Tax Help For Individuals

Taxes on gambling winnings?

Gambling takes many forms, including casino games, horse racing, sportsbook betting, lotto tickets, scratchers, bingo, and more. For most, gambling is a fun, recreational activity. However, many gamblers experience losses exceeding their winnings, and since excess losses aren’t deductible, they often skip reporting altogether, which doesn’t align with tax laws.

🚩 Reporting Winnings and Losses

If your gambling winnings hit certain levels, the government mandates that the gambling establishment collect your Social Security number and report your winnings to Uncle Sam on a Form W-2G. Gambling establishments will issue a Form W-2G if you:

✅ Win $1,200 or more on a slot machine or from bingo.
✅ Win $1,500 or more on a keno jackpot.
✅ Win more than $5,000 in a poker tournament.
✅ Win $600 or more from all other games, but only if the payout is at least 300 times your wager.

Reporting Winnings

Many believe they only need to report winnings that result in a Form W-2G. Unfortunately, the IRS disagrees. Even if your gains can be offset by gambling losses, the IRS expects you to report all gambling winnings, even those below the W-2G threshold, which they will scrutinize during an audit.

Gambling Losses

The good news is that you can deduct gambling losses if you itemize deductions, but only up to the amount of your gambling income. This means you can’t have a net gambling loss on your tax return. If you don’t itemize, you’ll owe taxes on the entire amount of your winnings, even if you incurred a net loss.

📉 Documenting Losses

How do you document gambling losses if audited? Discarded tickets aren’t acceptable documentation. The IRS suggests maintaining a detailed diary of your gambling activities, supplemented by verifiable documentation, including:

1️⃣ Date and type of wager
2️⃣ Name and location of the gambling establishment
3️⃣ Names of people present with you
4️⃣ Amounts won or lost

Save all relevant documentation, including losing tickets, checks, casino credit slips, hotel bills, plane tickets, and entry tickets. Slot clubs may provide records of electronic play, and affidavits from gambling officials can also help. Specific wagering transactions can be supported by:

✅ Keno: Copies of validated tickets.
✅ Slot Machines: Record of winnings by date and time.
✅ Table Games: Table number and casino credit card data.
✅ Bingo: Number of games played, cost, and amounts collected.
✅ Racing: Race details, wagers, and winnings/losses.
✅ Lotteries: Purchase dates, winnings, and losses.

Other Tax Side Effects of Gambling
Gambling income is fully reported as income while losses are itemized deductions, increasing your AGI, which can negatively impact your taxes.

Social Security Income
For those receiving Social Security, whether benefits are taxable depends on your AGI. If your AGI exceeds certain thresholds, up to 85% of Social Security benefits can be taxable.

💊 Health Insurance Subsidies

Under the Affordable Care Act, health insurance subsidies are based on AGI. Gambling winnings can reduce these subsidies, requiring you to pay more for health insurance.

Medicare B and D Premiums
Medicare premiums are based on AGI. High AGI can triple Medicare B premiums and add surcharges to Part D premiums.

Other Limitations
Other tax rules limit benefits based on AGI, such as medical deductions, child and dependent care credits, and the earned income tax credit.

🎯 GAMBLING GOTCHA #1 - Full Winnings Impact AGI

Since you can’t net winnings and losses, the full amount of your winnings adds to your adjusted gross income (AGI), which is used to determine eligibility for other tax benefits. A higher AGI can limit these benefits.

🎯 GAMBLING GOTCHA #2 - Itemizing Deductions

If you don’t itemize deductions, you can’t deduct losses, meaning you’ll pay taxes on all winnings, even if you had a net loss. Recent tax reforms increased standard deductions and limited other itemized deductions, so fewer taxpayers will itemize and more will pay taxes on their winnings.

🎯GAMBLING GOTCHA #3 - Social Security Benefits

If your gambling winnings push your AGI over the threshold, some of your Social Security benefits may become taxable.

🎯GAMBLING GOTCHA #3 - Social Security Benefits

If your gambling winnings push your AGI over the threshold, some of your Social Security benefits may become taxable.

