- Online Gambling Security: FTGA The FTGA was established in an effort to set a standard for online gaming operations. The agency maintains that by conducting business with only reputable companies, they can form an alliance of the most fair and professional offshore gaming.
- Casino regulators are government organizations, focused on monitoring and maintaining levels of safety and security at online gambling websites. A couple of the best-regarded regulators are the UK.
After the thrill of collecting gambling winnings, comes questions about taxes.
Yes, gambling income, which includes winnings from slots, table games, horse racing, sports betting, lottery games, jackpots, and the like, is considered taxable income. As such, you are required to report them on your tax return. The car, boat, or Harley Davidson and other noncash prizes also need to be reported.
There are plenty of questions surrounding Pennsylvania taxes and gambling winnings. Now there are even more with the advent of sports betting, betting apps, and online casinos in Pennsylvania.
The security provision also includes IP Access Rules and Zone Lockdown. Having all these measures available in one place is a valuable benefit to online gambling sites that want to protect player security.
Here are some answers.
How much are my gambling winnings taxed?
Casinos withhold 25% of winnings for those who provide a Social Security number. If you do not provide your Social Security number, the payer may withhold 28%.
Currently, Pennsylvania’s personal income tax is a flat tax rate of 3.07% which applies to all taxable income, including gambling and lottery winnings. PA has the lowest rate of all states with a flat tax.
The new regular withholding rate
Effective for taxable years beginning after December 31, 2017, the withholding rate under Section 3402(q) applicable to winnings of $5,000 or more from sweepstakes, wagering pools, certain parimutuel pools, jai alai, and lotteries (formerly 25%) is 24%.
Federal Form W-2G, Certain Gambling Winnings
The organization that pays the winnings, in most cases, the casino, is responsible for sending the recipient of the winnings Form W-2G, Certain Gambling Winnings.
Form W-2G reports the amount of winnings to you as well as to the IRS.
The payer is required to send Form W2G only if the winner reaches the following thresholds:
- The winnings (not reduced by the wager) are $1,200 or more from a bingo game or slot machine
- The winnings (reduced by the wager) are $1,500 or more from a keno game
- The winnings (reduced by the wager or buy-in) are more than $5,000 from a poker tournament
- The winnings (except winnings from bingo, slot machines, keno, and poker tournaments), reduced by the wager, are:
- $600 or more, and
- At least 300 times the amount of the wager
- The winnings are subject to federal income tax withholding (either regular gambling withholding or backup withholding)
How to report PA gambling winnings on taxes
According to the IRS, you must report the full amount of your gambling winnings each year on your federal taxes. First, you report gambling winnings as
You may receive a Form W-2G showing the amount of your gambling winnings and any tax withheld. Include the amount from box 1 as “Other Income” on Form 1040, Schedule 1 (PDF).
That number then goes on your U.S. Individual Income Tax ReturnForm 1040 (PDF), line 7a (designated “Other Income”). You should attach the Schedule 1 form to your Form 1040.
Include the amount shown in box 2 on the W-2G on line 17 (designated as federal income tax withheld) of your Income Tax Return (Form 1040).
Pennsylvania state taxes for gambling
In addition to federal taxes payable to the IRS, Pennsylvania levies a 3.07% tax on gambling income.
You should report your Pennsylvania taxable winnings on PA-40 Schedule T (PDF). Include the total winnings from line 6 of Schedule T on your Pennsylvania Income Tax ReturnPA-40 (PDF), line 8 (“Gambling and Lottery Winnings”).
If your gambling winnings come during a trip to another state or country, you are still required to report.
Michelle Malloy, Esq. at AUA Capital Management, LLC in Conshohocken, Pennsylvania, commented:
“Pennsylvania takes the position that they are entitled to tax a portion of your worldwide income based on certain income items (wages, interests, dividends, capital gains, gambling winnings, lottery winnings, etc).”
What if I don’t receive a Form W2-G?
If you did not receive Form W-2G, your winnings are still considered taxable income and should be reported. A payer is required to issue you a Form W-2G if you receive certain gambling winnings or have any gambling winnings subject to federal income tax withholding.
According to Malloy:
“You are required to report all gambling winnings for federal and Pennsylvania taxes. If you hit a certain threshold they (the casino) will withhold money. In the instance where a casino doesn’t do their job and and fails to send you a W2-G you are still required to report your winnings, or you run the risk of underreporting your taxable income for the year.”
Do I have to pay taxes if a group of people win the lottery?
What happens when a group of coworkers chip in on a lottery ticket that wins? What about you and a friend who put money on a long-shot team to win the championship?
Meet Form 5754 (PDF). Payers use this form to prepare Form W-2G when the person receiving gambling winnings subject to reporting or withholding is not the actual winner or is a member of a group of two or more people sharing the winnings.
Don’t send Form 5754 to the IRS. Keep a copy for your records and return the form to the payer (usually the casino) for preparation of Form W-2G for each person listed as winners.
