be winners in spite of the odds. Many, if not most, small businesses fit into that category. (mnsvho)
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