🎯GAMBLING GOTCHA #4 - Insurance Subsidies

Adding gambling income to your AGI can significantly reduce health insurance subsidies, increasing your costs.

🎯GAMBLING GOTCHA #5 - Online Gambling Accounts with Foreign Companies

If your online gambling account exceeds \$10,000 at any time during the year and it’s with a foreign company, you must report it to the Treasury or face penalties.

🎯GAMBLING GOTCHA #6 - Reporting Foreign Accounts

Regardless of winnings or losses, foreign online gambling accounts over $10,000 require filing a FinCEN Form 114 (FBAR). Penalties for non-compliance are severe.

Have questions about gambling and taxes?

Reach out to us for personalized advice and make sure you’re on the right side of the law. Let’s keep those winnings as joyful as they were when you won them!

Are elder care or caregiver expenses tax deductible?

Because people are living longer now than ever before, many individuals are serving as caregivers for loved ones (such as parents or spouses) who cannot live independently. These individuals often have questions regarding the tax ramifications associated with the cost of such care. For them, the cost of such care may be deductible as a medical expense.

❓ Is the Caregiver an Employee?

💡 Incapable of Self-Care

For the cost of caring for another person to qualify as a deductible medical expense, the person being cared for must be incapable of self-care. A person is considered incapable of self-care if, as a result of a physical or mental defect, that person is incapable of fulfilling their own hygiene or nutritional needs or requires full-time care to ensure their own safety or the safety of others.

💡 Assisted-Living Facilities

Generally, the entire cost of care at a nursing home, home for the aged, or assisted-living facility is deductible as a medical expense, provided that the person who lives at the facility is primarily there for medical care or is incapable of self-care. This includes the entire cost of meals and lodging at the facility. On the other hand, if the person is living at the facility primarily for personal reasons, then only the expenses directly related to medical care are deductible; the cost of meals and lodging is not a deductible medical expense.

💡 Home Care

A common alternative to nursing homes is in-home care, where day helpers or live-in caregivers provide care within the home. The services these caregivers provide must be allocated into (nondeductible) household chores and (deductible) nursing services. These nursing services do not need to be provided by a nurse; they simply must be the same services that a nurse would normally provide (e.g., administering medication, bathing, feeding, and dressing). If the caregivers also provide general housekeeping services, then the portion of their pay that is attributable to household chores is not deductible.

The emotional and financial aspects of caring for a loved one can be overwhelming, and as a result, caregivers often overlook their burdensome tax and labor-law obligations. Sadly, these laws provide no special relief from these tasks.

❓Is the in-home caregiver an employee?

Because of the way that labor laws are written, it is important to determine if an in-home caregiver is an employee. The answer to this question can be very subjective. Caregivers’ services can be obtained in a number of ways:

✅ Agency-provided caregivers are employees of the agency, which handles all the responsibilities of an employer. Thus, loved ones do not have any employment-tax or payroll-reporting responsibilities; however, such caregivers generally come at a substantially higher cost than others.
✅ Self-employed caregivers pay all their expenses, are responsible for their own income reporting and taxes, and are not considered employees under federal or state law. The IRS lists 20 factors that it uses to determine whether an individual is an employee; the main factors are financial control, behavioral control, and the relationship between the parties. Household workers are typically classified as employees.
✅ Household employees are subject to Social Security and Medicare taxes. The employer is thus responsible for withholding the employee’s share of these taxes and paying the employer’s share of payroll taxes. Fortunately for these employers, the special rules for household employees greatly simplify the payroll-withholding and income-reporting requirements. Any resulting federal payroll taxes are paid annually in conjunction with the employer’s individual 1040 tax return. Federal income tax withholding is not required unless both the employer and the employee agree to do so. However, the employer is still required to issue a W-2 to the employee and to file that form with the federal government. The employer also must obtain federal and state employer ID numbers for reporting purposes. Some states have special provisions for the annual reporting and payment of state payroll taxes; these may be similar to the federal requirements. The employer’s portion of all employment taxes (Social Security, Medicare, and both federal and state unemployment taxes) related to deductible medical expenses are also deductible as a medical expense.

