Can gambling losses be deducted from prize winnings reported on a 1099-misc?

[dakrebs]

I agree that it is a flaw in the Turbotax software - they should ask at the time of entry of the 1099-Misc information if this relates to gambling or wagering activity, like they have in prior years.  I got around this by going to the form, overriding the entry on Schedule 1, Line 8, blanking out the amount and re-entering it on line 8.b. (gambling).  That way the losses can be offset and it passes muster with the IRS.

[REvans2001]

That's all good info but where should one enter the 1099 misc amount won in the tournament?   Can I add it to Schedule 1 line 8b gambling income and therefore have it offset in the schedule A gambling losses? 

[REvans2001]

Thanks.  Do you mean you entered the amount on Schedule 1 line 8h 'prizes and awards'?  Then did your losses in schedule A reduce your income by that 1099 amount you put on line 8h?

[ColeenD3]

A prize is a prize and gambling winning are gambling winnings. They are not interchangeable. You can't offset awards and prizes with gambling losses. They are not the same thing.

Enter your prize as other income as described above. If they were gambling winnings, report them as gambling winnings and take your losses.

You must report all gambling winnings as "Other Income" on Form 1040 or Form 1040-SR (use Schedule 1 (Form 1040) PDF), including winnings that aren't reported on a Form W-2G. When you have gambling winnings, you may be required to pay an estimated tax on that additional income.

Topic 419

@REvans2001

[dcc56]

What's interesting in my case is that I had to gamble on slot machines in order to earn entries into a drawing where I eventually won a "prize". Usually when you gamble on slots in my area anything over $1199.00 gets you a W2-G form for tax purposes. When you win prize like I did....a 2021 Jeep where I decided to take the cash prize instead of $35,000 I was issued a 1099-MISC. I was unable to use my slot machine losses to offset the 1099-MISC. prize...the IRS rejected my return. But since I had to gamble on slots to earn entries into the prize drawing...perhaps it should be handled in a different manner.

So essentially my prize was just added to my income and I was not able to use my slot losses to offset the prize dollars. Good thing I am retired so my tax liability was still low, after all, taxes are "on sale" right now, they are low....but I don't want to pay any more than I actually owe! 

Thanks for the help on this topic.

[REvans2001]

I disagree with @@ColeenD3 because of the case law cited by @dakrebs https://ttlc.intuit.com/community/taxes/discussion/re-can-gambling-losses-be-deducted-[product key removed]ngs-reported-on-a-1099-misc/01/2536279#M908987

dakrebs

2 weeks ago :  " ... 

Tax Court case, Libutti vs. The Commissioner dated March 7, 1996. In that case, a heavy gambler (Libutti) spent millions of dollars gambling at a New Jersey casino. The casino, in turn, and as an enticement to frequent the casino, gave Libutti expensive gifts, including exotic cars, diamond jewelry, expensive travel vouchers, etc. exceeding $2.5 million in value. The casino issued 1099-Misc forms to Libutti for the value of these "comps" or gifts and Libutti, in turn, applied his gambling losses against all of the 1099-Misc income. The IRS took the position that Libutti could not offset his losses against such gifts (comps). However, the Tax Court sided with Libutti, in essence saying that the strong relationship between his gambling activities at the casino, and the casino's providing comps or gifts to Libutti all fell into the meaning of "gains from wagering activities" and, therefore, he could offset his losses against both the wagering winnings (gains) as well as the comps (gains). They pointed out the obvious in saying that such gifts or comps never would have been given to Libutti except for his gambling activity. In other words, the character of his gains was the same regardless of how they were received or on what forms they were reported. There is a similar relationship between gains from slot machine play, and gains from drawings where the tickets for the drawings are earned because of, and only because of, machine play. Though the gains from the slots are reported on Form W-2G, and the gains from the drawings are reported on Form 1099-Misc, the wagering losses for machine play can be offset against both.

"

[REvans2001]

Yes you can.  See reply with case law and rationale from retired CPA, @dakrebs .  I think you just add the 1099misc amount to line 8b gambling winnings and then you can use the gambling losses from your win/loss statement to offset those winnings. 

