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Wisconsin treatment of Gambling wins and losses

I have used the Wisconsin version of TurboTax for years. However, I do not believe you are treating gambling wins/losses correctly. You seem to assume that losses are not deductible for the state. The truth is more complicated. The TurboTax program is not designed to actually follow Wisconsin law. Have you reviewed the Wisconsin Dept of Revenue publications on this topic? The most recent is DOR Fact Sheet 1104, published 3/31/23. Will you be updating the program? Who can I follow up with, who is resposible for ensur

8 Replies
johnd84
Employee Tax Expert

Wisconsin treatment of Gambling wins and losses

Hi @davidGAW and thanks for your question:

TurboTax is setup to help you calculate your gambling income and losses for both state and federal. We'd be happy to assist you in preparing your Wisconsin taxes when tax time comes around. Please feel free to take advantage of TurboTax Live where a tax expert can help you accurately report everything on your next tax return. 

Thanks so much! 

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KatherineS63
Employee Tax Expert

Wisconsin treatment of Gambling wins and losses

I am a tax accountant and live in Wisconsin.  I have found that Wisconsin does not allow any losses for gambling.  Federal adjust gross income is what is used on the Wisconsin return.  So, if you took losses for gambling on your Federal return, this would not flow over because that happens on the Federal return AFTER the Adjust Gross Income is calculated.  

Gambling losses are indirectly deductible on your income tax return in the state of Wisconsin. While you don't claim them on your actual Wisconsin income tax return, you do claim them on your federal income tax return by itemizing deductionsfor which you receive a credit on your Wisconsin state income tax return.

 

I did look up the fact sheet you referenced.  It states, "In order to use the session method to report gambling gains, the taxpayer must be able to prove the net amount from each gambling session. The proof could be detailed original statements from a casino showing the taxpayer’s betting activities, or it could be the taxpayer’s own detailed records that keep track of the amount of money they brought into each gambling session and the amount of money they brought out of each gambling session if the records were prepared at the time the sessions took place.
If the taxpayer has no records to prove each session's net gains and losses, the taxpayer must report the
amount of gambling income from their Forms W-2G, plus any winnings not reported on a Form W-2G.
If a taxpayer qualifies as a professional gambler, they report gambling income and losses as a business
activity on federal Schedule C."

I would suggest calling the DOR for Wisconson  (608) 266-2486.

They are so helpful.  They will be able to tell you what exactly what you can deduct and what you can not deduct.  

 

 

KatherineS63

Wisconsin treatment of Gambling wins and losses

John, This is very much a "non-response" response. I did call at the time taxes were due, but this situation was too specific and unusual for the TurboTax specialists to help me. If you (or someone there) takes a few minutes to read the WI DOR fact sheet I referenced, you will see that your program is not asking the right questions for taxpayers like myself who are trying to follow the state's rules. Isn't there someone there who can review this issue? I feel like I am being dismissed without a fair hearing.

Wisconsin treatment of Gambling wins and losses

Katherine, thank you for the reply, and thank you for taking the time to actually read the fact sheet. I learned the hard way about the "session" approach recognized by Wisconsin. Therefore, I keep logs when I gamble and I am in a position to prove the losses I might incur. Let me give you an example: I sit down to play video poker. At one point I have a lucky hand and win $2,000, which generates a W-2G. However, by the end of my session, I am only ahead by $500, despite that one win. I would expect that the TurboTax program would recognize this situation. For instance, once I indicate I have a W-2G, the Wisconsin program would ask if I was keeping a log of my sessions? If not, it would default to the $2,000 gain. However, if I answered yes, it would initiate a routine that would have me report the sessions and only include the winning ones in my income.

 

By the way, I respect the fact that you are an accountant living here. I am not an accountant; prior to retiring, I was a tax collector. Because of that background, I'm not shy about digging into the details of this stuff. (Also, I too have always found DOR staff very helpful. This is a TurboTax problem, not a DOR problem.)

 

Thanks again.

KatherineS63
Employee Tax Expert

Wisconsin treatment of Gambling wins and losses

I called Wisconsin and asked them.  The expert said that the loss has to come through the Federal return.  There is no spot on the Wisconsin return to enter gambling losses.  So, that leaves you in a spot where you are left having to report the W2G as is.  

The expert referenced https://www.revenue.wi.gov/DOR%20Publications/pb600.pdf

I do think that it might be still good to call Wisconsin and see if they suggest a work around.  Really, they are the best to work with!!  I love calling the DOR WI.  They are so friendly.

Let me know what you find!!

 

KatherineS63

Wisconsin treatment of Gambling wins and losses

I'll follow up on this with DOR in the next day or two. Here's my point though: I created a work around this year by backing out some of the W-2Gs from the Federal return to more accurately report Wisconsin income. However, my position is that I shouldn't have to do this. The Wisconsin TurboTax should facilitate doing this. What I filed is a more accurate picture of my 2022 income, but I had to "backdoor" it using TurboTax. If I'm paying Intuit for this filing, they should deliver on what I paid for. I'm guessing there are other users in Wisconsin who overpaid because they just didn't understand the "session" concept Wisconsin uses. They relied on your company for that.

 

Thanks for your efforts today.

Wisconsin treatment of Gambling wins and losses

BTW, do you recall who you talked to?

Wisconsin treatment of Gambling wins and losses

I have been thinking about this all night.  Here is the issue:

The W2G are sent from the casino to the IRS.  So, when you enter the W2G into the software, it needs to match what was sent to the IRS.  

The Federal allows you to put gambling losses on the SCH A as an Itemized deduction.  As I mentioned earlier, Wisconsin uses the Federal Adjusted Gross Income which does not show the Itemized deduction.

When you go to the Wisconsin return, you are then getting a possible tax reduction for itemized deductions: In 2022 on form 1 this would be line 13. 

Federal works fine and you do maybe get something off for your itemizing on line 13 of your Wisconsin return.

The problem is that if you want to record sessions winning, then it messes everything up.  There is a form SB that allows adjustments, which seems like where you would make the adjustments to the W2G for Wisconsin but then you would be also getting the Line 13 itemized deduction credit so then you would be double dipping.  (Taking off the full amount of W2G and getting credit for the losses again)

I have to say, this sounds like a reporting of W2G issues more than a software issue.  Even if I was doing this by hand, it would have issues. 

The rule of thumb is always enter forms as they are received.

As far as calling WI DOR, I just called the number I gave you above and pressed I think option 9.  See what they have to say!  It is definately something that many have issues with but Wisconsin has an issue with how to get the credit properly.

Let me know what you find!

Katherine S 63
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