💵 Paying in cash to avoid W-2s

You may be thinking, “Wait a minute – the household employers I know pay in cash and do not pay payroll taxes or issue W-2s to their household employees.” This observation may be accurate, but such behavior is illegal, and it is not right to ignore the law. Think about what could happen if one of your household employees is injured on your property or if you dismiss such an employee under less-than-amicable circumstances. In such circumstances, the household employee will often be eager to report you to the state labor board or to file for unemployment compensation.

Note, however, that gardeners, pool cleaners, and repair people generally work on their own schedules, invest in their own equipment, have special skills, manage their own businesses, and bear the responsibility for any profit or loss. Such workers are not considered household

🚩 Other Issues to Consider

💡 Overtime

Under the Fair Labor Standards Act, domestic employees are nonexempt workers and are entitled to overtime pay for any work beyond 40 hours in a given week. However, live-in employees are an exception to this rule in most states.

💡 Hourly Pay or Salary

It is illegal to treat nonexempt employees as if they are salaried.

💡 Separate Payrolls

Business owners may be tempted to include their household employees on their companies’ payrolls. However, any payments to household employees are personal expenses and thus are not allowable as business deductions. Thus, business owners must maintain separate payrolls for household employees; in other words, personal funds (not business funds) must be used to pay household workers.

💡 Eligibility to Work in the U.S.

It is illegal to knowingly hire or continue to employ an alien who is not legally eligible to work in the U.S. When a household employee is hired to work on a regular basis, the employer and employee each must complete Form I-9 (Employment Eligibility Verification). The employer must carefully examine the employee’s documents to establish his or her identity and employment eligibility.

Still have questions?

Don’t let the stress of these details add to your caregiving responsibilities. Reach out to us today for a personalized consultation and ensure you’re maximizing your tax deductions while staying compliant. Contact our office now and let us help you make sense of it all.

Where’s my Refund? How to Check Your Federal Tax Refund Status in 2024

If your federal tax return has been filed and you are expecting a refund, you can quickly check the status online.

❓Where’s My Refund?

It is is a handy tool on the IRS website. Whether you chose direct deposit into one account, split your refund among several accounts, or asked the IRS to mail you a check, this tool provides online access to your refund information nearly 24/7.

If you e-file, you can get refund information within 24 hours after the IRS has acknowledged receipt of your return. Generally, refunds for e-filed returns are issued within 21 days. For paper returns, your refund information will be available within four weeks. When checking the status of your refund, have your federal tax return handy.

💡 How to Access Your Refund Information

Be Prepared
To access your personalized refund information, you must enter:

✅ Your Social Security number (or Individual Taxpayer Identification Number)
✅ Your filing status (single, married filing joint return, married filing a separate return, head of household, or qualifying widow(er))
✅ The exact refund amount that is shown on your tax return

Possible Responses

Once you have entered your personal information, one of several responses may appear, including:

✅ Acknowledgment that your return has been received and is in processing
✅ The mailing date or direct deposit date of your refund
✅ Notice that the IRS has been unable to deliver your refund due to an incorrect address. You can update your address online using the “Where’s My Refund?” feature

Direct deposit provides the quickest refunds. Allow additional time for checks to be processed through the mail.

❓ What if I Don't Receive My Refund?

When should you call the IRS if you don’t receive your refund? You should only call if it has been:

🚩 21 days or more since your return was e-filed
🚩 6 weeks or more since you mailed your return
🚩 When “Where’s My Refund?” tells you to contact the IRS

“Where’s My Refund?” also includes links to customized information based on your specific situation. These links will guide you through the steps to resolve any issues affecting your refund. If you have questions related to your refund, please give us a call.

Need help tracking your state tax refund or have other tax-related questions?

Our friendly team is here to help. Call us today for personalized assistance and peace of mind.