Reporting Gambling Income - Session Method

[dhuber24]

Is TurboTax planning to add the capability of reporting gambling activity using the Session Method of tracking/reporting wins and losses? I can't imagine I am the only tax-payer in the United States who files with TurboTax and elects to use the Session Method for reporting gambling activity?

Is there a way to create a product enhancement request to vote on? @support 

[DawnC]

You can use the session method and enter your manually calculated session totals into TurboTax.    

Instead of entering every W-2G exactly as written, enter your Total Net Winnings from all "winning sessions" as a single entry.

In TurboTax, all W-2G income is entered with Other gambling income (not on a W-2G) and then the losses are entered on the very next screen.  

• Comprehensive Record-Keeping: You must maintain a precise, contemporaneous diary or similar record of all wins and losses.
• Supporting Documentation: You must be able to provide tickets, receipts, casino statements, or other proof.
• Limitation: While this "session" approach can help determine your daily net, overall for the year, you can only deduct losses up to the amount of your total reported gambling winnings, and you must itemize deductions on Schedule A (Form 1040).

Topic 419 - Gambling winnings and losses  -  

[dhuber24]

That is exactly how I entered it in TurboTax, and within each state return (for states that don't allow netting losing sessions with winning sessions) which I have a W2G, I allocated a portion of the total winning sessions for each state.

I also have a detailed session log in a spreadsheet, as well as ATM receipts proving my starting cash in each session. So I have all of the required documentation and proof, per IRS guidelines.

The problem is that TurboTax does not allow me to attach the session logs to my return and declare that I am using the session method. This is an extremely important part of the reporting, since I won't be reporting the total W2G amounts I won over the course of the year. As a result, I am likely to get audited when they see I am reporting much smaller total session wins than what my total W2G's sum up to. 

I want TurboTax to create a function that allows me to attach documentation of my session logs, and also have the ability to declare in my return that I am reporting gambling activity using the session method.

[AmeliesUncle]

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@dhuber24 wrote:

I want TurboTax to create a function that allows me to attach documentation of my session logs,

and also have the ability to declare in my return that I am reporting gambling activity using the session method.

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The IRS does not look at any attached supporting documentation for anything.  Just keep it in case the IRS asks about it.

The IRS does not provide a direct mechanism to do that.  However, because your Session wins are less than your W-2Gs, there is a work around.  You can report your W-2Gs, so the IRS sees that.  Then you should be able to enter "Other Income" (it shows up on line 8z of Schedule 1) as a negative number and call it something like "Gambling Session Adjustment" so the combination of the W-2Gs and the negative "Other Income" totals the proper amount of Session winnings.

[Markith]

@AmeliesUncle I’m in the same boat as @dhuber24   The problem with doing what you’re suggesting, entering W2G as is then offsetting the sessions as an adjustment, is that my AGI is still grossly inflated causing me to miss out on several tax credits….it’s very frustrating. 

[AmeliesUncle]

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@Markith wrote:

  The problem with doing what you’re suggesting, entering W2G as is then offsetting the sessions as an adjustment, is that my AGI is still grossly inflated

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If you do what I suggested, it will NOT inflate your AGI.  The income and adjustment would both be on Schedule 1, so it would not affect AGI.

[Markith]

I think you are incorrect. 

[dhuber24]

@AmeliesUncle I can't enter the W2G, because those totals entered in that screen will then pass to some of the state returns. Because Wisconsin does not allow losing sessions to offset winning sessions over the year. Therefore, I can only enter my session wins as "other income" and then in the next screen I enter the same amount as a loss so that my net win/loss for the year is zero. However, that is only for federal and for states that allow losing sessions to offset any winning sessions. So I end up paying taxes to Wisconsin on the winning session. The problem is that there is no way for me to file this return stating the reason I am not submitting my total W2Gs is due to session method reporting. 

[AmeliesUncle]

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@Markith wrote:

I think you are incorrect. 

You said you are using the Session Method.  The way I described is for how to report the correct Session income.

Your picture shows how to claim losses, which is very different than Session income.

[AmeliesUncle]

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@dhuber24 wrote:

Because Wisconsin does not allow losing sessions to offset winning sessions over the year.

However, that is only for federal and for states that allow losing sessions to offset any winning sessions. 

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Are you talking about Itemized deductions?

For federal, all Session Wins are taxable.  Session Losses are an Itemized deduction.  

For Wisconsin, all Session Wins are taxable.  Session Losses are NOT an Itemized deduction.

If you follow the directions I gave, both Federal and Wisconsin will report the correct Session income (not including Itemized deductions).

If you Itemize your deductions, you can claim the Session gambling losses on Schedule A.   I'm not certain, but I wouldn't think that  TurboTax will let those Itemized deduction losses to flow to the Wisconsin Itemized deductions (offhand, I don't think there is even a place for it on the Wisconsin return).  

[dhuber24]

Yes. I am talking about itemized deductions. If I have $100,000 in W2Gs, but only $10,000 in winning sessions and $150,000 in total losing sessions, what i would report is $10,000 in income and $10,000 in itemized deduction (since I can't deduct more losses than my session wins). So the $100k in W2Gs becomes irrelevant, due to the session method. If I report $100k in W2Gs, I would have to pay state income tax to Wisconsin on $100k, since my $150k in losses can't be used as a deduction in Wisconsin. When really I only owe taxes on my $10k winning sessions.

Since I report the winning sessions as "other income" my W2G amount won't match what the IRS has. In order to prevent an audit, I was told to add verbiage on the "other income" line that states I elected to report using the Session Method.

Again, I'm looking for TurboTax to actually enhance their product so that I don't have to spend countless hours researching it (like I had to do with this).

[AmeliesUncle]

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@dhuber24 wrote:

Since I report the winning sessions as "other income" my W2G amount won't match what the IRS has.

In order to prevent an audit, I was told to add verbiage on the "other income" line that states I elected to report using the Session Method.

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If you don't enter the amount of W-2Gs on the gambling line, the IRS will send a letter saying you didn't report it.

What I've been saying is to enter the $100k of W-2Gs as gambling, then enter negative $90k as an "other income" for the Session adjustment.  That way the IRS will 'see' the $100k of gambling income from the W-2Gs, but the net result is the correct $10k of income for both Federal and Wisconsin.