Unfortunately OK has us over a barrel. I have been down this road every year with the OK Tax Commission. While Federal allows offsetting losses, Oklahoma does not have a specific deduction. In a nutshell, OK takes winnings and applies a percentage rate against federal taxable income which includes the reported losses and this is how they compute your OK state tax. There is no recourse. Additionally if your tax owed is over $500 I think, they want you to make estimated quarterly tax payments for the following year. If you do not and owe tax the next year, they charge penalties and interest on the quarterly amounts that you should have paid. How OK can legally charge state tax based on a percentage of income earned in another state is beyond me. Because they receive the WG2 forms, they will start sending you letters, etc. about filing OK tax return if you do not report the winnings. It is all part of the OK state tax code and I have researched extensively but there is no recourse. Either pay or suffer the consequences. I cannot understand how this is legal.