[REvans2001]

Yes you can.  See reply with case law and rationale from retired CPA, @dakrebs .  I think you just add the 1099misc amount to line 8b gambling winnings and then you can use the gambling losses from your win/loss statement to offset those winnings. 

[dcc56]

Turbo Tax does not allow this....at least I don't think it does when using the guided method. I entered the "prize" as a 1099 Misc and it does not consider any 1099 to be gambling winnings. The other suggestion here...(about comps and whatnot...) don't apply to me since I am not a "professional gambler" which I thought might open me up to having to pay into other fees of the self employed.

So now what? I've already filed my federal and state taxes. I got a refund from the State as too much was withheld.....so apparently my taxes were done correctly or they would have notified me and made an adjustment or contacted me. The 100 MISC I got "just" increased my income dollar amount and I paid the tax that was due for my adjusted income. I would LOVE to write off the $35,000 win because I have more dollars in losses from gambling over the whole year and could easily include it. I have a win/loss statement from several casinos I visit. Would you suggest I see a tax professional to help with an amended return our should I try to do it myself with Turbo Tax. Since I have never done an amended return I am not sure if Turbo Tax has this ability to help me do this. I might end up getting another refund that would offset the cost of a tax professional. Or I could just forget about the whole thing and be happy with what I won! Thanks to everyone here for advice. I honestly don't think Turbo Tax software dealt with this situation very well.  Cheers.

[ErnieS0]

You can amend your return in TurboTax @dcc56 if you want to follow @REvans2001's suggest.

Remove the 1099 and enter it as part of your gambling income.

• Tap Federal in the left column
• Select Wages & Income at the top
• Go to Less Common Income
• Start/Revisit Gambling Winnings

To amend your tax return: How do I amend my 2021 return?

[REvans2001]

I suggest getting friends' and family's recommendations for a practicing tax CPA in your area and show him the case law cited by @dakrebs . If CPA agrees, (or possibly visit IRS in person for this?) enter or add the 1099 amount to gambling winnings on  line 8b schedule 1 and then you can use the itemized deductions of your win/loss statements.  I don't agree with the pedantic statement that "a prize is a prize" because the types of wind are almost always predicated on participation on gambling activities. 

[cmc0605]

I'm in a similar boat as people above, I was given both a W2G (for a few large wins) and a 1099-MISC (for some "prizes"). I plan to itemize deduct from the W2G. You can't do that for the 1099-MISC directly in turbotax, from what I can gather.

In my case, however, the "prize winnings" were from a slot machine marathon that required slot play to participate in, let alone win anything. However, the prize itself was awarded after a certain amount of gameplay and not tied to any particular wager. That's the technicality, I suppose. I could consult with a legal expert but I'm undecided if this is necessary. 

How do I manually change things in the desktop version of turbotax? Do I need to download it instead, or is turbotax unusable for this? I'm hoping this all works out well...

[JamesG1]

In TurboTax CD/Download Premier to report a 1099-MISC as prize income, follow these steps to enter the income:

• Click on Federal Taxes.
• Click on Wages & Income.
• Click on I'll choose what I work on.
• Scroll down to 1099-MISC and Other Common Income.
• Click Start / Update to the right of Income from Form 1099-MISC.
• At the screen Does one of these uncommon situations apply?, select This was prize winnings.

The entry will be reported:

• on line 8i of Schedule 1 of the Federal 1040 tax return, and 
• on line 8 of the Federal 1040 tax return.

@cmc0605 

[Topixel]

Your workaround is clever and might be a real time-saver for others facing a similar issue with 1099-Misc forms related to gambling income. It's these little tips and tricks that can make tax season a bit smoother for everyone.
Speaking of gambling, if you're someone who enjoys gaming and is looking for some entertainment, you might want to explore online casino slots. They offer a wide range of games and can be a fun way to unwind and try your luck. Just remember to gamble responsibly and within your means.
In any case, thanks for sharing your solution and contributing to the community's knowledge. Tax season can be challenging, but with helpful insights like yours, it becomes a bit more manageable.