Are there any deductions available for taxes related to gambling?
Gambling losses can be deducted. However, they must be itemized on line 28 of Schedule A, Form 1040.
Also, you cannot deduct more than your winnings.
Expenses related to any gambling or lottery activities, (like your dinner at the steakhouse, celebratory drinks from the bar, or cost of hotel room) cannot be deducted.
If you are going to deduct gambling losses, keep these records:
- The date and type of each wager
- The name and location of the bet
- The amount won or lost
- Wagering tickets
- Canceled checks
- Credit card records
When using a players club/members card, casinos can track players’ spend. Therefore, you can request a win/loss report that will give you a fairly good sense of your activity in a casino. Online casino players can request the same report and most sites should be able to provide it without issue.
“A lot of people may under-report,” explained Malloy. “They might win $10,000 but have $3,000 of expenses so they think they are just going to report $7,000. That can be an issue, as Pennsylvania does not allow a deduction for expenses. If you win a lot of money in June, for example, you might want to make an estimated tax payment [due Sept. 15 and Jan. 15] so you don’t have an underpayment penalty the following April.”
How to claim gambling winnings and/or losses
Pennsylvania provides a helpful resource to determine how to claim gambling winnings and/or losses.
There is a prompt where you can start a ten-minute interview.
Be sure to have the following information ready:
- Your and your spouse’s filing status
- Amount of your gambling winnings and losses
- Any information provided to you on a Form W-2G
Taxes on multistate lotteries
The Pennsylvania Department of Revenue considers multi-state lottery prizes, like those from Powerball and Mega Millions, awarded on tickets purchased through a licensed Pennsylvania state lottery ticket vendor, a prize by the Pennsylvania Lottery.
“Such prizes are considered Pennsylvania source income and both residents and nonresidents are subject to tax on such income if the prize is a cash prize. Multistate lottery prizes awarded on tickets purchased through a vendor in another state lottery are considered prizes awarded by that state lottery. Such prizes are not considered Pennsylvania source income and only residents are taxed on such income regardless of whether the prize is a cash or noncash prize.”
Due to a 2016 law change, any cash prize won from a Powerball of Mega Millions ticket in any state is taxable for state purposes, in addition to federal taxes.
What happens if you win a few thousand dollars on a winning PA lottery ticket?
Lottery winnings are included in taxable income. Pennsylvania Lottery winners of an individual prize valued at more than $600 will receive a Form W2-G by mail.
If your spouse also wins, they must report their winnings separately.
“For a significant windfall, like over $5 million, it definitely makes sense to talk to an attorney or accountant to determine if they should take a lump sum payout or annuity. They may also need to think about estate tax planning, financial planning and/or asset protection planning for their windfall,” said Malloy.
Sports betting winnings and taxes
Sports betting winnings are taxable income.
The IRS states:
“Gambling winnings are fully taxable and you must report the income on your tax return. Gambling income includes but isn’t limited to winnings from lotteries, raffles, horse races, and casinos. It includes cash winnings and the fair market value of prizes, such as cars and trips.”
Even though sports betting isn’t specifically listed, it falls under the umbrella of “gambling winnings.”
Wherever your sports betting win occurred – at the OTB, the casino, on a sports betting app – they payer should send Form W-2G.
Sports betting losses might also be used as deductions if you itemize your deductions and keep a detailed record of wins and losses.
Based on your tax bracket, sports bettors in Pennsylvania could owe up to 35 % of winnings to the federal government in addition to the 3.07 % Pennsylvania taxes net gambling winnings.
Online gambling and taxes
Sports betting apps and online casinos provide unmatched convenience. You may also enjoy the anonymity of playing behind a screen name instead of in person. However, it still comes with the same tax responsibilities. Online gambling winnings are considered taxable income at the same rate as other gambling winnings.
For online gambling winnings, the payer is required to send Form W2G only if the winner reaches the following thresholds:
- The winnings (not reduced by the wager) are $1,200 or more from a bingo game or slot machine
- The winnings (reduced by the wager) are $1,500 or more from a keno game
- The winnings (reduced by the wager or buy-in) are more than $5,000 from a poker tournament
- The winnings (except winnings from bingo, slot machines, keno, and poker tournaments), reduced by the wager, are:
- $600 or more, and
- At least 300 times the amount of the wager
- The winnings are subject to federal income tax withholding (either regular gambling withholding or backup withholding)
In terms of deductions for taxes, players can request a report from online casinos detailing wins and losses.
Theresa Lanowitz collaborated on this blog.
Introduction
The proliferation of technology and internet connectivity has made it possible for people to seek out most things online, and gaming and gambling are not exceptions. In addition to online video games, social media, music, and video streaming, there are also online casinos and gambling for real money. Well, for gambling in the USA there are state laws to mind, but in some states online gambling is permitted.
Many players have registered on online gaming and gambling sites to enjoy the action right in their homes or wherever they may be (although with COVID-19, people may be stuck at home more than they want.) The demand for VIP membership to online casinos is rising. With online gambling in particular, on top of cybersecurity awareness and safe practices, there is the additional need to review and find the online casinos with a good reputation, and robust online security. Check for scams related to a new site. Anything involving money gets the attention of cyber criminals.
The popularity of online games on marketplaces is growing. You can play for free, but many fun features are offered “for fee”. The rest of the article will focus on online gaming, as that’s legal pretty much everywhere.
Risks and threats in online gaming
As you enjoy your gaming session, you need to know the risks involved to take precautions and highly secure your data from unauthorized access. The most common threats to online gamers include the usual lineup:
Computer viruses
Almost all internet users have encountered computer viruses, as they are quite common. It’s pretty basic, but antivirus is basic protection against old, known attacks. Opening unsolicited emails, downloading free software, and sharing devices like flash disks are ways viruses can infiltrate your computer.
Ransomware attacks
Online gamers need to bear in mind they are subject to infection with ransomware. A tell-tale sign that your computer is under attack from ransomware is when you cannot access your files unless you pay a hefty ransom.
Phishing scams & Identity theft
Say you receive an email from an online gaming outfit you’ve played on before with a neat offer. How can you be sure it’s really from them and not a phishing attack? Phishing attacks happen when cybercriminals mimic trustworthy individuals or institutions to obtain private information like passwords. With the stolen information, these criminals can access your credit, use your identity to open bank accounts, make PIN changes, or even sell your identity to con artists.
Spyware
If you’re dealing with a disreputable online gaming operation, especially if the service is free, they might be spying on you and selling your personal information. Spyware does precisely what spies do; studying your every move and action while using the internet without your permission. Your browsing history quickly finds its way to third parties, which is a serious privacy breach.
Trojan malware
Especially when you download executables from a site – there is a very real danger they might bring Trojans with them, or legitimate executables may have been replaced with Trojans. Trojan viruses resemble real software and are some of the most common tools used by cybercriminal networks. They have been notably used by criminals on webcams to watch their targets' movements and gather vital information.
How to help protect yourself against cybercrime when using online gaming
Thanks to the internet, the world is now a global village, and staying away is not an option. Arguably you could stay away from online gaming. But what fun would that be? On the bright side, there are many ways to help mitigate your risks and have a safer online experience.
Use a reliable Virtual Private Network (VPN)
Virtual Private Networks are a must-have tool, whether you are protecting your home or office network. They conceal crucial information like your location, IP address, history, activity, and digital devices, making them a very strong security measure against identity theft threats.
Install antivirus software on your computers
Antivirus software scan for known viruses and prompt you to take action once they find a threat. They indicate the infected files and schedule regular scans to protect your computer. Also, reliable antivirus software will offer protection against ransomware, spyware, Trojans, and spam. However, antivirus software only deals with known threats, and nothing is a total assurance.
Look out for suspicious emails and pop-ups
Opening unsolicited emails and pop-ups are like opening a Pandora box when it comes to cybersecurity. Anyone can target you through such emails and once you open them, there is no telling the level of damage that can occur, including phishing attacks.
Be safe using public Wi-Fi
Nowadays, public Wi-fi is available in almost all public spaces. While the allure of freebies in these harsh economic times may seem tempting, think again before you login in to play your favorite game, then use the same WiFi to do some banking transactions. Cybercriminals have mastered the gaps in public Wi-Fi and will easily steal your personal information. If you have no other option, use a VPN for important transactions. Take good care with public WiFi.
Ditch Wi-Fi for your mobile network when handling private information
How To Gamble Online Legally
Your mobile phone can connect to the internet either through your cellular network or through Wi-Fi. You can configure your phone to automatically use known Wi-Fi if it’s available. What differentiates the two is that cellular networks are encrypted while Wi-Fi is not. Therefore, it makes perfect sense to use your mobile network when accessing private information like your bank account.
Can You Gamble Online Legally
Create strong, long, unique passwords
Unique passwords for your online gaming and gambling accounts make the work of cybercriminals harder, locking them out of your accounts. Such passwords are long passphrases, following NIST guidance. Avoid using personal details like your date of birth or popular words like the names of celebrities that are easily guessed. Consider using one of the many available password managers for hassle-free password management and security.
Clear all information before selling or donating digital devices
Many people forget that their devices carry a good deal of personal information, including cached info and saved login credentials to your gaming and gambling accounts. For this reason, you need to provide that that all information is cleared before selling your device. Apart from applying factory reset, you can use a data destruction company to destroy your hard drive before giving it up for recycling.
Conclusion
Online gaming can be very enjoyable. But stay safe! Learning to help protect your data from cybercriminals will go a long way to providing you get the best out of your online experience. Enlisting a combination of these tools is the best approach for maximum online security. While it may prove a bit expensive to access all these tools, it can be much cheaper in the long run when you have less worries about losing your cash or personal details to online fraudsters.